llp-plt3-130614074047-phpapp01.ppt
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Limited Liability Partnerships (LLP) @
Perkongsian Liabiliti Terhad (PLT)
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Outline
Business Entities Limited Liability Partnerships (LLP)
LLP in Malaysia
LLP for Professionals Foreign LLP
Observation
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Business Entities
Generally, there 3 types of businessentities which are available all over the in
Malaysia:
(i) Sole proprietorships(ii) Partnerships / Firm
(iii) Companies- Sdn Bhd/Bhd
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AttributesType/
Attributes
Legal
Status
Limited
Liability
Existence Regulation Tax
Sole
Proprietorships
Not
a legal
entity
Not
available
Depends on
the sole
proprietor
Self
Regulated/
Registration of
Business Act1950
Income Tax
Partnerships/
Firm
Not
a legal
entity
Not
available
Depends on
the partners Partnership
Act 1961/
Contracts Act
1950
Income Tax
Companies Legal
entity
Available
Independent
from the
members-
perpetual
succession
Companies Act
1965
Corporate
Tax
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Restriction by professional
bodies
Accountants Main regulation which governs the accounting
profession is the Accountants Act 1967- section 18
Without prejudice to any other provisions of thisAct or rules or by-laws no member shall
(c) in anyway, practice as a chartered
accountant or licensed accountant other
than(i) in his own name;
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(ii)in the name or names of his partner or
partners being chartered accountants or
licensed accountants; or(iii) in the name of a firm existing at the time of the
coming into operation of this Act or formed
thereafter provided that the partners in
Malaysia are eligible to be registered as
chartered accountants or licensed accountants;
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Although the above provision does notspecifically provides for restriction for
accountants to set up practices as a company,
it is clear that the provision does not provide
company as a medium for accountants to carryout their business or practices.
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Malaysian Institute of Accountants (Membership
and Council) Rules 2001[P.U.(A)343/2001] (asamended by the Malaysian Institute of
Accountants (AMENDMENT) RULES 2002
[P.U.(A)258/2002]):
Rule 2 : member in public practice means achartered accountant or licensed accountant who,
as a sole proprietor or in a partnership, provides
or is engaged in public practice services in return
for a fee or reward for such services otherwise
than as an employee.
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Despite that the rule does not expressly statedthe restriction for accountant to practice as a
company, the Rule clearly stated that the
medium in which the practice can be carried out
is through sole proprietorships or partnerships.
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Lawyers
The main regulation which governs theprofession is the Legal Profession Act (LPA)
1976.
Other than the LPA1976, the lawyers are also
regulated by rulings and by-laws.
Chapter 1 of the Rulings, clause 1.01(l) clearly
provides that all references to a firm or a law
firm mean a firm of Advocates and Solicitorswhether a partnership or a sole proprietorship.
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The exclusion of company structure fromreferences to a firm clearly indicates that the
business of legal practices can only be carried
out in the form of sole proprietorships or
partnerships.
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Architects Act Architectural consultancy practice
7A.(1) Notwithstanding subsection 7(1), a sole
proprietorship, partnership or body corporate may
practice as an architectural consultancy practice and
recover in any court any fee, charge, remuneration or other
form of consideration for any architectural consultancy
services rendered by it pursuant to its practice as an
architectural consultancy practice carried on by virtue of
this section, if it is registered with the Board as an
architectural consultancy practice and has been issued witha certificate of registration.
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A body corporate providing architectural consultancy
services, professional engineering services and/or
quantity surveying services
Section 7B.(1) Where a body corporate carrieson a practice of providing architectural
consultancy services, professional engineering
services and/or quantity surveying services, the
Board may, subject to such conditions orrestrictions as it may deem fit to impose,
register that part of the practice providing
architectural consultancy services.
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REGISTRATION OF ENGINEERS ACT 1967
Section 7A. (1) Notwithstanding subsection7(1), a sole proprietorship, partnership or body
corporate may practice as an Engineering
consultancy practice and recover in any court any
fee, charge, remuneration or other form ofconsideration for any professional engineering
services rendered by it pursuant to its practice as
an Engineering consultancy practice carried on by
virtue of this section, if it is registered with the
Board as an Engineering consultancy practice and
has been issued with a certificate of registration.
A b d idi f i l i i
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A body corporate providing professional engineering
services, architectural consultancy services and/or
quantity surveying services.
Section 7B. (1) Where a body corporatecarries on a practice of providing
professional engineering services,
architectural consultancy services and/or
quantity surveying services, the Board may,subject to such conditions or restrictions as it
may deem fit to impose, register that part of the
practice providing professional engineering
services.
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QUANTITY SURVEYORS ACT 1967
Section 7A. (1) Notwithstanding subsection7(1), a firm, or a body corporate may practice
as consulting Quantity Surveyors and recover
in any court any fee, charge remuneration or
other form of consideration for any professionaladvice or services rendered by it pursuant to its
practice as such, if it has the written approval of
the Board, and has been issued with a valid
permit, to so practice.
A b d t idi tit i
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A body corporate providing quantity surveying
services, professional engineering services and/or
architectural consultancy services
Section 7B. (1) Where a body corporatecarries on a practice of providing quantity
surveying services, professional engineers
services and/or architectural consultancy
services, the Board may, subject to suchconditions or restrictions as it may deem fit to
impose, grant an approval to practice in respect
of that part of the practice providing quantity
surveying services.
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Limited Liability Partnerships
LLP is a hybrid business entity that combines the
best features of partnerships and company. It enjoys the attributes of a body corporate,
namely, separate legal entity, limited liability, and
perpetual succession HOWEVER the internal
regulation is based upon an agreement which isakin to a partnership agreement.
