ISLAMABAD: The Senate Standing Committee on Finance and Revenue on Thursday approved the Limited Liability Partnership (LLP) Bill 2017, which is considered an updated and internationally acceptable business vehicle for entrepreneurs with limited capital.
The committee, chaired by Senator Saleem Mandviwalla, was informed that the proposed law provides a new form of business structure, which would fill the gaps between business firms such as sole proprietorships or partnerships, the liability of whose partners’ is unlimited, and the companies governed under the Companies Ordinance, 1984, whose members enjoy the benefits of limited liability.
Briefing the committee, Securities and Exchange Commission of Pakistan (SECP) Chairman Zafar Hijazi said it has long been recognised that businesses require a framework which provides flexibility suited to requirements for small and medium enterprises and the service sector in particular.
He said that the services sector is playing a major role in the national economy and there is a growing diversity in the range of services being offered.
“The main advantage of the LLP for business is that it will not require complex legal and procedural requirements suitable for large and widely held companies,” he added.
The committee was informed that growth of Pakistan’s economy is dependent upon local entrepreneurs and professionals, and the introduction of LLP will provide professionals’ and entrepreneurs’ a platform at par with other international jurisdiction to operate in flexible and innovative framework.
The Senate Committee was briefed that the proposed law also provides that LLP will be a corporate body, which has the flexibility of a general partnership and would avail all the advantages of a limited liability company.
Besides, the right of a partner to a share of the profits is transferable either wholly or partly. However, the transfer of any such rights will not cause dissolution of the LLP.
The law also provides the conversion of firms (including private companies) into LLPs. The LLPs is proposed to be taxed as a partnership, but will have the benefits of being a corporate, separate juristic entity, having perpetual succession but distinct from its partners whereas traditional partnership lacks such features.
Once LLP is set forth, it will provide the much needed support towards the corporatisation of the economy of Pakistan and the creation of business opportunities by roping in young entrepreneurs’ and professionals’ as incorporation of LLP does not have any requirements of minimum capital contribution among others incentives.
In another development the SECP has invited comments on draft Futures Exchanges (Licensing and Operations) Regulations that can be submitted by April 21, 2017.
The salient features of the draft regulations include the application of fit and proper criteria to the majority shareholders, directors and senior management officers.
In addition, the regulations require composition of a board of directors and related matters, the appointment of chief executive officer with approval of the SECP and the constitution of risk committee and appointment of chief risk officer.