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Can CS in practice work as a designated partner?

Upasna Agarwal A.C.S (Company Secretary) (26 Points)

20 June 2010

What requirements needs to be fulfilled for Company Secretary in practice and advocates to continue to render their attestation and appearance before superior courts, on becoming designated partners of LLP? Do they have to take prior approval from their respective council to work in same capacity as individual under LLP name? Please guide us with full details.

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2 Replies

Kiran Toshniwal (Practicing Company Secretary) (142 Points)
Replied 21 June 2010

ATTENTION PRACTISING COMPANY SECRETARIES

Resolution under regulation 168 of the Company Secretaries Regulations, 1982 allowing members in practice to carry out non-attestation services through the new business structure of Limited Liability Partnership.

The Council had at the 156^th meeting held on 19^th – 20^th March, 2005, in exercise of its powers under regulation 168 of the Company Secretaries Regulations, 1982 accorded general permission to members in practice to become non-executive director/promoter/promoter director/subscriber to the Memorandum and Articles of Association of a company the objects of which include areas which fall within the scope of the profession of Company Secretaries irrespective of whether or not the practising member holds substantial interest in that company.

The Council had also allowed members in practice to become non-executive directors/promoter/promoter director/subscriber to the Memorandum and Articles of Association of a company which is engaged in any other business or occupation provided that the practising member does not hold substantial interest in the company.

The term non-executive director was defined to mean an ordinary director who is required to attend the meetings of the board or its committees only, not paid any remuneration except the sitting fees for attending the board/committee meetings and any remuneration to which he is entitled as ordinary director, and devoting his time for the company only to attend meetings of the board or committee thereof and not for any other purpose.

In line with the aforesaid decisions, the Council has passed the following resolution under regulation 168 allowing Company Secretaries in Practice to become partners of LLP, the objects of which include areas which fall within the scope of non-attestation services of the profession of Company Secretaries or in any other business or occupation.

“Resolved that under regulation 168 of the Company Secretaries Regulations, 1982, the Council gives general permission to the members in practice to :

(a) become passive partner of a limited liability partnership (LLP) the objects of which include carrying out non-attestation services which fall within the scope of the profession of Company Secretaries irrespective of whether or not the practising member holds substantial interest in that LLP;

(b) become passive partner of LLP which is engaged in any other business or occupation provided that the practising member does not hold substantial interest in that LLP.

For the purposes of the above resolution:

(i) “Attestation Services” include services which require signing any certificate, document, report or any other statements relating thereto on behalf of a Company Secretary in Practice or a firm of such Company Secretaries in his or its professional capacity or which require signing anything that is required to be signed by a Company Secretary in practice.

(ii) Non-attestation Services” means services which are not attestation services.

(iii) A “passive partner” means a partner of LLP who fulfils the following conditions:

(a) he must not be a designated partner;

(b) subject to the LLP agreement, he may make agreed contribution to the capital of LLP and receive share in the profits of the LLP; and

However, none of the following activities shall constitute taking part in the management of the LLP:

(1) Enforcing his rights under the LLP agreement (unless those rights are carrying out management function).

(2) Calling, requesting, attending or participating in a meeting of the partners of the LLP.

(3) Approving or disapproving an amendment to the partnership agreement.

(4) Reviewing and approving the accounts of the LLP;

(5) Voting on, or otherwise signifying approval or disapproval of any transaction or proposed transaction of the LLP including -

(a) the dissolution and winding up of the LLP;

(b) the purchase, sale, exchange, lease, pledge, mortgage, hypothecation, creation of a security interest, or other dealing in any asset by or of the LLP;

(d) the admission or removal of a partner of the LLP;

(e) transactions in which one or more partners have an actual or potential conflict of interest with one or more partners or the LLP;

(f) any amendment to the LLP agreement;

(iv) a member shall be deemed to have a “substantial interest” in an LLP if he is entitled at any time to not less than 25% of the profits of such LLP.