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Law firms can't agree on LLP conversion as Trilegal waits for BCI clarification

Tax

Trilegal is awaiting a response from the Bar Council of India (BCI) on whether the firm is allowed to convert to a limited liability partnership (LLP) under the Advocates Act, as start-up Vidhii Partners vowed to convert to LLP in two months and Luthra & Luthra, Nishith Desai Associates, IndusLaw and at least eight other firms have reserved respective LLP names.

Trilegal wrote a letter to the bar council of Delhi several months ago, requesting clarification on whether it was allowed for lawyers to practice in an LLP entity structure under the Advocates Act.

"We got a response from the Bar Council [of India around a month ago] that they'd like to hear us and present our arguments, so we are still in the process of figuring out the date that is convenient to everybody," said Trilegal co-founding partner Anand Prasad, adding: "We haven't heard back from them yet. Again it's on the slow burner."

"Our view is that we should be allowed to convert and LLPs should be allowed to practice law," said Prasad the firm had asked the BCI in its first letter.

Firm name reserved Date name
reservation granted
Kaden Boriss LLP (converted) 17 April 2009
IndusLaw LLP 15 May 2009
Trilegal LLP
29 June 2009
Khaitan & Co LLP
8 July 2009
Luthra & Luthra Law Offices LLP 1 October 2009
Axon Partners LLP (converted) 15 October 2009
Singhania and Partners 15 May 2009
Rajani Associates Legal LLP 29 March 2010
Universal Legal LLP
25 May 2010
Nishith Desai Associates LLP 29 June 2010

"There's an issue of whether LLPs have a different legal character," he explained, "since the Bar Council licences are issued only to individuals. Individuals can combine to form a firm but even if you're a partner in a firm you're still individually liability – if in an LLP your individual liability will get fudged."

"So we sought the clarification with them – we've said that in our view [LLP] is another sort of partnership."

Trilegal is one of several firms that have registered their LLP trading names (see table), although only two have converted to date.

BCI chairman Gopal Subramanium did not respond for comment at the time of going to press.

UPDATE 6 August, 23:55: Subramanium said: "The Bar Council will be considering Trilegal's letter in its forthcoming meeting on 22nd August. Trilegal is being asked to make a presentation."

Conflicted intentions

Khaitan & Co is understood to be seriously considering converting to LLP but partners have partly been unable to agree how to structure an LLP in a tax efficient manner.

Nishith Desai Associates managing partner Nishith Desai told Legally India two months ago that he still had concerns particularly about the capital gains tax implications of transferring assets from a traditional partnership into an LLP, as well as whether privileged communication was protected between client and law firm in an LLP.

Prasad commented: "I think what will happen is that first the LLP should be allowed to practice law, then it's for people to decide that there's a tax. If there is a tax and if it is nicer not to be taxed, then you figure out if you want to convert."

Prasad said that he thought that privilege issue would not be a concern under existing rules.

Paras Kuhad Associates breakaway firm Vidhii Partners Advocates would convert to LLP "in about two months", said its founding partner Manish Desai.

"I think it's perfectly legal because the Advocates Act permits a partnership but doesn’t specify the nature of a partnership. The only restriction is that you should not have as a partner anyone who should not be an advocate," explained Desai.

He also rejected that there would privilege or legal practice repercussions because the Advocates Act still applied to each advocate.

IndusLaw founding partner Gaurav Dani said that although IndusLaw had registered its LLP name, the firm would not be converting anytime soon.

"Until anybody else is doing it we don't think we should do it too," said Dani. "Another issue is that liability is not an issue in India as of now. The only reason I'd want to convert if I am 20 partners or more, which I am not as of now."

"It doesn't give us any immediate benefit as of now and there is no regulatory issue," he added. "Branding could be the only benefit but I don't see it as very significant."

Done deal

Two firms have already converted to LLP status, with Kaden Boriss LLP having been granted approval to use the name on 17 April 2009 and Axon Partners LLP 15 October 2009.

The government paved the way for conversion to LLP in its 2009 budget, in which it made clear that an LLP should be tax transparent like a partnership for tax purposes.

A number of commentators and lawyers are currently in disagreement about whether law firms will be able to convert to LLP or not.

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Like +1 Object -1 Anonymous guest 07 Aug 10, 04:15
I hope BCI will respond with specific clarification to Trilegal's letter immediately after cows come home! I am afraid if the people sitting there would even understand what an LLP means; what is the nature of a law firm; and how LLP will be different from a firm under Partnership Act 1932? The reason for above thought is that I am in possession of a letter issued by BCI to few law firms a few months back asking inter alia "whether the firms have any collaboration under LLP Act"! Now you can understand!
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Like +1 Object -1 Anonymous guest 07 Aug 10, 04:18
I don't understand. If you can practice as a partnership, when the Advocates Act is absolutely silent, and in fact, seems only to recognise individuals as practicioners, why would you need to go to the BCI for you to convert to an LLP? Malpractice liability issues, because you are limiting liability of partners?
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Like +1 Object -1 Anonymous guest 07 Aug 10, 04:20
Why all this brownnosing of the BCI? Who do these folks think the blooming LLP Act was passed for, anyway?
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Like +1 Object -1 Anonymous guest 07 Aug 10, 04:21
The BCI is probably evading Trilegal's query because the foreign law firm issue is being debated. Foreign firms will be a beneficiary of the LLP Act and the LLP Act was criticised by bar associations as a step towards allowing UK law firms.
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Like +1 Object -0 Anonymous guest 07 Aug 10, 04:29
I am afraid if you can able to draft anything properly.
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Like +0 Object -0 Anonymous guest 07 Aug 10, 05:38
All excuses...

first the excuse against opening up of legal sector was limit imposed on partnerships
then government introdused LLP
then the excuse of not converting was tax issues on conversion
then government clarified no adverse tax consequence
then the excuse that tax clarification was not clear enough
then this year the government further clarified
now the excuse that BCI does not recognise!

I wait for the day when the big law firms will actually walk the talk and convert themselves, until then all talk of lock-step, modified lock-step being introduced is purely hog wash.
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Like +0 Object -0 Anonymous guest 07 Aug 10, 05:49
I am told Khaitan & Co's Delhi office has already converted into a LLP
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Like +0 Object -0 Anonymous guest 07 Aug 10, 06:01
I agree with you totally. All these were excuses.

Also add to your list the excuse from Nishith regarding "loss of privilege". This takes tha cake.

Even their demand of bringing about an LLP law was an excuse. None of the proprietary Indian law firms are ever going to convert to an LLP. Reason is simple - public filing of accounts. They don't want to do it.
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Like +0 Object -0 kianganz 07 Aug 10, 11:25
BCI chairman Subramanium said: "The Bar Council will be considering Trilegal's letter in its forthcoming meeting on 22nd August. Trilegal is being asked to make a presentation."
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Like +0 Object -0 Anonymous guest 08 Aug 10, 05:35
Will the A&O connection adversely affect Trilegal's chances?
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Like +0 Object -0 Anonymous guest 12 Aug 10, 10:43
The Advocates Act 1961 says that only class of persons who can practise law are advocates. There is no mention of law firms or any type of entity. Then how come we have law firms? And what if foreign firms hire only lawyers who are registered with the local bar council. There is nothing to stop them from doing that.

Am I correct?
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Like +0 Object -0 mrlawwyer 19 Aug 14, 16:53
We are an LLP Law firm based in New-Delhi we have our registered LLP Office and we are a group of 6 partners, and we all are practicing on our own individual capacity in New Delhi High Court and various other courts, and after work we sit at our registered LLP Office for client work.

I don't see whats the Problem ??
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