June 01, 2021
K.P.Krishnan-led committee submits report to IFSCA Chairman Injeti Srinivas
Fund management activity in India’s GIFT City the only international financial services centre (IFSC) in India may soon get a fillip with an IFSCA appointed panel recommending the adoption of Variable Capital Company (VCC)-like legal structure for the fund industry in such IFSCs.
A VCC is basically an alternative form of corporate vehicle that dispenses with some of the key limitations of companies and LLPs and provides for higher regulatory standards than those applicable to trusts. A VCC can be used for both open-ended and closed ended alternative and traditional fund strategies.
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Expert panel on Variable Capital Company submits report to IFSCA
By IANS |
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Expert panel on Variable Capital Company submits report to IFSCA. Image Source: IANS News
New Delhi, June 1 : An expert committee has suggested separate legal framework akin to Variable Capital Company (VCC) for the purpose of conducting fund management activity in the International Financial Services Centres (IFSCs).
In its report submitted to International Financial Services Centres Authority (IFSCA) Chairperson Injeti Srinivas, the K.P. Krishnan-headed expert committee on feasibility of VCCs in the IFSCs recommended that a legal framework governing entities that undertake fund management would provide certainty and clarity to investors.
Introduction
Limited liability partnerships (LLPs) are partnerships in which the partners have limited liability. Therefore, LLPs exhibit elements of both partnerships and companies.
The Ministry of Corporate Affairs (MCA) introduced the concept of the LLP to help small and medium-sized enterprises in general and enterprises in the service sector in particular. Internationally, LLPs are the preferred vehicle for doing business in the service industry and for activities involving professionals. LLPs in India are governed by the Limited Liability Partnership Act 2008. In recent years, there has been a sharp increase in the registration of LLPs.
Proposed changes
In order to improve LLP compliance and regulate the designated partners of LLPs, the MCA has stated that it will extend certain sections of the Companies Act 2013 to the Limited Liability Partnership Act and therefore LLPs. As such, the following provisions of the Companies Act will soon apply to LLPs:
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The Kerala High Court held that a Limited Liability Partnership can form a partnership with an individual or other persons.
In this case, a partnership deed was executed between an individual and an LLP. Registrar of Firms refused registration of the partnership firm on the ground that a LLP cannot be a partner of a firm. This was challenged before the High Court contending that the LLP is liable to be treated as a person and there cannot be any objection for registering a partnership with an LLP which is a person.
According to the Registrar of Firms, provisions of the Limited Liability Partnership Act 2008 are inconsistent with that of the Indian Partnership Act, 1932, pertaining to the liability. It contended that Section 25, 26 and 49 of the Indian Partnership Act makes the partners to be jointly and severally liable with all the other partners and also severally liable for the acts of the firm, of which such person is a partner. Under Section 28 of the LLP Ac