LLP Registration in Pakistan

Introduction to Limited Liability Partnership (LLP): Combining Flexibility and Limited Liability for Business Success

In the ever-evolving world of business, entrepreneurs and professionals seek corporate structures that offer both flexibility and limited liability. A Limited Liability Partnership (LLP) presents itself as an innovative solution, fusing the advantages of a general partnership with the benefits of limited liability typically associated with companies. This harmonious blend ensures that members enjoy the best of both worlds, while also streamlining compliance at a lower cost.

The Birth of LLP: A Marriage of Convenience

The concept of LLP emerged as a response to the need for a corporate structure that could adapt to diverse business scenarios. An LLP allows members to organize their internal management based on mutual agreements, akin to a general partnership. However, crucially, it shields them from unlimited personal liability, offering protection similar to that of a company.

This legal entity proves especially beneficial for small and medium-sized enterprises (SMEs) and businesses in the services sector. Globally, LLPs have become the preferred vehicle for businesses involved in professional services or related industries. The introduction of LLPs in Pakistan has opened up new avenues for entrepreneurs, professionals, and service-oriented enterprises to establish commercially efficient structures tailored to their specific needs.

Limited Liability Limited Partnership (LLLP): An Alternative Variant

Within the realm of LLPs, there exists another interesting model known as Limited Liability Limited Partnership (LLLP). This variant features one or more general partners and one or more limited partners. The LLLP model becomes particularly relevant for partnership firms where certain members require unlimited liability.

General Partnership and the Existing Legal Framework in Pakistan

Before the advent of LLPs, general partnership firms operated under the regulations outlined in the Partnership Act of 1932 in Pakistan. Under this setup, such firms were not regarded as juristic persons, leaving partners with unlimited liability for all obligations and liabilities of the firm. While general partnerships provided structural flexibility and a formal partnership relationship, they lacked the limited liability protection offered by modern corporate structures.

Registering a general partnership in Pakistan was not a compulsory requirement, leaving it to the discretion of the members to decide whether to formalize the partnership or not. The Partnership Act of 1932 defines a partnership as “the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”

In general, a partnership comprising twenty or fewer individuals could engage in lawful commercial activities or professions. However, specific cases, such as practicing law or accounting, required the formation of a partnership with twenty or more individuals, as these activities could not be carried out under the umbrella of a limited liability company as stipulated by the law.

The introduction of Limited Liability Partnerships (LLPs) in Pakistan has provided a game-changing corporate structure for businesses seeking flexibility and limited liability protection. Entrepreneurs, professionals, and enterprises in the services sector can now establish commercial vehicles that cater to their unique requirements effectively. With LLPs gaining popularity as the preferred choice globally for service-oriented industries, their adoption in Pakistan is likely to fuel business growth and innovation, promoting a vibrant and dynamic economic landscape.

Comparing General Partnership and LLP: Understanding the Differences

Limited Liability Partnership (LLP) stands as a unique legal structure that combines aspects of both general partnerships and companies, offering partners limited liability protection within an incorporated entity. This distinctive blend creates a separate legal persona for the LLP, distinguishing it from its partners. Let’s delve into a comparison between a General Partnership and an LLP to understand their key differences.

1. Liability Protection:

• General Partnership: In a partnership registered under the Partnership Act of 1932, all partners bear joint and several liability for the actions of the firm during their tenure. This means that each partner is responsible for the firm’s debts and obligations, and they can be held personally liable for any misconduct or negligence of other partners.
• LLP: In an LLP, the partners enjoy limited liability, safeguarding their personal assets from the debts and liabilities of the business. Unlike general partnerships, partners are not personally responsible for the misconduct or negligence of their co-partners, providing them with a higher level of protection.

2. Legal Recognition:

• General Partnership: A general partnership does not have a separate legal identity. It is an aggregation of individual partners, and its existence is tied to the collective partnership agreement.
• LLP: On the other hand, an LLP is recognized as a distinct legal entity separate from its partners. This means that the LLP can enter into contracts, own assets, and sue or be sued in its name.

3. Management Rights:

• General Partnership: Partners in a general partnership have the right to participate in managing the business directly. Decisions are typically made jointly by the partners.
• LLP: Similarly, partners in an LLP also have the right to manage the business directly, giving them more control over its affairs. This sets LLPs apart from companies, where shareholders elect a board of directors to manage the company.

Suitability of LLP for Business Sectors:

1. Manufacturing Sector:

LLPs have been widely recognized as a suitable business vehicle for the manufacturing sector. Many small and medium enterprises have embraced the LLP structure due to its benefits of reduced compliance burden and increased access to credit in the market.

2. Services Sector:

The services sector, especially professionals such as chartered accountants, company secretaries, and advocates, finds LLPs to be a lifeline. The flexibility of an LLP allows professionals to operate efficiently and enjoy limited liability protection.

Charitable Purpose and LLP:

LLPs are designed for mutual benefit and profit-earning through commercial activities. As a result, they are not suitable for charitable purposes. Charitable organizations are distinct entities formed to pursue welfare objectives and are subject to different legal regulations.

In conclusion, the Limited Liability Partnership (LLP) structure provides a middle ground between general partnerships and companies, offering partners limited liability protection while allowing flexibility in management. This legal entity has gained acceptance in various sectors globally, empowering businesses and professionals to operate efficiently while protecting their interests. However, due to its profit-oriented nature, LLPs are not appropriate for charitable activities.

The Eighteenth Constitutional Amendment and Its Implications on the Introduction of LLP Concept

The Eighteenth Constitutional Amendment, a significant milestone in the constitutional history of Pakistan, brought about fundamental changes in the distribution of legislative powers between the federal and provincial governments. As a result of this amendment, unincorporated businesses, such as general partnerships, now fall under the domain of the provincial government. This means that the Parliament no longer has the legislative competence to introduce laws relating to unincorporated entities like general partnerships.

However, there is an exception to this shift in legislative authority. As per Entry 31 of the Federal Legislative List in Schedule Four of the Constitution of the Islamic Republic of Pakistan, the federal government retains the power to legislate on matters related to corporate entities, including Limited Liability Partnerships (LLPs). The entry specifies that the federation has the authority to legislate on the incorporation, regulation, and winding-up of trading corporations, including banking, insurance, and financial corporations, but not those corporations owned or controlled by a province and operating solely within that province. The entry also excludes co-operative societies and corporations with objects not confined to a province, but it does not exclude universities.

From a legal standpoint, it is the opinion of experts that the term “corporation” encompasses all incorporated entities, including LLPs. Even if there were arguments suggesting that legislation concerning general partnerships is exclusively within the purview of the provinces, the Parliament still has the authority to legislate on this subject for all federal territories, including Islamabad Capital Territory. The draft law can then be forwarded to all provinces for implementation in their respective territories, adapting it to suit their specific needs and requirements.

Moreover, another option available to the Parliament is to follow the procedure laid down in Article 144 of the Constitution. This article provides a mechanism for the federal government to legislate on a matter within the legislative authority of the provinces if it is necessary to give effect to an international agreement.

In conclusion, despite the Eighteenth Constitutional Amendment transferring the legislative authority over unincorporated businesses like general partnerships to the provincial domain, the concept of LLPs falls within the scope of the federal government’s legislative powers. This amendment, while devolving significant powers to the provinces, does not impede the federal government’s ability to introduce and regulate LLPs, which have proven to be an efficient and flexible corporate structure in various jurisdictions worldwide.

Structure and Nature of Entity: Understanding the Limited Liability Partnership (LLP)

The Limited Liability Partnership (LLP) is a distinct corporate structure that offers a unique blend of features from both partnerships and companies. Let’s explore the key characteristics and nature of this entity:

Formation of LLP:

LLP is a separate legal entity and a body corporate. It exists independently of its partners and enjoys perpetual succession. To form an LLP, a minimum of two or more persons can associate for the purpose of carrying on a lawful business with the intention of making a profit. These individuals must subscribe their names to an incorporation document, which is then filed with the Registrar to establish the LLP.

Perpetual Succession:

LLPs benefit from perpetual succession, meaning the entity continues to exist even if the original partners retire, resign, or pass away. The LLP’s identity remains intact, and new partners can be admitted to carry on the business.

Governance by Agreement:

The rights and duties of partners within the LLP and those between the LLP and its partners are determined by an agreement. This agreement could either be between the partners themselves or between the LLP and its partners.

Limited Liability:

One of the defining features of an LLP is limited liability. As a separate legal entity, the LLP is responsible for its debts and liabilities to the full extent of its assets. The liability of individual partners, on the other hand, is limited to the agreed contribution they make to the LLP. This contribution can be tangible (e.g., monetary) or intangible (e.g., property or expertise) or a combination of both.

Liability of Partners:

Unlike traditional partnerships, no partner in an LLP is personally liable for the independent or unauthorized actions of other partners or any misconduct they may engage in. However, there is an exception to this limited liability. If the LLP or any partner is found to have acted with intent to defraud creditors or for any fraudulent purpose, their liabilities become unlimited for all or any of the debts or other liabilities of the LLP.

