In a welcome move for all Chartered Accountants across the country, Ministry of Corporate Affairs has now allowed CA’s forming Limited Liability Partnerships (LLP’s) to conduct Audits and conduct attestation work.
MCA in a General Circular dated 4th April 2011 has clarified that:-
The word “Partnership” wherever occurring in the Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980 shall mutatis mutandis be construed as including those limited liability partnerships (LLPs) where all the other partners are natural persons (individuals) and that the word “partner” shall also be construed accordingly.
Earlier LLP’s were not covered under the definition of partnership and CA’s forming LLP’s were not allowed to be appointed as Statutory Auditors. But now that MCA has allowed CA’s forming LLP’s to become Statutory Auditors, it will help Small and Medium Firms to enhance their capacity by including other non-CA professionals as well in their organisation which will help them to grow big.
MCA in the circular stated that at the time of enactment of the Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959 and the Company Secretaries Act, 1980 only one form of partnership existed in India, namely Partnership under the Partnership Act 1932. But subsequently Parliament has enacted the Limited Liability Partnerships Act, 2008.
The matter of permitting member of ICAI, ICWAI and ICSI was been examined by the Ministry. Acts governing these professionals were passed at a time when Limited Liability Partnership did not exist. It is also clear from the definitions in the Limited Liability Partnership Act that such entities are also partnerships and their members are also partners. Accordingly LLP’s shall be construed as partnership for the purpose of Section 2 of the Act governing these 3 professional institutes.
However, this clarification shall apply only to these 3 Acts and not to any other enactment where the word “partnership’ occurs
To give a much need impetus to the Small and Medium CA Firms, the Council of ICAI has decided to allow all existing CA firms to convert themselves into LLPs, which would enable CA firms to grow bigger and increase their capacity. It has also been decided that, upon conversion, firms will be permitted to retain their seniority and all benefits of merger, networking, etc., will be available to the LLPs.
ICAI expects many small and medium firms would be converting into LLP’s after this approval by the MCA and ICAI would be coming out with a format for making an application for conversion to an LLP.