Limited Liability Partnership ('LLP') is a new business entity that combines the characteristics of a company as well as a conventional partnership. It confers limited liability upon the partners of the LLP and has perpetual succession, yet flexible when it comes to internal management.
The LLP Act 2012 (“the Act”) received its Royal Assent on 2 February 2012 and published in the Gazette on 9 February 2012. As of 30 October 2015, there are 6,363 registered LLPs in Malaysia.
Here’s sharing an overview of LLP, and the differences between LLP and company + conventional partnership (or a business registered under the Registration of Businesses Act 1956). In order not to bring up unnecessary technicalities to this note, let's not quote sections from the Act.
The distinction and advantages of LLP vs Company
Among the main distinctions between an LLP and a company are:
1. LLP does not require issuance of shares;
2. LLP is not formally required to hold Annual General Meetings (AGM);
3. Its accounts need not be audited;
4. No requirement to lodge financial statements with SSM. Only key financial information is required, and such info is non-public;
5. LLP may generally carry on business with less than 2 partners for not more than six months, or longer, subject to permission from the Registrar i.e. SSM; and
6. Setting up LLP is cheap, costing approximately RM500.
Basically anyone person can become a partner in an LLP, including foreigners.
A Compliance Officer for an LLP (somewhat like a company secretary for a corporation) must either be a Malaysian citizen or Permanent Resident (PR), the latter with a local address. He/she can either be a qualified person, or if not then must be any one of the partners of that LLP itself. “Qualified person” can either be a company secretary, accountant or lawyer , just like in the case of a company.
Technically, a bankrupt person may become a partner in LLP, provided he/she must not be involved in its management, inter alia acting as Compliance Officer.
However, if a bankrupt partner wants to take part in managing the LLP, he/she must obtain leave from the Director General of Insolvency or the Court. For a partner who is adjudicated bankrupt outside Malaysia, he/she must seek leave from the Court in order to take part in the management of the LLP.
The Disadvantages of LLP (vs Company)
1. No registration of charges:
This makes LLP less attractive among some entrepreneurs, because it may be more difficult to obtain a bank loan. Imagine the bank’s dismay because it cannot become a secured creditor of the LLP!
2. The procedure to dissolve an LLP is long and costly: From having to make an online application to preparing various documents –to obtain tax clearance from the Inland Revenue Board (LHDN) including when the LLP is dormant, service of notice to all partners, the publication of 2 advertisements in nationwide newspapers, one in BM and one in English, to the making of statutory declaration, all these are tedious and cost approximately RM2,000.
If the current condition remains, it may potentially lead to the mushrooming of dormant LLPs in the future.
On the issue involving dissolution of LLP and the online application that has to be made, since the 4 documents (namely copy of LHDN notice, notice to partners, advertisements, and SD) are attached into the application using softcopy, this may raise a risk of lodgment of false documents… because the scanned documents are received and processed at face value.
The Advantages of LLP (vs Conventional Partnership)
1. LLP is a legal
entity that is separate from its partner, while a conventional partnership is
not;
2. The liability of a
partner in LLP is limited to the extent to his/her capital contribution, while the liability of a partner in conventional partnership is unlimited;
3. LLP has perpetual
succession, a conventional partnership does not; and
4. Property belongs to
the LLP and not the partners.
No comments:
Post a Comment