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Amarchand wants to convert to LLP

Amarchand Mangaldas is planning to convert to a limited liability partnership (LLP) once the structure is finalised and has been sanctioned by the Bar Council of India.

Amarchand co-managing partner Shardul Shroff (pictured) told Legally India that he would like the firm to become an LLP when the regulatory details are clear.

Shroff predicted: "As soon as there is clarity from the professional bodies and the taxation principles applicable, several Indian professional firms would shift to the LLP / LLC model as it supports the younger generation of partners and gives them immunity of limited liability for the fault of other partners of the firm."

He added that an LLP or limited liability company (LLC) structure would also make it considerably easier to manage a large firm.

"This is a step in the right direction as it enables larger agglomeration of professionals without being constrained by the 20 partner limit under the Indian Partnership Act 1932," he said.

Amarchand currently has a total 43 partners but operates as three separate partnerships for the purposes of keeping within the limit.

The Limited Liabilities Partnership Act was passed in late 2008 and is hoped to enable Indian law firms to grow and compete more fairly with foreign firms if liberalisation takes place.

How an LLP will be treated for tax purposes has not yet been decided. But Shroff and observers expect that the issue will be addressed in the upcoming Finance Bill and 6 July 2009 budget announcement.

A main question concerns whether an LLP will be tax transparent or whether the corporate entity is taxed in addition to its individual partners.

Shroff commented that the LLP structure was a welcome step in the globalisation of India and added that LLPs would also drive the development of insurance principles of the professional liability of partnerships.

Currently India has no requirement for law firms to be insured and no firms are commonly known to have taken out professional liability insurance.

An LLP is an independent corporate entity where the liability of its individual partners is limited.

On the other hand, LLPs also impose additional principles of transparency, including the auditing and public disclosure of firms' financial accounts.

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