The Chartered Accountant

CORPORATE AND ALLIED LAWS
It may be noted that most of the procedural provisions of LLP Act are
to be governed by the Rules to be framed by the Central Government.
In particular, the form of accounts, form of annual financial statements,
solvency statement, auditor’s report etc., are to be prescribed by Rules.
Let us hope that the Government will publish draft rules for public
comments so that practical difficulties can be pointed out before finalising
the rules.
(a) the LLP was a party to such agreement
instead of the company, and
(b) for any reference to the company,
there was substituted in respect of
anything to be done on or after the
date of registration a reference to the
LLP.
(xi) All deeds, contracts, schemes, bonds, agreements,
applications, instruments and arrangements
subsisting, immediately before
the date of registration of LLP, relating
to the company or to which the company
is a party, shall continue in force on or
after that date as if they relate to the LLP
and shall be enforceable by or against the
LLP as if the LLP was named therein or
was a party thereto instead of the company.
(xii) Every contract of employment to which
clauses (x) and (xi) above apply, shall
continue to be in force on or after the
date of registration of LLP, as if the LLP
was the employer thereunder instead of
the company.
(xiii) Every appointment of the company in any
role or capacity which is in force immediately
before the date of registration of
LLP shall take effect and operate from
that date as if the LLP was appointed.
(xiv) Any authority or power conferred on the
company which is in force immediately before
the date of registration of LLP shall
take effect and operate from that date as
if the LLP was appointed.
(xv) The provisions of clauses (vi) to (xiv)
above shall apply to any approval, permit
or licence issued to the company under
any other law, which is in force immedi-
ately before the date of registration of
LLP. This will be subject to the provisions
of the law under which such approval,
permit or licence is issued.
(xvi) LLP shall ensure that for a period of 12
months commencing not later than 14
days after the date of registration of LLP,
every official correspondence of the LLP
bears the following -
(a) a statement that it was, as from the
date of registration, converted from
a company into a LLP.
(b) the name and registration No. of the
company.
From provisions of the Third and Fourth Schedules
it is not clear as to what treatment should
be given to the amount standing to the credit of
share capital in the company which is converted
into LLP. In the absence of any provision in LLP
Bill, it is possible to take the view that the amount
of paid-up share capital shall be credited to the
capital account of each partner in proportion to
his/her shareholding in the company on the date
of conversion into LLP. This will apply both to
Equity and Preference Capital. So far as credit
balances of General Reserve and other reserves
are concerned, the same can be retained by LLP
or transferred to the Credit of capital or loan
account of each equity shareholder in the proportion
of his/her shareholding. Whatever treatment
is to be given in the accounts should be recorded
in the Partnership Agreement.
From the above discussion it will be noticed that
a partnership firm, with unlimited liability of partners,
can now be converted into limited liability
LLP by following the above simplified procedure
stated above. Similarly, a private limited company
or a closely held unlisted public company can also
THE CHARTERED ACCOUNTANT 1023 DECEMBER 2008