08-16-2017, 10:06 PM
Limited Liability Partnership A Comparative Analysis
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Introduction
The importance of the Partnership Act 1890 in the historical development of partnership law in the United Kingdom is beyond question. Drafted in 1879 and finally enacted in 1890 after much debate and amendment, this seminal piece of Victorian legislation with its "rather limpid prose" and the "deceptive simplicity, born of clear and elegant expression" in which Sir Frederick Pollock clothed its provisions, was intended as partial codification of the considerable number of common law and equitable principles developed by the law courts. It has served as an example for most Commonwealth jurisdictions and has strongly influenced the American Uniform Partnership Act of 1914 (UPA). In fact, in irrespective of the UPA, the Partnership Act has served as a model for more than 30 other partnership Acts and ordinances with implementation dates ranging from 1891 to at least 1981.
Basic Concepts
1. Partnership
A Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Under the Indian Partnership Act, 1932, every partner is jointly and severally liable for all the acts of the firm.
2. General Partnership
A general partnership is formed when two or more people intend to work together to carry on a business activity. The distinguishing feature of a partnership is the unlimited liability of the partners. Each partner is personally liable for all of the debts of the partnership. That includes any debts incurred by any of the other partners on behalf of the partnership. Any one partner is able to bind the partnership by entering into a contract on behalf of the partnership.
3. Limited Partnership
A limited partnership consists of one or more general partners and one or more limited partners. The general partner is responsible for the management of the affairs of the partnership, and he has unlimited personal liability for all debts and obligations. Limited partners have no personal liability. The limited partner stands to lose only the amount which he has contributed and any amounts which he has obligated himself to contribute under the terms of the partnership agreement.
Limited Liability Partnership in India
In an increasingly litigious market environment, the prospect of being a member of a partnership firm with unlimited personal liability is, to say the least, risky and unattractive. In India, some bodies of professionals have been prohibited from practicing under an incorporated form. E.g. Development of legal profession in India has been restricted in India on account of the number of impediments in the current regulatory system which hinders Indian law firms from competing effectively against foreign firms. This would hamper the growth of Indian Law Firms in comparison to the Foreign Law Firms once the Legal Sector is opened.
The general partnership or partnership simpliciter has traditionally been the entity of choice to provide services by professionals such as lawyers, accountants, doctors, architects, and company secretaries. The unlimited liability of general partnerships under the Indian Partnership Act 1932 has become a cause for concern in the light of increase in the incidence of litigation for professional negligence, the size of the claims and the risk to a partner's personal assets when a claim exceeds the sum of the assets of the partnership