Designated/Managing Partners:

Each LLP must have at least one partner designated as the Designated/Managing Partner. This partner must be a resident in Pakistan. The law outlines the specific duties and obligations of the Designated Partners.

Exclusion of Partnership Act, 1932:

It is essential to note that the provisions of the Partnership Act, 1932, do not apply to Limited Liability Partnerships. LLPs operate under their own set of rules and regulations as prescribed by the relevant laws.

In conclusion, the Limited Liability Partnership (LLP) is a versatile and modern business structure that combines the benefits of limited liability with the flexibility of a partnership. Its separate legal identity and perpetual existence, coupled with the limited liability of partners, make it an attractive option for various businesses and professions.

 Ease of Incorporation: Registering a Limited Liability Partnership (LLP)

Incorporating a Limited Liability Partnership (LLP) is a relatively straightforward process, offering ease of registration to potential partners. To establish an LLP, the following steps need to be taken:

• Submission of Partner’s Statement: Every individual intending to become a partner of the LLP must submit a statement to the Registrar. This statement includes details such as the partner’s name, address, and other relevant information.
• Partnership Agreement: Along with the partner’s statements, the LLP must submit its partnership agreement to the Registrar. This agreement is a crucial constitutive document that defines the existence of the LLP and regulates the structure and control of the entity and its members. It outlines the duties, liabilities, and mutual rights of the partners. It is equivalent to the memorandum and articles of association in the case of a limited company.
• Contents of Partnership Agreement: Unlike the requirement of an object clause in the memorandum of association for limited companies, the LLP partnership agreement need not include an object clause. It means that the LLP can undertake any business that is permissible by law and does not intend to deceive or defraud the public.

Preparation of Statement of Accounts and Audit Review

LLPs have an obligation to maintain annual accounts that reflect a true and fair view of the entity’s state of affairs. Every year, the LLP must file a statement of accounts and solvency with the Registrar, adhering to the prescribed time and dates. The accounts of LLPs may be subject to audit, although the Registrar may exempt certain classes of LLPs from this requirement. The audit requirements for LLPs’ books of accounts are flexible, allowing the LLP to undergo an audit review conducted by any member of a professional accountancy body.

Single Annual Return and Other Filings

Unlike companies, LLPs are not required to submit an annual return to the Registrar. However, any changes in the particulars of partners or the place of business must be intimated to the Registrar using the prescribed form, providing details of the nature, cause, and effect of the changes. LLPs can submit all filings online, making the process more efficient and accessible.

In conclusion, the incorporation process for an LLP is designed to be efficient and straightforward, enabling potential partners to establish a separate legal entity with limited liability protection while adhering to relevant regulations and reporting requirements.

 Filing Days and Flat Rate Fees Structure for LLPs

To streamline the filing process and ensure the timely submission of returns, a split filing regime will be introduced for different categories of Limited Liability Partnerships (LLPs). This means that LLPs belonging to various sectors, such as trading or manufacturing, will have specific designated days for submitting their returns. This approach aims to avoid delays in processing and receiving returns, enhancing efficiency and compliance.

Additionally, a flat rate fee structure will be implemented to incentivize professionals and entrepreneurs to choose LLP as their preferred business structure. This means that a fixed fee will be applicable for all types of filings required as part of the LLP regulations, simplifying the fee system and promoting ease of doing business.

Convertibility of Status: LLP to Company and Vice Versa

The law allows single-member companies, private companies, or unlisted public companies to convert into LLPs, and vice versa, following the provisions outlined in the legislation. This conversion facility offers flexibility to businesses, allowing them to adapt their corporate structure as their needs evolve.

Taxation Issues

For income tax purposes, LLPs will be treated as Partnership Firms. Profits will be taxed in the hands of the LLP itself and not the individual partners. Dividend distribution tax will not be applicable to LLPs. The remuneration paid to partners will be taxed as “Income from Business & Profession.” Notably, there will be no capital gains tax on the conversion of partnership firms into LLPs, and capital gains on the conversion of companies into LLPs will also be exempt from taxation. Additionally, LLPs will not be eligible for presumptive taxation.

In conclusion, the legislation for LLPs in Pakistan aims to simplify filing procedures, offer flexibility in corporate structures, introduce a separate Registrar of LLPs, and align relevant provisions while providing favorable tax treatment for LLPs. These measures collectively contribute to creating a business-friendly environment and encouraging entrepreneurs to adopt the LLP structure for their ventures.

Comparison between General Partnership and LLP

Below is a comparison table highlighting the key differences between a General Partnership and a Limited Liability Partnership (LLP):

S.No. Particular Limited Liability Partnership General Partnership

• Liability: Partners have limited liability because they can bind the LLP with their actions, but not other partners. Partners have unlimited liability and remain liable for the unlawful acts of other partners.
• Body Corporate: An LLP is treated as a separate legal entity or juristic person. A partnership is not treated as a juristic person.
• Legal Entity: An LLP is a separate legal entity from its partners. A partnership is not a separate entity, and the partners are collectively referred to as a firm.
• Perpetual Succession: LLPs have perpetual succession, irrespective of the death or retirement of any partner. A partnership can be dissolved upon the death or retirement of a partner.
• Minimum Partners: A minimum of 2 partners is required to form an LLP. The same applies to a general partnership.
• Dissolution: An LLP cannot be dissolved by the partners; it continues to exist unless formally wound up. A partnership can be dissolved at the will of the partners.
• Maximum Partners: There is no limit on the number of partners in an LLP. A general partnership cannot have more than 20 partners.
• Registration: LLPs require compulsory registration with the Registrar of LLP. General partnerships have optional registration with the Registrar of Firms.
• Property: LLPs can own property, assets, liabilities, rights, privileges, and obligations as they enjoy a separate legal existence. Partners in a general partnership cannot hold property in the firm’s name.
• Partnership Act, 1932: The provisions of the Partnership Act, 1932, do not apply to LLPs. The provisions of the Partnership Act, 1932, apply to general partnerships.
• Common Seal: An LLP is required to have a common seal, which represents the signature of the LLP. A general partnership does not require a common seal.
• Ownership of Assets: In an LLP, the LLP itself owns the assets, and partners have only their capital contributions in the LLP. In a general partnership, partners have joint ownership of all the assets.
• Liability: In an LLP, the liability of partners is limited to their capital contribution, except when a partner acts with intent to conduct fraud. In a general partnership, partners have unlimited liability.
• Agency Relationship: Partners are agents of the LLP in an LLP structure. In a general partnership, partners are agents of the firm and each other.
• Contracts/Business Transactions: A partner can enter into contracts with the LLP in an LLP structure. In a general partnership, a partner cannot enter into contracts with the firm.
• Compromise/Arrangements/Merger/Amalgamation: Provisions exist in all jurisdictions for compromise, arrangements, mergers, and amalgamations for LLPs. There are no specific provisions for these actions in a general partnership.
• Rights/Duties/Obligations of Partners: The rights, duties, and obligations of partners in an LLP are governed by the Partnership Agreement. In a general partnership, these aspects are governed by the partnership deed.

In summary, while both general partnerships and LLPs involve collaboration between partners, the LLP structure offers certain advantages such as limited liability protection, separate legal entity status, and perpetual succession, making it an attractive option for businesses seeking flexibility and protection.

Overview of Pakistan’s Limited Liability Partnership Act, 2017

Introduction:

The Limited Liability Partnership Act, 2017, is a crucial legislation in Pakistan that aims to provide provisions for the incorporation, regulation, and winding up of limited liability partnerships as body corporates. This act was enacted to facilitate businesses by offering a hybrid structure that combines the benefits of limited liability with the operational flexibility of partnerships.

Scope and Applicability:

• The Act extends to the entire territory of Pakistan.
• It came into force immediately after its enactment, but different dates may be appointed for different provisions.

Definitions:

The Act provides several definitions for key terms, such as:

• “Address” refers to the residential address of an individual partner or the registered office address of a body corporate partner.
• “Advocate” means a qualified legal practitioner.
• “Body corporate” includes limited liability partnerships registered under this Act, both within and outside Pakistan, and certain entities specified by the Federal Government.
• “Business” encompasses all trades, professions, and occupations.
• “Chartered Accountant” and “Cost and Management Accountant” have the same meanings as defined in their respective ordinances.
• “Commission” refers to the Securities and Exchange Commission of Pakistan.
• “Court” designates the Company Bench of a High Court as provided in the Companies Ordinance, 1984.
• “Designated Partner” denotes a partner designated as such pursuant to section 10 of the Act.
• “Financial year” refers to the period from July 1 to June 30 of the succeeding year.

Limited Liability Partnership and Agreements:

• A “Limited Liability Partnership” is a partnership registered under this Act, offering limited liability to its partners.
• “Limited Liability Partnership Agreement” is a written agreement between partners that determines their mutual rights, duties, and their relation to the LLP.

Registrar and Officer:

• “Registrar” refers to the official responsible for registering limited liability partnerships.
• “Officer” includes managers, receivers, and liquidators of the LLP.

