Senate’s Standing Committee on Finance and Revenue has approved the Limited Liability Partnership Bill 2017 (LLP) on Thursday. It is being considered as an up-to-date and internationally recognizable business vehicle for entrepreneurs.
The proposed law enables a new form of business structure which will help fill the gap between business firms like sole proprietors and partnerships, where the partners’ liability is unlimited and where the members enjoy the benefits of limited liability.
While briefing the committee, Securities and Exchange Commission of Pakistan (SECP) Chairman, Zafar Hijazi, said it is well known that it’s a business requirement to have a framework which can provide flexibility suitable for small and medium enterprises or the service sector.
The services sector has been playing a major role for the country’s economy and the range of services continue to grow more diverse. To assist such enterprises, the government has passed the new bill.
Benefits of LLP
The main advantage of LLP is that it does not need complex procedural or legal requirements for large-scale companies.
The committee was briefed that Pakistan’s growth is contingent upon local professional and entrepreneurs. The introduction of LLP will be a platform which will put these professionals and entrepreneurs on par with their international counterparts through a flexible and innovative framework.
LLP will be a corporate body with the flexibility of general partnership but will avail all the advantages of a limited liability company (LLC). A partner’s right to a share of the profits would be completely or partially transferable. However, the transfer of rights will not cause dissolution of the LLP.
Current private companies will also be allowed to convert firms into LLPs. Companies under the new framework will be taxed as a partnership, but will have the benefits of being a corporate (LLC), separate juristic entity and have perpetual succession, though distinct from its partners. Traditional partnerships lack such benefits.
Once set forth, LLP will provide assist in corporatization of Pakistan’s economy and will create new business opportunities as the new framework does not have a minimum capital contribution requirement.
Futures Exchanges (Licensing and Operations) Regulations Draft
In a separate development, the SECP is asking for suggestions on the draft for Futures Exchanges (Licensing and Operations) Regulations. The last date for comments on the draft is April 21st, 2017.
The draft includes regulations for the application of fit and proper criteria to the majority shareholders, directors and senior officers. The new regulation also requires composition of a board of directors, the appointment of a Chief Executive Officer (CEO) with approval from the SECP, the constitution of a risk committee and a Chief Risk Officer.