The roll out of India’s limited liability
rules is being held up by professional bodies that need to amend
their own rules to allow for the corporate governance overhaul.

The Limited Liability Partnership (LLP) Law,
passed by the Indian Ministry of Corporate Affairs earlier this
year, is expected to lead to increased consolidation and the
creation of one-stop multidisciplinary firms – potentially spelling
an end to the country’s multitude of micro-practices.

Although the process of registering LLPs
has begun, three professional bodies – the Institute of Chartered
Accountants of India (ICAI), the Institute of Company Secretaries
of India (ICSI) and the Institute of Cost and Works Accountants of
India (ICWAI) – need to amend their own regulations to allow for
the structures.

ICWAI president Kunal Banerjee estimated this
process will take months and changes can not be made before
Indian’s general election, which is currently being held.

The corporate governance makeover should
enable higher growth in the professional service sector.

Firms will be able to form multidisciplinary
practices comprised of cost accounting, chartered accounting and
company secretary professionals. Another benefit is that limited
liability protects partners from being personally liable for the
individual or unauthorised actions of others within the firm.

The new LLPs require a minimum of two partners
and there will be no cap, unlike the current limit of 20 partners
per firm. In India, it is common for several firms to work in close
partnership under different legal names to provide a critical
mass.

Banerjee has welcomed the move but says it is
too early to know if the new structure will take off.

“Today if you want the services of a cost
accountant you go to a cost accountant firm, if you want the
services of a chartered accountant you go to a chartered
accountants firm. This is going to allow you a single window
solution. It may also give rise to larger firms coming into force,”
he said.

There is an estimated 65,000 practising
chartered accountants in India and about 40,000 to 45,000 chartered
accounting firms.