The Limited Liability Partnership Act, 2017, represents a significant step towards modernizing Pakistan’s business structure. By providing a framework for the formation and functioning of LLPs, the Act offers entrepreneurs and professionals a viable alternative to traditional partnership models. The Act aims to foster business growth and attract more investments while ensuring that businesses operate with limited liability protection and greater flexibility in their internal governance.

PART II – Nature of Limited Liability Partnership

3. Separate Legal Personality:

• A limited liability partnership (LLP) is a body corporate upon registration under this Act, and it possesses a distinct legal entity separate from its partners.
• The LLP enjoys perpetual succession, meaning its existence remains unaffected by changes in its partners.

4. Capacity and Execution of Documents:

• A registered LLP has the capacity to sue and be sued in its name.
• The LLP can acquire, own, hold, develop, or dispose of both movable and immovable property.
• It is entitled to have a common seal for official purposes.
• An agreement made in writing before LLP registration between subscribers to the incorporation document may impose obligations on the LLP, subject to ratification by all partners after registration.
• Until the ratification, the person acting on behalf of the LLP will be personally bound by the contract, unless expressly agreed otherwise.
• Contracts on behalf of the LLP shall be made in writing under the common seal, binding the LLP and its successors as well as all parties involved.
• A designated partner of the LLP may sign documents or proceedings requiring authentication.
• The LLP can authorize a person, through a writing under the common seal, to execute deeds on its behalf. The deed, when signed by the authorized agent or attorney, shall have the same effect as if under the common seal.
• The authority of such an agent or attorney shall continue until the period specified in the instrument of authority or until notice of revocation is given.

Penalties for Misuse of LLP Name and Seal:

• Using or authorizing the use of a seal that does not bear the LLP’s name or issuing business documents without the LLP’s name mentioned may result in an offense punishable by a fine of up to five hundred thousand rupees.

PART III – Registration

5. Incorporation Document:

• For registration of a limited liability partnership (LLP), two or more persons associated with the intention of carrying on a lawful business for profit must subscribe their names to an incorporation document. The document should contain specific particulars as provided in sub-section (2).
• The LLP must have a registered office where all communications, notices, and documents may be addressed and served. The LLP may change its registered office, but such a change must be notified to the Registrar within fifteen days of the change.
• The incorporation document should be filed in the prescribed manner and with the required fees as determined by the Commission through regulations.
• A statement in the form prescribed by the Commission must be filed, either by an advocate, a member of the Institute of Chartered Accountants, or the Institute of Cost and Management Accountants, engaged in the formation of the LLP, or by anyone who has subscribed their name to the incorporation document. The statement should confirm compliance with all the requirements of this Act, as well as the rules and regulations, in respect of registration and related matters.

6. Provision Related to Name:

• Every LLP must have the acronym “LLP” as the last letters of its name.
• The Registrar shall not register an LLP with a name that, in their opinion, is undesirable, inappropriate, deceptive, or designed to exploit or offend religious susceptibilities.
• No LLP shall be registered with a name suggesting or calculated to suggest patronage of a head of state, connection with the government or any government department, or any corporation set up by law.
• The Commission shall have the final authority to decide whether the name of an LLP violates the prescribed provisions.
• The LLP must display its name in a conspicuous position outside every office or place where it conducts business. Failure to do so may result in penalties.
• The Commission may prescribe regulations concerning the reservation, rectification, change, and publication of LLP names, as well as any associated fees.

7. Registration of Incorporation Document:

• Upon compliance with the requirements of clauses (b) and (c) of sub-section (1) of section 5, the Registrar shall register the incorporation document and issue a certificate confirming the registration of the LLP.
• The certificate issued by the Registrar is conclusive evidence of the LLP’s registration with the specified name.
• The Registrar may refuse to register the incorporation document if he has reasonable grounds to believe that the proposed business is undesirable, unlawful, deceptive, or contrary to national security or interest.

8. Partners:

• Any individual, body corporate, or company can become a partner in a limited liability partnership, except in the following circumstances:
• a. If the individual has been declared of unsound mind by a court with a valid finding in force.
• b. If the individual is an undischarged insolvent.
• c. If the individual has applied to be adjudicated as an insolvent, and the application is pending.
• Upon incorporation, the persons who have subscribed their names to the incorporation document automatically become partners. Others can become partners by entering into and complying with the provisions of the limited liability partnership agreement.

9. Minimum Number of Partners:

• Every limited liability partnership must have at least two partners.
• If the number of partners is reduced below two, and the LLP continues its business for more than six months or as prescribed, the sole remaining partner during that period, who is aware of carrying on the business alone, shall be personally liable for the obligations incurred by the LLP during that time.
• A person may cease to be a partner of an LLP due to death, dissolution of the LLP, or by mutual agreement with other partners, with reasonable notice.
• Every partner of an LLP acts as its agent, subject to the terms of the LLP agreement.

10. Designated Partners:

• Every LLP must have at least one designated partner who is an individual and a resident of Pakistan. In cases where all partners are bodies corporate or a mix of individuals and bodies corporate, at least two individuals (partners or nominees of the bodies corporate) must act as designated partners, and one of them must be a resident of Pakistan.
• The incorporation document can either specify the designated partners or state that all partners will be designated partners.
• Any partner can become a designated partner through an agreement with other partners and may cease to be one through a similar agreement.
• If a vacancy arises for any reason, the LLP must appoint a designated partner within thirty days. If not appointed, every partner shall be deemed a designated partner.
• An individual cannot become a designated partner without prior consent, and the LLP must file the particulars of the designated partner’s appointment with the Registrar within thirty days.
• An individual eligible to be a designated partner must meet the conditions and requirements specified by the Commission through regulations.
• A designated partner ceases to hold that position if they or the body corporate/company for which they are a nominee cease to be a partner in the LLP.
• Unless stated otherwise in the Act, a designated partner is responsible for ensuring the LLP’s compliance with all provisions of the Act, including filing documents, returns, statements, and reports, as specified in the LLP agreement.

11. Joint Liability:

If the LLP violates the provisions of sections 8, 9, and 10, both the LLP and every designated partner shall be held liable and punishable with a fine that may extend to one million rupees.

12. Relationship of Partners:

• The rights and duties of the partners in a limited liability partnership, as well as the rights and duties of the LLP and its partners, are determined by the limited liability partnership agreement between the partners.
• The limited liability partnership agreement and any modifications to it must be filed with the Registrar as per the prescribed form, manner, and fee set by the Commission through regulations.
• Any written agreement made before the incorporation of the LLP among the persons who subscribe to the incorporation document may impose obligations on the LLP. However, such an agreement must be ratified by all partners after the incorporation of the LLP.
• In the absence of an agreement on any matter, the rights and duties of the partners and the LLP will be determined by the provisions set out in the First Schedule.

13. Cessation of Partnership Interest:

• A person may cease to be a partner of an LLP in the following ways:
• a. Through an agreement with the other partners.
• b. In the absence of an agreement, by giving a notice of at least thirty days to the other partners about their intention to cease as a partner. The LLP must also deliver written notice to the Registrar about the cessation.
• A person may also cease to be a partner due to death or the dissolution of the LLP.
• If a person has ceased to be a partner, they will still be regarded as a partner in relation to anyone dealing with the LLP, unless:
• a. The concerned person has notice that the former partner is no longer part of the LLP.
• b. Notice of the former partner’s cessation has been delivered to the Registrar.
• Cessation of partnership does not automatically discharge the former partner from any obligations incurred while being a partner.
• When a partner ceases to be a part of the LLP, the former partner or the person entitled to their share (due to death or insolvency) shall receive an amount equal to:
• a. The capital contribution actually made by the former partner to the LLP.
• b. Their right to share in the accumulated profits of the LLP after deducting any losses as of the date the former partner ceased to be a partner.
• A former partner or the person entitled to their share cannot interfere in the management of the LLP unless otherwise provided in the LLP agreement.
• Failure to comply with subsection (6) by a former partner or their personal representative or liquidator constitutes an offense.

14. Registration of Changes in Partners:

• A limited liability partnership must ensure that the following notices are filed with the Registrar within fifteen days:
• a. Notice of a person becoming or ceasing to be a partner or designated partner.
• b. Notice of any change in the name or address of a partner (in the case of a designated partner).
• If all partners of the LLP are designated partners, notice under point (a) is not required.
• The notices filed with the Registrar must be in the prescribed form, accompanied by the appropriate fee, signed by the designated partner, and authenticated as per the regulations set by the Commission.
• If the LLP fails to comply with these registration requirements, both the LLP and every designated partner involved shall be subject to a fine of up to one million rupees.
• If a partner ceases to be part of the LLP and has reasonable cause to believe that the LLP may not file the required notice, they may file the notice themselves. The Registrar shall obtain confirmation from the LLP unless the LLP has already filed the notice.

