he FIDIC.docx

   1. he FIDIC 'Rainbow Suite' of New Contracts was published in 1999 and includes: • the Red Book: Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer; • the Yellow Book: Conditions of Contract for Plant and Design-Build; • the Silver Book: Conditions of Contract for EPC/Turnkey Projects; • the Green Book: Conditions of Short Form of Contract. These 'new' forms were first editions and designed to be user-friendly, with a standardized approach and a reduction in the general conditions from over 60 to 20 clauses. Additional forms in use since 1999 include: • the Blue Book: Contract for Dredging and Reclamation Works; • MDB/FIDIC Contract: FIDIC conditions incorporated in the standard bidding documents of multilateral development banks; • the White Book: Client/Consultant Model Services Agreement; • the Gold Book: FIDIC Design, Build and Operate Projects. 5 COLOR INCLUDING 1 BIS HARMONIZED EDITION - IN FIDIC 1. RED BOOK - FOR CONTRUCTION 2. PINK BOOK - FOR CONTRUCTION IN RED BOOK 3.YELLOW BOOK- FOR PLANT & DESIGN-BUILD 4. SILVER BOOK - FOR EPC TURNKEY PROJECT 5. GREEN BOOK - FOR SHORT FORM OF CONTRACT Conditions of Contract for Works of Civil Engineering Construction (Red Book 4th) -First Edition 1957 Fourth Edition 1987 -Reprinted 1988 with editorial amendments -Reprinted 1992 with further amendments Supplement to the 1992 Red Book published in 1996 2. Conditions of Contract for Electrical and Mechanical Works including erection on site (Yellow Book) -First Edition 1963 -Third Edition 1987 3. Conditional of Contract for Design-Build and Turnkey (Orange Book) -First Edition 1995 4. Conditions of Sub-contract for Works of Civil Engineering Construction -First Edition 1994 5. Client/Consultant - Model Services Agreement (White Book) -Third Edition 1998 -Fourth Edition 2006 6. Short Form of Contract (Green Book) -First Edition 1999 7. Conditions of Contract for Construction, for Building and Engineering Works, Designed by the Employer (Red Book 1999) - First Edition 1999 8. Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and Engineering Works, Designed by the Contractor (Yellow Book) First Edition 1999 9. Conditions of Contract for EPC Turnkey Projects (Silver Book) -First Edition 1999 10. Form of Contract for Dredging & Reclamation Works (Blue Book) -First Edition 2006. 11. The Harmonised Multilateral Development Banks Form of Contract (Pink Book) -First Edition 2005 -Third Edition 2010 12. Conditions of Contract for Design, Build and Operate Projects (Gold Book) -First Edition 2008 13. Conditions of Subcontract for Construction (compatible with the 1999 Red Book) -First Edition 2011 The New FIDIC Forms © Daniel Atkinson 01 January 1997 KEYWORDS: The New FIDIC Forms, test editions, Allocation of Risks, Yellow Book, Red Book, Silver Book, IChemE Green Book, ECC Options D and E , Green Book (Short Form), Communications, Impossibility, Design Liability , Background The Federation International des Ingnieurs - Conseils (FIDIC) is the leading body for the development of model standard forms of contract for use in the international construction industry. The standard forms are generally accepted by Employers and Contractors as providing a balanced allocation of risks and providing fair procedures for administration of contracts. In September 1998 FIDIC published "test editions" of its forms of contract in a new livery of colours Red and Yellow to update the existing Red, Yellow and Orange Books. FIDIC also introduced a short form of contract in another primary colour - the Green Book. A metallic colour has now been added in the Silver Book which is likely to be the most controversial form. The new Red Book is the traditional form for civil engineering construction in which the Contractor constructs to the Employer's design. There is however provision for the Contractor to carry out design where specified. The form maintains the role of the Engineer and the payment mechanism is based on measure and value. The new Red Book revises the previous Red Book version and incorporates current thinking on the management of contracts. The new Yellow Book replaces the existing Yellow and Orange Books. It is intended to be used for Design and Build contracts and for Plant Contracts. The Engineer administers the contract and payment is on periods or installments of the Lump Sum. The Green Book is an entirely new FIDIC form and adopts the overall risk philosophy of the Red and Yellow Books. It is intended for contracts of low capital value or simple contracts of short duration such as dredging works. There is no Engineer and the payment mechanism is required to be specified in the Appendix to the Form of Agreement, but payment is at monthly intervals. The new Silver Book is an entirely new FIDIC form for BOT and similar projects. It is intended to be used on fixed-price turn key projects. There is no Engineer, instead the Employer deals directly with the Contractor. Risk is placed largely with the Contractor. Payment is on periods or installments of the Lump Sum. One form of contract missing from the new livery is the Target