LLP shall be liable for business risks/debts but
defaulted partners shall be jointly liable with theLLP.
Partners are liable for his tortious act; e.g
negligence.
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Main Characteristics of LLP
A legal entity- as a body corporate (LLPs in UK, India,
Singapore, Labuan) or as a non-body corporate (JerseyLLP) or as a partnership (US LLP)
Attributes- similar to companies (SLE, LL, PS.etc)
Internal regulation- similar to partnerships (via agreement)
Third party protections- claw back mechanisms andminimum disclosure.
Formalities and Disclosure requirement- annual declarationof solvency- no submission of audited account/ AGMminutes
Tax status- on the entity (Labuan) or as a partnership-income of partners (UK, Jersey and Spore) or as apartnership but at fixed rate (India) or as a company(Malaysia)
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Legal Status
LLP
Body Corporate
(UK, India,
Singapore,
Malaysia)
Non-body corporate
(Isle of Jersey, UK)
Partnership(US)
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Attributes
LLP
Limited
Liability
(Partial)
Ability to
enter legal
proceedings
Perpetual
Succession
SeparateLegal Entity
Right to
own
property
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The limitation of liability in LLP is only
PARTIAL- viable for innocent partner and not to
defaulted partners. As such, partners still have
to be cautious on their duties to client as they
shall be jointly liable with the LLP for theirdefault in tort and in contracts.
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Internal Regulation
r
Agreement Between Partnersor
Default Rules
S
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Tax Status
LLP
Entity
(Labuan)
3%- trading activity
Not taxable- non-trading
Income of
Partners
(UK, Spore, US)
Partnership at
a flat rate
(India- 30%)
O h hi hli h
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Other highlights
Third party protections- claw back mechanismsand minimum disclosure.
Registration Formalities-moderate- less thancompanies but more than partnerships.
Disclosure-only submission of annual solvency/
insolvency report. Accounts- No audit requirement but keep of
records for certain years.
Partnership laws are not applicable whilst winding
up procedures/laws on companies are applicable.
LLP IN MALAYSIA
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LLP IN MALAYSIA
Agenda Labuan LLP Malaysia PLT
Legal status Body corporate Body corporateAttributes Similar to companies-
partial limited liability for
defaulted partners
Similar to companies-
partial limited liability for
defaulted partners
Internal
regulation
Partnership agreement or
default rules of the Act
LLP Agreement or default
rules of the Act
Third parties
/ creditors
protection
The word Labuan LLP as
part of the name
Keep proper accounting
records.Claw-back provision.
The word PLT as part of
the name
Keep accounting and
other recordswhich givea true and fair view of the
LLP state of affairs (7
years)
Claw-back provisions
(section 22)
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Agenda Labuan LLP Malaysia
PLT
Formalities/
Disclosure
requirement
Formal registration
Annual declaration of
solvency.
Formal registration
Annual declaration of
solvency/insolvency
Applicable
Laws
Labuan LP and LLP Act
2010
LLP Act 2012
Tax regime Labuan Entity
-Trading activity- 3%
-non-trading- not taxable
RECOMMENDATIONS
(i) Irrevocable option to
be taxed either as apartnership or a
company
(ii) Fixed rate on the
entity- attractive rate .
LLP IN MALAYSIA
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LLP for Professionals
Section 2 of LLP act 2012:professional practice means the practice as
specified in the first column of the First
Schedule which is governed by the written law
as specified in the second column of the First
Schedule, respectively;
First Schedule only provides for Chatered
Accountants, Advocates and Solicitors andCompany Secretary.
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LLP for professionals The members of the LLP shall only be
professionals such as all architects, engineers,quantity surveyors, accountants or all lawyers.
The partners shall regulate their activities by way
of contract among themselves which shall
incorporate requirement of the professionals ethicsand regulation.
The LLP cannot limit its liability below the
compulsory level of insurance that has to be takento protect clients interests.
The LLP is liable for all the business debts but the
professionals liabilities remains in tort- negligence
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Power to amend Schedules
Section 92. The Minister may, by orderpublished in the Gazette, vary , delete, add to,
substitute or otherwise amend the First
Schedule, Second Schedule and Third
Schedule.
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Foreign LLP- Part VI of LLP Act 2012
Section 44. (1) A foreign limited liability
partnership shall not carry on business in Malaysiaunless it is registered as a foreign limited liability
partnership under this Act.
Section 46. (1) Notwithstanding anything under
this Act, a foreign LLP shall appoint at all times at
least one compliance officer from amongst its
partners or persons qualified to act as secretariesunder the Companies Act 1965 who
(a) is a citizen or permanent resident of Malaysia;
and (b) ordinarily resides in Malaysia.
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Section 48 (8) The foreign limited liabilitypartnership shall be deemed to continue to exist
in Malaysia until the winding-up of its affairs in
Malaysia is completed
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Conversion from Sdn.Bhd to PLT
Section 30.
(1) A private company may convert to a limitedliability partnership if and only if
(a) there is no security interest in its assets
subsisting or in force at the time of application;and
(b) the partners of the limited liability partnership
to which it is to be converted comprises all the
shareholders of the private company and no oneelse.
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Conversion from partnership to PLT
Section 29.
(1) A conventional partnership may convert to a limitedliability partnership if and only if the partners of the limited
liability partnership to which the conventional partnership is
to be converted, comprises all the partners of the
conventional partnership and no one else.(2) In this Part, convert, in relation to a conventional
partnership converting to a limited liability partnership,
means a transfer of the properties, interests, rights,
privileges, liabilities, obligations and the undertaking of the
conventional partnership to the limited liability partnership.
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