15. Extent of Liability of Limited Liability Partnership:

• The limited liability partnership is not bound by any act done by a partner if:
• a. The partner did not have authority to perform that particular act on behalf of the LLP.
• b. The other party dealing with the partner either knew that the partner lacked authority or did not believe the partner had authority to act on behalf of the LLP.
• The LLP is liable for any wrongful act or omission of its partner carried out within the course of the LLP’s business or with its authority.
• Any obligation of the LLP, whether arising from a contract or otherwise, is solely the obligation of the LLP, and its liabilities are met from its property.

16. Extent of Liability of a Partner:

• A partner is not personally liable, directly or indirectly, for any obligation of the LLP solely by reason of being a partner.
• The personal liability of a partner for their own wrongful act or omission is not affected, but the partner will not be personally liable for the wrongful acts or omissions of other partners of the LLP.

17. Unlimited Liability in Case of Fraud:

• If an act is carried out by the LLP or any of its partners with the intent to defraud creditors or for any fraudulent purpose, the liability of the LLP and partners involved in such acts shall be unlimited for all debts or liabilities of the LLP. However, if a partner is involved in such an act, the LLP will be liable to the same extent as the partner, unless the LLP proves that it was done without its knowledge or authority.
• Any person who was knowingly a party to carrying on the business with fraudulent intent shall be punishable with imprisonment for up to two years and a fine of up to two million rupees.

18. Form of Contribution:

• The form and value of a partner’s contribution to the limited liability partnership will be decided mutually by the partners.
• The contribution may consist of various elements, such as money, negotiable instruments, properties (movable and immovable), valuable rights, intangible assets, knowledge, skills, etc., which the partners believe will add value to the partnership.

19. Liability for Contribution:

• The obligation of a partner to contribute money, property, or other benefits, tangible or intangible, to the limited liability partnership will be as per the terms specified in the limited liability partnership agreement.
• Creditors of the limited liability partnership, who extend credit or rely on any obligations specified in the agreement without knowledge of any compromises between partners, can enforce the original obligations against the partner involved.

20. Maintenance of Books of Accounts, Other Records, and Audit:

• The limited liability partnership must maintain proper books of accounts related to its affairs for each year of its existence on an accrual basis and according to the double-entry system of accounting. These books of accounts should be kept at the registered office for a prescribed period.
• Within four months from the end of each financial year, the limited liability partnership must prepare a statement of accounts for that financial year, signed by the designated partners, indicating their acceptance of the statement.
• The Commission may specify certain classes of limited liability partnerships that need to file the statement of accounts with the Registrar every year. This filing should be done in the prescribed form, manner, and accompanied by the required fee as specified by the Commission through regulations.
• The statement of accounts of limited liability partnerships should be audited in accordance with the regulations prescribed by the Commission. However, the Commission has the authority to exempt certain classes of LLPs from this audit requirement.
• Only chartered accountants are qualified to be the auditors of a limited liability partnership.
• Failure to comply with the provisions of this section may lead to fines, both for the LLP itself and for its designated partners.

21. Inspection of Documents Kept by Registrar:

The incorporation document, names of partners, and any changes made therein, along with other documents filed by the limited liability partnership, are available for inspection at the Registrar’s office during business hours. Any person can access these documents, subject to the regulations and fees prescribed by the Commission.

22. Penalty for False Statement:

If any person makes a false statement in any return, statement, or document required by or for the purposes of this Act, and:

• Knowingly provides false information in any material particular, or
• Omits any material fact knowing it to be material,
• they shall be liable to punishment. The penalty may include imprisonment for a term of up to two years, or a fine that may extend to two million rupees, or both.

23. Filing and Registration of Documents:

• The Registrar has the authority to examine any document required or authorized by this Act to be filed or registered with the Registrar. If the document:
  • Does not comply with the legal requirements or regulations set by the Commission,
  • Is incomplete due to any defect, error, or omission,
  • Is insufficiently legible or written on non-durable paper,
  • Is not properly authenticated, or
  • Is not in the prescribed form (if any),
  • the Registrar can refuse to accept the document for filing or registration. The limited liability partnership may be directed to file a revised document within a specified period or amend and resubmit the document.
• If the contents of a document are found to be defective, false, forged, or incapable of rectification, the Registrar can issue a written order to return or cancel the registration of the document.
• If the Registrar returns or cancels the registration of a document under sub-section (2), it will not be considered as delivered in accordance with the provisions of the Act.
• The registration or filing of a document with the Registrar does not create any presumption regarding the validity or invalidity of the document or the correctness of the information it contains.

24. Partner’s Transferable Interest:

• A partner’s rights to a share of profits, losses, and distributions in the limited liability partnership, as specified in the partnership agreement, are transferable either wholly or in part. Any such transfer must be communicated to the Registrar within seven days.
• The transfer of a partner’s rights, as mentioned in sub-section (1), does not lead to the disassociation of the partner or the dissolution and winding up of the limited liability partnership.
• However, the transfer of rights does not automatically grant the transferee or assignee the right to participate in the management or activities of the limited liability partnership or access information about its transactions.

25. Conversion from Firm to Limited Liability Partnership:

The Second Schedule of the Act contains provisions that govern the conversion of a firm into a limited liability partnership.

26. Conversion from Private Limited Company to Limited Liability Partnership:

The Third Schedule of the Act contains provisions that govern the conversion of a private limited company into a limited liability partnership.

27. Foreign Limited Liability Partnership:

• A foreign limited liability partnership is not allowed to carry on business in Pakistan unless it is registered as a foreign limited liability partnership, as prescribed by the regulations.
• The Federal Government is empowered to make rules regarding the establishment of a place of business by foreign limited liability partnerships within Pakistan and the conduct of their business. Through notification in the official Gazette, it may also specify provisions of the Act that shall apply to foreign limited liability partnerships, with certain exceptions, modifications, and adaptations.
• Apart from the specific rules and notifications mentioned in the preceding points, all other provisions of this Act apply to foreign limited liability partnerships.

28. Compromise, Arrangement, or Reconstruction of Limited Liability Partnerships:

• The Federal Government is authorized to make rules concerning compromise, arrangement, or reconstruction of limited liability partnerships. It may also issue a notification in the official Gazette specifying provisions of the Act that apply to such schemes, with certain exceptions, modifications, and adaptations.
• For any compromise, arrangement, or reconstruction under sub-section (1), all other provisions of this Act shall apply.

29. Winding Up:

The winding up of a limited liability partnership can be either voluntary or by the Court.

30. Circumstances for Winding Up by Court:

A limited liability partnership may be wound up by the Court under the following circumstances:

a) If the limited liability partnership itself decides to be wound up by the Court.

b) If the number of partners of the limited liability partnership is reduced below two.

c) If the limited liability partnership is unable to pay its debts.

d) If the limited liability partnership has acted against the interests of Pakistan’s sovereignty, integrity, security of the State, or public order.

e) If the limited liability partnership has failed to file the statement of accounts with the Registrar for five consecutive financial years.

f) If the limited liability partnership is involved in unlawful or fraudulent activities.

g) If the Court deems it just and equitable that the limited liability partnership be wound up.

31. Procedure for Winding Up:

• The Federal Government is authorized to make rules regarding the winding up and dissolution of limited liability partnerships. It may also issue a notification in the official Gazette specifying provisions of the Act that apply to the winding up and dissolution proceedings, with certain exceptions, modifications, and adaptations.
• Apart from the specific rules and notifications mentioned in the preceding point, all other provisions of this Act apply to the procedure for winding up.

32. Non-applicability of the Partnership Act, 1932:

The provisions of the Partnership Act, 1932, do not apply to a limited liability partnership, unless otherwise provided in this Act.

33. Business Transactions of Partners with Limited Liability Partnership:

A partner may lend money to the limited liability partnership and engage in other business transactions with it, as prescribed. In such transactions, the partner shall have the same rights and obligations as a person who is not a partner.

34. Application of Company Law:

The Federal Government has the authority to issue a notification in the official Gazette directing that certain provisions of the Ordinance (this Act) shall apply to any limited liability partnership, either in their entirety or with specific exceptions, modifications, and adaptations as mentioned in the notification.

35. Electronic Filing of Documents:

• Any document that needs to be filed or registered under this Act can be submitted in an electronic format, subject to the conditions and manner prescribed by the Commission through regulations.
• A certified copy or extract of any document electronically filed with or submitted to the Registrar will be considered as valid as the original document and admissible as evidence in any legal proceeding.
• Any information provided by the Registrar and certified as a true extract from a filed document will be admissible as evidence in any proceeding and presumed to be accurate, unless evidence to the contrary is presented.

36. Payment of Default Fee:

If a document or return required to be filed or registered with the Registrar is not submitted on time and is allowed to be filed later, a default fee of five thousand rupees for each day of delay, in addition to the regular fee, will be charged. This is applicable without prejudice to any other actions or liabilities under this Act.