Cost Reimbursable form of contract. This is not widely used internationally but is used extensively in the UK and particularly on tunnelling contracts. Available standard forms are the IChemE Green Book and the ECC Options D and E which have all been used with some success. Allocation of Risks In many projects one of the significant risks is that of changed Site and Ground conditions. The starting point is the responsibility for supply of information. Clauses 4.10 and 4.11 are the relevant provisions in the Red and Yellow Book. Clause 4.10 requires the Employer to have made available, 28 days prior to the latest date for submission of the Tender, all relevant data in his possession on sub-surface conditions at the Site. The Contractor is only responsible for interpreting the data. Under Clause 4.11(b) the Contractor is deemed to have based the Contract amount on such data, and in the case of the Yellow Book any further data relevant to the Contractor's design. This effectively means that the Employer warrants the accuracy of the information he has provided. Under Clause 4.10 the contractor is also deemed to have obtained all necessary information as to risks which may influence or affect his Tender or the Works. He is deemed to have inspected and examined the Site and other available information. However, these "deeming" provisions are limited to the extent that the investigation by the Contractor is practicable, taking into account cost and time. Clause 4.12 defines the allocation of risk forchanged ground which in the Red and Yellow Books follows the traditional forseeability test. The Employer carries the risk of physical condition which could not have reasonably been foreseen by an experienced contractor by the date for submission of the Tender. Physical Conditions is defined as both natural physical conditions as well as man-made and other physical obstructions and pollutants. The definition excludes climatic conditions, but includes hydrological conditions. The Green Book (Short Form) is silent on the matter of supply of information. Clause 6.1 defines the Employer's risks which include changed ground . Sub-clause 6.1(b) includes as an Employer's risk any operation of the forces of nature affecting the Site and/or the Works which were either unforeseeable or against which an experienced contractor could not reasonably have been expected to take precautions. Sub-Clause 6.1(e) defines as the Employer's Risks physical conditions or obstructions other than climatic conditions where were not reasonably foreseeable by an experience contractor. The Silver Book adopts a different approach. The Employer is required to have made available to the Contractor all relevant data in the Employer's possession on hydrological and sub-surface conditions at the Site. The Contractor however is responsible for verifying as well as interpreting the data. There is therefore no warranty by the Employer of the accuracy of the information. The Silver Book allocates all the risk of changed ground conditions to the Contractor. Clause 4.11 provides that the Contractor is deemed to have satisfied himself as to the sufficiency of the Contract Price, and states that it covers all things necessary to design, execute and complete the Works. Clause 4.12 provides that the Contractor accepts responsibility for having foreseen all difficulties and costs of successfully completing the Works. Controversially the Silver Book at Clause 5.1 also passes to the Contractor responsibility for the accuracy and completeness of the Employer's Requirements. The Employer is expressly stated not to be responsible for any error, inaccuracy or omission in the Employer's Requirements. The Employer is only responsible for the definition of the intended purpose of the Works and the criteria for testing/performance of completed Works. The more usual provision for responsibility for the Employer's Requirements is to be found at Clause 5.1 of the new Yellow Book. This allows the Contractor within a specified period after Notice of Commencement, to notify the Engineer of any error, fault or defect in the Employer's Requirements. The Engineer then decides whether to issue a variation. The Contractor is entitled to extension of time and adjustment of the Contract Price, unless the error was one which an experienced contractor would have discovered before submitting his Tender, had he used reasonable skill and care. The Silver Book therefore clearly envisages that the Contractor will carry our a rigorous check of the Employer's Requirements before submitting his tender and take the risk of any errors whether it is reasonable or not for the Contractor to identify the errors. Communications There has been a significant shift in current thinking in the UK on the nature, timing and effect of communications in construction contracts. The trend is towards more detailed programming, early warning of the potential consequences of events and the adoption of notices as a condition precedent to the contractor's entitlement under the contract. A further recent development has been the