The Ministry of Corporate Affairs has specified five new categories of professions that are eligible for forming firms under the new limited liability partnership Act. Already approved by the Cabinet, these professions are over and above the earlier categories of chartered accountants, cost accountants and company secretaries to form LLP firms.
The other professions include engineers, lawyers, architects, actuaries and financial management consultants. These professions could make LLPs among themselves or in collaboration with other specified professionals.
An LLP is a partnership in which some or all partners (depending on the jurisdiction) have limited liability. It, therefore, exhibits elements of both partnerships and corporations.
Similarly, chartered accountants, company secretaries and cost accountants can form firms among themselves or with any other professionals specified under the LLP Act.
Sources explained that in an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence and this is an important difference from that of a limited partnership.
The Cabinet is also considering ratifying the Valuation Bill, 2008, with some changes. As opposed to valuation of financial assets, this Bill will now provide for valuation of all assets which needs valuation for business purposes. Therefore, all valuation ranging from shares and stock to real estate or buildings in which valuation is to be done for any purpose will fall under the ambit of this Bill.
The Bill, under consideration of the Cabinet, provides for setting up an institute which will act as regulatory and supervisory authority for all valuations and evaluating bodies and entities.
If the Bill gets Cabinet nod, the proposed institute will control broking firms, banks, investment banks and real estate companies, which are involved in valuation exercise.
Currently, corporate valuation is done by auditors, merchant bankers, company secretaries or chartered accountants. Such valuation is required for initial public offerings, sealing mergers and amalgamations, as well as strategic alliances and corporate restructuring.
Experts say that monitoring the valuation exercise will bring in more transparency, especially in sectors like real estate. “Even for share valuation or deciding on swap ratios for listed companies, whatever the chartered accountants or merchant banking firms decide, one has to go by that. In that respect, an independent government-appointed body can decide on grievances more transparently and without bias,” said experts.