37. Power of Registrar to Strike Defunct Limited Liability Partnership off Register:

If the Registrar has reasonable cause to believe that a limited liability partnership is not conducting its business or operating in accordance with the provisions of this Act, or has failed to comply with any provision of this Act, the Registrar may strike off the name of the limited liability partnership from the register of limited liability partnerships. The procedure for this will be prescribed by the Commission through regulations. The regulations may also include provisions for voluntary strike off from the register and for dormant limited liability partnerships.

38. Penalty for Improper Use of the Term “Limited Liability Partnership” or “LLP”:

If any person or group of persons carries on business under a new name or title that includes the words “limited liability partnership” or “LLP” or any contraction or imitation of these words as the last word or words, without being duly incorporated as a limited liability partnership, they shall be liable to a fine that may extend up to two million rupees.

39. General Penalties:

Any person found guilty of an offense under this Act for which no specific punishment is provided shall be liable to a fine that may extend up to one million rupees. Additionally, they may be subject to a further fine of up to ten thousand rupees for every day the default continues after the first day.

40. Offenses by Limited Liability Partnerships:

If an offense under this Act is committed by a limited liability partnership, the partner(s) or designated partner(s) responsible for the management of the limited liability partnership, as well as the limited liability partnership itself, shall be considered guilty of the offense and may be proceeded against and punished accordingly.

41. Appeal to Appellate Bench:

Any person who is dissatisfied with an order or decision of the Registrar or any Commissioner or officer of the Commission may file an appeal to the Appellate Bench. The relevant provisions of section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 shall apply to such appeals. The appeal must be filed within sixty days of the date of the decision and accompanied by the prescribed fee.

42. Appointment of Registrar of Limited Liability Partnerships:

The Commission has the authority to designate an officer of the Commission as the Registrar of limited liability partnerships and appoint additional Registrars, Joint Registrars, Deputy Registrars, and Assistant Registrars as required for the proper administration of this Act. The Registrar shall be responsible for the implementation of the Act and the collection of fees, and the Commission may issue directions to the Registrar concerning the exercise of powers and functions. The Commission may also delegate powers, functions, and duties to any person subject to conditions or restrictions deemed appropriate.

43. Power of Registrar to Obtain Information:

The Registrar has the authority to require any person, including present or former partners, designated partners, or employees of a limited liability partnership, to provide information, answer questions, or make declarations in writing for the purpose of carrying out the provisions of this Act. Failure to comply with the Registrar’s summons or requisition may result in a fine of up to two million rupees.

Inspection of Books of Account by Registrar, etc.:

(1) The books of account and other books and papers of every limited liability partnership shall be open for inspection by the Registrar or any officer authorized by the Commission if deemed necessary.

(2) Every partner, officer, or other employee of the limited liability partnership is required to produce to the person making the inspection all the books of account and other books and papers of the limited liability partnership under their custody or control and provide any statements, information, or explanations related to the affairs of the limited liability partnership as requested within the specified time and place.

(3) It is the duty of every partner, officer, or other employee of the limited liability partnership to provide reasonable assistance to the person making the inspection.

(4) During the inspection, the person authorized may make copies of the books and papers or place marks of identification on them to show that the inspection has been conducted.

(5) After the inspection is completed, the authorized officer shall submit a report to the Commission.

(6) The person authorized to conduct the inspection has the same powers as the Registrar under this Act in relation to making inquiries.

(7) An offense is committed by a limited liability partnership or any person if they fail to produce the required documents or obstruct, intimidate, distract, harass, or hinder the Registrar during the exercise of their powers under this section.

Punishment for Default in Compliance with Provisions of Section 44:

If a default is made in complying with the provisions of section 44 (related to inspection of books and papers), the person in default shall be punishable with imprisonment for a term that may extend to one year and a fine not less than one million rupees.

Investigation of Affairs of Limited Liability Partnership:

(1) The Commission may appoint one or more competent persons as investigators upon receiving a report under section 44(5) to investigate the affairs of any limited liability partnership and report thereon as directed by the Commission.

(2) The appointed investigator has the same powers as vested in a court under the Code of Civil Procedure, 1908, while trying a suit for enforcing attendance, examining persons on oath, compelling the discovery and production of books and papers, and issuing commissions for examining witnesses.

(3) Any contravention or non-compliance with the orders, directions, or requirements of the investigator exercising powers of a court shall entail the same liabilities, consequences, and penalties as provided under the Code of Civil Procedure, 1908, and the Pakistan Penal Code, 1860.

Penalty to be Imposed by the Commission:

When a penalty is provided for any offense, contravention, or default under this Act, rules, or regulations, the Commission shall impose such penalty after providing a reasonable opportunity of hearing to the party involved.

Appeal to the Court:

(1) Any person aggrieved by the final decision of the Commission may file an appeal to the Court within sixty days of the decision being communicated to them.

(2) The Court, upon receiving the appeal, has the authority to accept, set aside, or modify the Commission’s decision, or make any other order that serves the interests of justice.

(3) For the purposes of sub-section (1), “final decision of the Commission” refers to a decision of the Appellate Bench of the Commission under section 33 of the Securities and Exchange Commission of Pakistan Act, 1997.

(4) When an appeal is filed, the Court shall decide whether to admit the appeal in part or in whole after considering the facts and circumstances of the case. However, admission of the appeal does not automatically operate as a stay, and the Commission must be given an opportunity to be heard before granting any stay.

(5) The Court shall conduct the hearing of the appeal on a day-to-day basis, and adjournments, if any, shall be granted only under exceptional circumstances, subject to a maximum of two adjournments not exceeding fifteen days each or a total of thirty days in all.

(6) If a party fails to appear and address arguments before the Court on the third hearing, the Court may proceed and decide the appeal on its merits, considering that the party has relinquished its right to address arguments.

Recovery of Penalties:

(1) Any penalty imposed by the Commission under this Act or related rules or regulations shall be payable to the Commission and can be recovered as a decree for the payment of money.

(2) The Court has the power to act as the executing court for the purpose of recovering penalties, following the provisions of the Code of Civil Procedure, 1908, for executing decrees.

(3) The Court can attach any immovable property or sell any movable property, including bank accounts, of the person or company on whom a penalty has been imposed by the Commission. Any attempt to alienate, transfer, encumber, or mortgage such property shall be void and illegal.

(4) All relevant government departments, authorities, bodies, private entities, banks, housing societies, or any other concerned entity shall be bound to assist the Commission in providing details of movable or immovable property of the judgment debtor as ordered by the Court.

50. Cognizance of Offences:

No court shall take cognizance of any offence punishable with imprisonment or fine, or both, under this Act, except on a written complaint of the facts constituting the offence, filed by an officer authorized by the Commission and signed by a commissioner. Only a court of sessions or higher shall have the jurisdiction to try such offences.

51. Power of the Federal Government to Make Rules:

(1) The Federal Government may make rules, by notification in the official Gazette, for various matters related to this Act, including matters that require prescription by the Federal Government.

(2) Before making any such rules, the draft thereof shall be published in the official Gazette to gather public opinion for a period of not less than fourteen days from the date of publication.

(3) Any rules made under sub-section (1) may prescribe a penalty of up to two million rupees for contravention, and if the contravention is continuing, an additional fine of up to ten thousand rupees for every day after the first during which the contravention continues.

52. Power to Issue Directives, Circulars, Guidelines, etc.:

The Commission has the authority to issue directives, prudential requirements, codes, circulars, guidelines, or notifications that are necessary to implement the provisions of this Act and the related rules and regulations.

Non-compliance or contravention of such directives, requirements, codes, circulars, guidelines, or notifications may result in a penalty of up to two million rupees, and if the contravention continues, an additional fine of up to ten thousand rupees for every day after the first during which the contravention continues.

53. Power to Make Regulations:

(1) The Commission may make regulations required to carry out the purposes of this Act, provided that they are not inconsistent with the rules made under this Act.

(2) Before making any regulations, the draft thereof shall be published in the official Gazette for eliciting public opinion for a period of not less than fourteen days from the date of publication.

(3) Any regulation made under sub-section (1) may prescribe a penalty of up to two million rupees for contravention, and if the contravention is continuing, an additional fine of up to ten thousand rupees for every day after the first during which the contravention continues.

54. Power of the Commission to Alter Schedules:

The Commission has the authority to alter or add any entry in the Schedules by notification in the official Gazette. Such alterations or additions will have the effect as if enacted in this Act and will come into force on the date of the notification, unless the notification otherwise directs.

55. Power to Remove Difficulty:

If any difficulty arises in giving effect to the provisions of this Act, the Federal Government may, by order published in the official Gazette, make necessary provisions to remove the difficulty.

Recommended Terms of LLP Partnership as per the LLP ACT 2017 

• Every partner in a Limited Liability Partnership may participate in the management of the business or management of the LLP.
• No partner is entitled to receive remuneration for acting in the business or management of the LLP.
• No person can be introduced as a partner without the consent of all existing partners.
• Any matter or issue related to the LLP is decided by a majority vote of the partners, with each partner having one vote. However, any change in the nature of the business requires a resolution passed by a majority of less than three-fourths of the partners.
• Each partner must provide true accounts and full information regarding the affairs of the LLP to any partner or authorized representative.
• If a partner engages in a competing business without the LLP’s consent, he must account for and pay over all profits made in that business to the LLP.
• Each partner is accountable to the LLP for any benefit derived from any transaction concerning the LLP or from using the LLP’s property, name, or business connections without the LLP’s consent.
• A majority of the partners cannot expel any partner unless there is an express agreement between the partners granting such power.