adoption of "exhaustive remedy" clauses, which provide that the only remedies available to the parties are those stated in the contract, to the exclusion of any other legal remedies. The FIDIC forms have adopted only some of these new ideas. The provision in the Red, Yellow and Silver Books in relation to programme are not radical. Clause 8.3 simply requires the Contractor to submit a programme and to revise the programme when it is no longer consistent with actual progress. The Contractor is required however to give prompt notice of specific probable future events or circumstance which may adversely affect the work, increase the Contract Price or delay execution of the Work. There is no direct sanction for failure to warn, but it is to be noted that in making a fair determination under Clause 3.5, due regard is to be taken of all relevant circumstance. It may be argued that this would include the contractor's failure to warn when he could have done, although this is not so expressly stated. The Green Book under Clause 7.,2 simply requires the Contractor to submit a programme but does provide for Early Warning at Clause 10.3. If the contractor fails to notify as soon as he becomes aware of any circumstance which may delay or disrupt the Works or give rise to a claim for additional payment, then the Contractor's entitlement is reduced if the Engineer as a result is unable to keep relevant records or take steps to minimise the effects of the events. One of the features of the new forms is the stringent notice provisions. Under the Red, Yellow and Silver forms, Clause 20.1 requires the Contractor to give notice as soon as practical, and not later than 28 days after the event or circumstance giving rise to the claim for extension of time or additional payment. Within 42 days of the event or circumstance the contractor is required to submit a fully detailed claim with full supporting particulars. If the event or circumstance has a continuing effect then the Contractor is required to send further claims at monthly intervals giving the accumulated delay and/or amount claimed. The final claim is to be sent within 28 days after the end of the effects. The Contractor is only entitled to payment for such part of the claim as he has been able to substantiate. If the Contractor fails to comply with the provisions, then there will be no entitlement to extension of time nor to additional payment. In the Red and Yellow Books any notice for unforseen physical conditions is required to described the physical conditions so they can be inspected by the Engineer, and set out the reasons why the Contractor considers them to be unforeseeable. None of the FIDIC forms adopt an "exhaustive remedy" clause, so the absence of notice may not cause the contractor to lose all entitlements, but clearly will have a significant effect on the administration of the contract. Impossibility The FIDIC forms have kept the impossibility provisions found in many standard forms. The new Red, Yellow and Silver Books at Clause 19.7 release the parties from further performance if any event or circumstance outside the control of the Parties make it impossible or unlawful for either or both parties to fulfill its obligations. The Green Book at Clause 1.1.14 goes further and defines "Force Majeure" as any event or circumstance which makes performance of a Party's obligations illegal or impracticable and which is beyond that Party's reasonable control. Clause 13.2 allows the Contractor to suspend the execution of the Works but only "if necessary". If the event continues for a period of 84 Days then either Party may give notice of termination. Design Liability A significant feature of all the new forms is that the Contractor has a fitness for purpose obligation for any design which is his responsibility. The new Red Book at Clause 4.1(c) makes the Contractor responsible for any part of the Permanent Works which the Contract specifies is to be designed by the Contractor. When the Works are completed, that part designed by the Contractor is required to be fit for such purpose for which that part was intended. The new Green Book at Clause 5.2 also provides that the Contractor's design is fit for the purpose intended defined in the Contract. The Yellow and Silver Books has a similar provision, but since the Contractor is responsible for all design Clause 4.1 provides that the Works are to be fit for their purpose. Any error in the design in the Employer's Requirements is subject to Clause 5.1 described above. Conclusions The new FIDIC forms have adopted much of current thinking in the administration of contracts and shifted risk and responsibility to the Contractor. Many of the changes will cause controversy. Unfortunately there is no radical thinking in the mechanism for dealing with the evaluation and settlement of claims, which are an inevitable result of the changes. The adoption of a Dispute Adjudication Board is a welcome change, but the procedure is unwieldy for all but the most complex disputes. It is unfortunate that the opportunity was not taken to introduce a mechanism