The Second Schedule – Conversion from Firm to Limited Liability Partnership:

• A firm may convert to a Limited Liability Partnership (LLP) by complying with the requirements specified in this schedule.
• The partners of the firm will be bound by the provisions of this schedule applicable to them upon conversion.
• The eligibility for conversion requires that all partners of the firm must become partners of the LLP, and no one else can be a partner in the LLP formed after conversion.
• To apply for conversion, the firm must file a statement signed by all its partners with the Registrar, providing certain particulars and fees as prescribed by the Commission.
• Upon registration of the documents, the firm will be dissolved, and its property, assets, interests, liabilities, obligations, and undertaking will transfer to the LLP.
• Pending proceedings, agreements, contracts, and appointments of the firm will continue to be enforced by or against the LLP after conversion.
• The partners of the firm, for liabilities and obligations incurred before conversion, will continue to be personally liable jointly and severally with the LLP, subject to any agreement with the LLP.

The Third Schedule – Conversion from Private Company to Limited Liability Partnership:

• A private company may convert to a Limited Liability Partnership (LLP) by complying with the requirements specified in this schedule.
• The eligibility for conversion requires that there should be no security interest in the assets of the company at the time of application and all the shareholders of the company must become partners of the LLP formed after conversion, and no one else can be a partner in the LLP.
• To apply for conversion, the company must file a statement signed by all its shareholders with the Registrar, providing certain particulars and fees as prescribed by the Commission.
• Upon registration of the documents, the company, its shareholders, and the LLP formed after conversion will be bound by the provisions of this schedule applicable to them.

Note: The information provided in the third schedule is incomplete, and there may be more provisions and details in the full document. The third schedule seems to outline the procedure and requirements for converting a private company to a Limited Liability Partnership (LLP) in Pakistan. However, without the complete text, it is challenging to provide a comprehensive summary of the entire schedule.

Summary of remaining provisions from the Third Schedule – Conversion from Private Company to Limited Liability Partnership:

• The Registrar may refuse to register a Limited Liability Partnership (LLP) if he is not satisfied with the particulars or other information furnished under the provisions of the Act. The Registrar may also require the documents to be verified in a manner he considers fit.
• Upon registration, the following effects will take place:
  • The LLP will be registered under the Act with the name specified in the certificate of registration.
  • All movable and immovable property, assets, interests, rights, privileges, liabilities, obligations, and the undertaking of the company will be transferred to and vest in the LLP without any further action needed.
  • The company will be deemed dissolved and removed from the records of the Registrar of Companies.
• If any property to which clause (b) of paragraph 7 applies is registered with any authority, the LLP must notify the authority of the conversion and the particulars of the LLP in the manner determined by the authority.
• All pending proceedings by or against the company before any court, Court, or other authority on the date of registration may be continued, completed, and enforced by or against the LLP.
• Any conviction, ruling, order, or judgment of any court, Court, or other authority in favor of or against the company may be enforced by or against the LLP.
• Existing agreements, deeds, contracts, schemes, bonds, agreements, applications, instruments, and arrangements to which the company was a party before the date of registration will continue in force as if the LLP were a party instead of the company, and any reference to the company will be substituted with a reference to the LLP.

Note: The third schedule outlines the procedure and requirements for converting a private company to a Limited Liability Partnership (LLP) in Pakistan. The schedule covers the eligibility criteria for conversion, the statement to be filed, registration process, and the effects of registration on property, agreements, and existing proceedings.

Continuance of employment: Any contract of employment to which paragraph 11 or 12 of the Third Schedule applies shall continue in force on or after the date of registration as if the Limited Liability Partnership (LLP) were the employer thereunder instead of the company.

Existing appointment, authority, or power: Every appointment of the company in any role or capacity which is in force immediately before the date of registration shall take effect and operate from that date as if the Limited Liability Partnership (LLP) were appointed. Any authority or power conferred on the company which is in force immediately before the date of registration shall take effect and operate from that date as if it were conferred on the LLP.

Application of paragraphs 7 to 14: The provisions of paragraphs 7 to 14 of the Third Schedule (both inclusive) shall not apply to any approval, permit, or license issued under any written law to the company which is in force immediately before the date of registration of the Limited Liability Partnership (LLP).

Notice of conversion in correspondence: The Limited Liability Partnership (LLP) shall ensure that for a period of twelve months commencing not later than fourteen days after the date of registration, every official correspondence of the LLP bears the following:

• A statement that it was, as from the date of registration, converted from a company to a Limited Liability Partnership (LLP).
• The name and registration number of the company from which it was converted.

Penalty for non-compliance: Any LLP that contravenes the provisions of sub-paragraph (1) shall be punishable with a fine which may extend to one million rupees, and with a further fine which may extend to ten thousand rupees for every day after the first day after which the default continues.

Note: The Third Schedule outlines the procedure and requirements for converting a private company to a Limited Liability Partnership (LLP) in Pakistan. The schedule covers various aspects such as existing contracts, appointments, authorities, licenses, and correspondence during and after the conversion process.

The Limited Liability Partnership Regulations, 2018

Introduction:

Josh and Mak International is pleased to present an overview of “The Limited Liability Partnership Regulations, 2018,” which have been formulated by the Securities and Exchange Commission of Pakistan (SECP) under the authority granted by section 53 of the Limited Liability Partnership Act, 2017 (XV of 2017). These regulations were previously published under S.R.O. 407(I)/2018 on 26th March, 2018, as required by sub-section (2) of section 53 of the Act. The purpose of these regulations is to provide a comprehensive framework for the governance and operation of Limited Liability Partnerships (LLPs) in Pakistan.

Chapter I – Preliminary:

1. Short title and commencement:

(1) These regulations shall be referred to as “The Limited Liability Partnership Regulations, 2018.”

(2) They shall come into force with immediate effect.

2. Definitions:

(1) In these regulations, unless the subject or context requires otherwise:

• (a) “Act” refers to the Limited Liability Partnership Act, 2017 (XV of 2017).
• (b) “Annexure” means any attachment to these regulations.
• (c) “Companies Act” refers to the Companies Act, 2017 (XIX of 2017).
• (d) “Electronic documents” encompass documents in electronic form and scanned images of physical documents.
• (e) “E-service” denotes any service or means provided by the Commission for the lodging or filing of electronic documents.
• (f) “Financial statements” in relation to LLP, include:
  • (i) a statement of financial position as at the end of the period.
  • (ii) a statement of profit and loss.
  • (iii) notes comprising a summary of significant accounting policies and other explanatory information.
  • (iv) comparative information in respect of the preceding period.
  • (v) any other statement as may be notified by the Commission.
• (g) “Form” refers to any form appended to these regulations.
• (h) “Incorporation documents” entail the documents prescribed under these regulations for the incorporation of LLP.
• (i) “LLP” signifies a Limited Liability Partnership registered under the Act.
• (j) “Register” includes both manual or electronic registers maintained by the registrar for recording LLP-related information.
• (k) “Schedule” denotes the fee schedule appended to these regulations.
• (l) “Statement of accounts” refers to the financial statements of the LLP.

(2) Words and expressions used but not defined herein shall have the same meaning as assigned to them in the Act, the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997), and any rules made thereunder.

In conclusion, The Limited Liability Partnership Regulations, 2018, lay the groundwork for the proper functioning and regulation of Limited Liability Partnerships in Pakistan. The regulations provide definitions, guidelines, and procedural aspects that promote transparency, compliance, and accountability within the LLP framework. It is essential for all stakeholders to familiarize themselves with these regulations to ensure smooth operations and adherence to legal requirements.

Chapter II – Provisions Related to Name

3. Reservation of Name:

(1) Any individual intending to establish an LLP must submit an application to the registrar using LLP-Form-I [Part 1] to reserve a name for the LLP. This application can be filed either online or in physical form and must be accompanied by the specified fee as per the Fee Schedule of the regulations.

(2) The applicant is responsible for ensuring that the proposed name of the LLP meets the criteria specified in section 6 of the Act and these regulations.

(3) If the registrar is satisfied that the proposed name fulfills the criteria, the name will be allowed for a period of thirty days from the date of availability.

• Note: If the applicant fails to file the application for LLP incorporation along with the required fee within the specified period, the name’s availability will be canceled. In case of refusal of the proposed name, the registrar will issue an order of refusal using LLP-Form-I [Part III].
• (4) If any person is dissatisfied with the registrar’s decision, an appeal may be filed with the Commission within thirty days of the order, as per sub-section (4) of Section 6 of the Act.

4. Prohibition of Certain Names:

(1) The following words and their combinations, either in English or any language with the same meaning, are not permissible in the name of an LLP:

(a) Federal Government, Provincial Government, Name implying association with any foreign government, Name suggesting association with any political personality, Commission, Authority, Register/ Registered, Co-operative, Bureau, Division, Department, Undertaking, Municipal, Union, Republic, Nation, President, Governor, Prime Minister, Chief Minister, Minister, Cabinet, Senate, National Assembly, Provincial Assembly, Parliament/ Parliamentary, Statute/ Statutory, Court/ Judiciary/ Judge, Jury, Administrator.

(b) Names of International bodies and abbreviations thereof, including but not limited to, United Nations, South Asian Association for Regional Cooperation, Organization of Islamic Conference, World Bank, International Finance Corporation, Asian Development Bank, Islamic Development Bank, International Monetary Fund, Red Cross, Red Crescent.

• Note: Under special circumstances and upon request from any government or authority, the Commission may allow any of the above names.

5. Rectification of Name:

An LLP registered with a name that contravenes the provisions of section 6 of the Act or these regulations, or a name obtained through false or incorrect information, may:

(a) File an application to the registrar, as provided in regulation 6, for changing or rectifying the name.

(b) If directed by the registrar, change its name within thirty days of receiving the directive, with the registrar’s approval.

• Note: The registrar must provide the LLP with an opportunity to make a representation against the proposed direction before issuing a name change directive.

6. Change of Name by LLP:

(1) An LLP intending to change or rectify its name must pass a resolution, with the approval of at least three-fourths of the partners present in the meeting.

(2) After obtaining partner approval, the LLP must submit an application to the registrar using LLP-Form-II, along with the specified fee mentioned in the Fee Schedule, for the change of name.

• Note: The new name must be available as per the Act and these regulations.

7. Registration of Change of Name and Effect Thereof:

(1) Once an LLP changes or rectifies its name, the registrar will record the new name in the register in place of the former name and issue a certificate using LLP-Annexure-I.

(2) The LLP must continue to mention its former name along with the new name on all its documents and at all its business locations for three months from the date of the registrar’s certificate, in accordance with sub-section (5) of section 6 of the Act.

(3) The change of name will not affect any rights or obligations of the LLP, and any legal proceedings by or against the LLP under its former name will remain valid and may continue or be initiated against the LLP under its new name.

CHAPTER III – Incorporation of Limited Liability Partnership

8. Application for Incorporation of Limited Liability Partnership:

Subject to regulation 3, the applicant must submit an application to the registrar using LLP-Form-III, either online or in physical form, for the incorporation of the LLP. The application must be accompanied by the specified fee as per the Fee Schedule and the following documents:

(a) Copies of National Identity Card (NIC) of the partners and designated partners. In the case of a physical application, include the witness’s NIC copies, and for foreigners, a copy of the passport.

(b) An attested copy of the LLP agreement duly executed by the partners, witnessed, and notarized.

(c) Consent of designated partner (if any).

(d) In the case of a physical application, the original bank challan showing payment of the specified fee from the Fee Schedule.

(e) Any other information and document required by the registrar.

9. Examination of Documents by the Registrar:

The registrar will examine the incorporation documents submitted for the LLP’s registration. If the registrar is satisfied that the documents are complete and comply with the Act and these regulations, they will register the documents.

10. Issuance of Certificate of Incorporation:

Upon registering the incorporation documents, the registrar will issue a certificate of incorporation under their signatures, authenticated by the official seal of the Registrar as per LLP-Annexure-II.

CHAPTER IV – Partners and Designated Partners

11. Consent to Act as Designated Partner:

Every individual who agrees to act as a designated partner must file their prior consent on LLP-Form-IV [Part I] with the LLP. The LLP must then file the designated partner’s particulars, along with their consent to act as such, with the Registrar using LLP-Form-IV [Part II] within thirty days of receiving the consent.

12. Eligibility of Designated Partners:

As per section 10 of the Act, a person cannot be appointed as a designated partner of an LLP if they:

(a) Are a minor.

(b) Are of unsound mind.

(c) Are an undischarged insolvent.

(d) Have applied to be adjudicated as an insolvent, and their application is pending.

(e) Have any other disability or disqualification that renders them incapable of performing as a designated partner.

13. Registration of Changes in Partners:

(1) A notice, in accordance with section 14 of the Act, to become or cease to be a partner or designated partner, shall be signed, authenticated under the common seal of the LLP, and filed with the registrar within fifteen days using LLP-Form-V. This must be accompanied by the copy of the LLP Agreement and the specified fee from the Fee Schedule.

(2) The notice regarding the admission of a new partner, as per sub-regulation (1), must be accompanied by their consent to act as such on LLP-Form-IV, along with a copy of the LLP Agreement.

(3) A notice concerning any changes in the name or address of a partner or designated partner must also be filed within fifteen days using LLP-Form-V, along with the copy of the LLP agreement (if required) and the specified fee from the Fee Schedule.

14. Form of Contribution:

(1) Each partner’s contribution shall include, but not be limited to, money, negotiable instruments, properties (including valuable rights), intangibles, knowledge, and skills, as specified in the partnership agreement.

(2) The respective contribution of each partner may be accounted for in accordance with the partnership agreement and disclosed in the LLP’s financial statements, along with the nature and value of the contribution.

(3) The monetary value of partners’ contributions, representing tangible and intangible properties, shall be determined in accordance with the Company law and rules and regulations made thereunder.

15. Partner’s Transferable Interest:

The LLP must inform the Registrar of any transfer of rights of a partner to share the LLP’s profits and losses and to receive distributions to another person. Additionally, the LLP must file the LLP agreement as per LLP-Form-VIII, along with the specified fee from the Fee Schedule, within seven days of such change.

CHAPTER V – Books of Accounts and Auditors

16. Books of Accounts:

(1) Each LLP must maintain books of accounts at its registered office, covering its state of affairs for each year of existence on an accrual basis and following the double entry system of accounting.

(2) The books of accounts of every LLP relating to a period of at least ten years immediately preceding the current year must be preserved in good order.

(3) Every LLP must prepare its financial statements within four months from the end of each financial year. However, LLPs notified by the Commission must file the financial statements along with the fee to the Registrar.

(4) The books of account must contain:

(a) Particulars of all sums of money received and expended by the LLP and the related matters.

(b) A record of the assets and liabilities of the LLP.

(c) Statements of the cost of goods purchased, inventories, work-in-progress, finished goods, and cost of goods sold.

(d) Any other records decided by the partners.

(e) Any other particulars as notified by the Commission.

(5) The financial statements of the LLP must be approved through a resolution passed by a majority of partners. The financial statements shall be signed on behalf of the LLP by its designated partner. If the designated partner is unavailable, all the partners must sign.

17. Appointment of Auditor:

(1) An auditor or auditors of an LLP must be appointed with the approval of the majority of partners through a resolution.

(2) The first auditor or auditors of an LLP must be appointed by the partners within sixty days of the date of incorporation of the LLP, and the LLP must obtain written consent from the auditor before the appointment.

18. Terms of Appointment of Auditors:

(1) The auditor or auditors of an LLP shall hold office according to the terms of their appointment.

(2) The remuneration of the auditor appointed by the LLP may be fixed by the designated partner or as specified in the limited liability partnership agreement.

(3) The partners of an LLP may remove an auditor from office before the expiry of the term by a three-fourth majority, following the procedure in the limited liability partnership agreement.

(4) An auditor of an LLP may resign from their office by providing a notice in writing at the LLP’s registered office.

(5) Any vacancy of the auditor shall be filled by the partners within thirty days of the date thereof.

19. Auditors’ Right to Information:

(1) An auditor of an LLP has the right:

(a) Of access, at all times, to the LLP’s books, accounts, and vouchers (in any form they are held).

(b) To require any partner, designated partner, officer, employee, or person holding or accountable for any of the LLP’s books, accounts, or vouchers to provide necessary information or explanations for the performance of the auditor’s duties.

20. Duties of Auditor:

(1) The LLP’s auditor must conduct the audit and prepare the report in compliance with the requirements of International Standards on Auditing as adopted by the Institute of Chartered Accountants of Pakistan.

(2) The auditor must examine the financial statements to form an opinion on whether they present a true and fair view and whether they comply with the requirements of the Act and the regulations.

(3) The auditor’s report must state various aspects, including whether all necessary information and explanations were obtained, if proper books of accounts were maintained, and if the financial statements provide a true and fair view of the LLP’s state of affairs and profit or loss.

(4) Any statements or remarks made on the financial statements must be annexed to the auditor’s report.

(5) The auditor’s report must be either unmodified or modified and may include references to any matters requiring attention.

21. Authentication of Auditor’s Report:

(1) The auditor’s report must state the name of the auditor and be signed and dated.

(2) If the auditor is an individual, the report must be signed by the individual. If the auditor is a firm, the report must be signed by the partnership firm with the name of the engagement partner.

CHAPTER VI – Conversion to Limited Liability Partnership

22. Conversion from Firm to Limited Liability Partnership:

(1) To convert from a firm to an LLP, the applicant must file an application as per LLP-Form-VI [Part I], following the requirements specified in the Second Schedule of the Act. The application must also comply with all the requirements regarding LLP incorporation and payment of the prescribed fee as per the Fee Schedule of these regulations.

(2) Once the registrar is satisfied with the application, the LLP will be registered, and a Certificate of Incorporation will be issued as per LLP-Annexure-II.

23. Conversion from Private Limited Company to Limited Liability Partnership:

(1) To convert from a private limited company to an LLP, the applicant must file an application as per LLP-Form-VI [Part II], following the requirements specified in the Third Schedule of the Act. The application must also include the payment of the prescribed fee as per the Fee Schedule of these regulations.

(2) Once the registrar is satisfied with the application, the LLP will be registered, and a Certificate of Incorporation will be issued as per LLP-Annexure-II.

CHAPTER VII – Mode and Manner of Filing of Applications and Documents

24. Electronic Documents:

(1) The Commission may offer e-services for the electronic filing or lodging of applications, documents, or reports required under the Act, rules made under the Act, or these regulations.

(2) A certified copy or extract from any electronically filed or lodged document with the Commission or the registrar, bearing the seal and signature of an authorized officer, shall be admissible in evidence in any proceedings as of equal validity as the original document.

(3) The Commission or the registrar shall not be liable for any loss or damage arising from any errors or omissions in electronically obtained documents if such errors or omissions were made in good faith and in the ordinary course of their duties.

25. Mode of Payment:

The fees for filing applications, documents, or reports may be paid through any acceptable methods of payment notified by the Commission from time to time.

26. Payment of Fees, etc.:

All fees and other sums payable, paid, or realized under the Act, rules, regulations, or notifications shall be accounted for to the Commission and deposited with a designated bank branch specified by the Commission. The original receipt of payment must be furnished to the Commission or the registrar, along with the relevant document or application, or any other communication indicating payment.

CHAPTER VIII – Miscellaneous

27. Registered Office:

An LLP must notify the registrar of any change in its registered office address or other particulars by submitting LLP-Form-VII along with the specified fee within fifteen days of the change.

28. Filing of LLP Agreement:

Any changes made to the partnership agreement of an LLP must be filed with the Registrar within seven days of the change using LLP-Form-VIII. The filing must be accompanied by the appropriate fee as specified in the Fee Schedule of the regulations.

29. Striking Off Name of LLP:

(1) The Registrar may strike off the name of an LLP from the register if the LLP is not conducting any business or is not operating in compliance with the provisions of the Act or has failed to adhere to any provision of the Act.

(2) The Registrar shall send a notice of his intention to strike off the name of the LLP from the register to the LLP and all its partners. The LLP and its partners have one month from the date of the notice to submit their representations.

(3) If the LLP fails to show cause against the proposed striking off within the given time or the Registrar is satisfied that the name should be struck off, he may proceed with striking off the name, and the LLP shall be dissolved. However, if the LLP has known assets and liabilities, it shall be directed to proceed for voluntary winding up in accordance with the provisions of the Act.

(4) The liability of designated partners and other partners shall continue and may be enforced as if the LLP had not been dissolved.

30. Establishment of LLP Registration Office:

The Commission shall establish offices at suitable locations for the registration of LLPs and for performing other duties under the Act and the rules and regulations.

31. Inspection of Documents Kept by Registrar:

(1) The registrar shall allow any person to inspect incorporation documents, names of partners, and any changes made therein upon payment of the prescribed fee.

(2) The inspection shall be carried out in the presence of the registrar or an authorized official during specified business hours.

(3) While notes may be taken, verbatim copies of the documents are not allowed to be taken.

32. Issuance of Copies of Documents:

Upon application, the registrar shall provide copies of incorporation documents and other filed documents under the Act, rules, or regulations, subject to payment of the prescribed fee.

33. Destruction of Documents:

(1) With prior approval from the Registrar of LLP, physical LLP records kept under the Act may be destroyed after ten years from the date of filing in the case of an existing LLP and five years from the date of dissolution in the case of a dissolved LLP, provided they are not of significant public value, have not been ordered to be preserved, or are not needed for pending proceedings.

(2) Physical records relevant to any ongoing legal proceeding, inquiry, or investigation must not be destroyed until the matter reaches a final conclusion or the respective authority closes the inquiry or investigation.

(3) Documents filed through e-service must be preserved permanently.

34. Penalty for Contravention of the Regulations:

Failure to comply with or contravention of any provisions of these regulations may result in a fine, and in case of continuous non-compliance, a further fine, as specified in sub-section (3) of section 53 of the Act.

LIMITED LIABILITY PARTNERSHIP REGULATIONS, 2018 

Summary of the various forms and information related to the Limited Liability Partnership (LLP) registration process and other related procedures in the 2018 Regulations appendix:  Form LLP Form-I – Application for Reservation of Name Part-I:

• This form is used to apply for the reservation of the proposed name of the LLP.
• The applicant must provide three options for the name, and only one name will be allowed.
• The applicant must declare that the information provided in the form is true and correct.

Form LLP Form-II – Application for Change / Rectification of Name Part-I:

• This form is used for changing or rectifying the name of an LLP.
• The applicant must provide the LLP incorporation number, current name, and proposed new name.
• The reason for the change or rectification must be stated in the form.

Form LLP Form-III – Application for Incorporation of Limited Liability Partnership Part-I:

• This form is used for the incorporation of an LLP.
• The applicant must provide details of the LLP, business objects, details of partners, designated partners, and their liability.

Form LLP Form-IV – Consent to Act as Partner / Designated Partner:

• This form is filled by the partners/designated partners of the LLP to give their consent to act as partners/designated partners.
• The form also includes a statement of the applicant under section 5(d) of the Act.

Form LLP Form-V – Notice of Induction and Cessation of Partners and Designated Partners:

• This form is used to notify the registrar about the induction or cessation of partners/designated partners in the LLP.

Form LLP Form-VI – Application for Conversion of Firm or a Private Company into Limited Liability Partnership:

• This form is used for the conversion of a firm or a private company into an LLP.
• The applicant must provide information about the firm/company, its partners/shareholders, and the reasons for the conversion.

Form LLP Form-VII – Change of Registered Office:

• This form is used to change the registered office address of the LLP.

Form LLP Form-VIII – Change in Limited Liability Partnership Agreement:

• This form is used to make changes in the LLP agreement, such as induction or cessation of partners, changes in objects, etc.

Certificate of Incorporation:

• The certificate issued by the registrar upon the incorporation of the LLP or upon the change of name of the LLP.

Fee Schedule:

• This section provides the fee structure for various activities related to the LLP registration process.

*For complete and accurate information, it is essential to refer to the official Limited Liability Partnership Act, 2017, and the Limited Liability Partnership Regulations, 2018, issued by the Securities and Exchange Commission of Pakistan.

Comparative Analysis of International Jurisdictions for Limited Liability Partnerships (LLP)

Below is a summary of the legislation and key features of Limited Liability Partnerships (LLPs) in different international jurisdictions:

1. United States (“US”):

• Legislation: The Revised Uniform Partnership Act (1997) is a standard statute adopted for the governance of business partnerships by US States.
• Key Features: Each US State has its own law governing the formation of LLPs, but all States have passed variations of the Revised Uniform Partnership Act. LLPs offer limited liability to partners, similar to a corporation, while maintaining the flexibility of a partnership.

2. United Kingdom (“UK”):

• Legislation: Limited Liability Partnerships Act 2000 (Great Britain) and Limited Liability Partnerships Act (Northern Ireland) 2002.
• Key Features: UK LLPs have a continuing legal existence independent of their members, offering limited liability to partners. Taxation is similar to a partnership, and there is no requirement for the LLP agreement to be in writing.

3. Singapore:

• Legislation: Limited Liability Partnerships Act 2005.
• Key Features: Singapore LLPs draw on both US and UK models and are treated like a general partnership for tax purposes (tax transparency). The LLP agreement regulates internal governance and profit/loss allocation.

4. India:

• Legislation: Limited Liability Partnership Act 2008.
• Key Features: Indian LLPs have a separate legal entity with perpetual succession and no upper limit on the number of partners. LLPs provide limited liability protection, and partners’ liability is limited to their agreed contributions. The LLP Act allows for various business activities.

5. Japan:

• Legislation: Limited Liability Partnership Act.
• Key Features: Japanese LLPs were introduced in 2005 and provide limited liability for members (LLP Members). The members themselves manage the LLP business, and taxation is at the member level, avoiding double taxation.

6. South Africa:

• No specific legislation for LLPs has been identified. Professionals, such as attorneys and accountants, use section 53(b) of the Companies Act for limited liability. Some interest groups are advocating for the introduction of LLPs.

In conclusion, Limited Liability Partnerships have been adopted in various international jurisdictions, offering a unique blend of limited liability protection and the operational flexibility of a partnership. The specific legislation and features vary among countries, allowing businesses to choose the most suitable structure based on their needs and requirements.