for evaluating entitlement which would reduce the most costly part of disputes resolution. What Does LLC Mean for a Company? A limited liability company (LLC) is a type of business in which the owners, called members, have much less liability for company actions and debts than a company like a corporation, according to the Internal Revenue Service. Many new business owners form their companies as an LLC instead of traditional C and S corporations because of the LLC's legal and tax advantages. Function Up until the mid-1970s, companies only had the choice of forming a corporation or partnership, and both had severe disadvantages. Partnerships have little legal protection from company debt obligations and lawsuits, but are taxed only once. Corporations, on the other hand, face double taxation because the tax code applies to net profits and capital gains, but offer legal protection to their shareholders. LLCs essentially combine the best features of corporations and partnerships. Benefits Under LLC statutes, a company automatically qualifies for a "tax pass-through." Tax pass-through means that the company does not pay taxes on net profits; the owners pay taxes on income from the business that's shown on their personal tax returns. The biggest benefit is that shareholders and owners retain no responsibility for debts unless someone specifically signs an agreement taking liability for a debt. Related Reading: What Does LLC Mean As a Professional Designation? Disadvantage Despite LLCs' popularity, you may still want to form an S or C corporation in certain circumstances. LLC companies are a relatively new type of business entity as of 2010, so many investors are hesitant to invest in an LLC until they are better understood, according to the Gaebler website, a resource for entrepreneurs. In addition, LLCs usually have higher legal fees because S and C corporations already have pre-made agreements. Misconceptions As of 2010, LLC businesses are not recognized by the federal government, according to the IRS. An LLC has to file as a corporation, partnership or sole proprietorship on its tax return—most LLCs are automatically considered a corporation. Certain types of business, such as banks and insurance companies, cannot form an LLC, but actual restrictions on forming an LLC depend on the laws of the state in which the company resides. Tip You can quickly convert any business into an LLC in most states by filling out a simple form called a "certificate of conversion," according to legal information website Nolo. Other states require formal articles declaring the formation of an LLC. In addition, every potential LLC must transfer all pertinent business information, such as identification numbers and sales tax permits, to the new entity. A few states require a newspaper article declaring the end of a partnership and the formation of an LLC. References (5) Meaning Limited Liability Partnership entities, the world wide recognized form of business organization has been introduced in India by way of Limited Liability Partnership Act, 2008. A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence, this is an important difference from that of a unlimited partnership. In an LLP, all partners have a form of limited liability for each individual's protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly.An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents. Limited Liability Partnership is managed as per the LLP Agreement, however in the absence of such agreement the LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which describes the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership and its partners. LLP has a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct. Limited Liability Partnership Act, 2008 came into effect by way of notification dated 31st March 2009.  Renowned and accepted form of business worldwide in comparison to Company.  Low cost of Formation.  Easy to establish.  Easy to manage & run.  No requirement of any minimum capital contribution.  No restrictions as to maximum number of partners.  LLP & its partners are distinct from each other.  Partners are not liable for Act of partners.  Less Compliance level.  No exposure to personal assets of the partners except in case of fraud.  Less requirement as to maintenance of statutory records.  Less Government Intervention.  Easy to dissolve or wind-up.  Professionals can form Multi-disciplinary Professional LLP, which was not allowed earlier.  Audit requirement only in case of contributions exceeding Rs. 25 lakh or turnover exceeding Rs. 40 lakh.  Any act of the partner without the other partner, may bind the LLP.  Under some cases, liability may extend to personal assets of partners.  Cannot raise money from Public. Comparison between existing Business Forms and LLP Result Category Company LLP Prevailing Law Companies are prevailed by ‘Companies Act, 1956’ Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under Registration Registration with Registrar of Companies required. Registration with Registrar of LLP required. Creation Created by Law Created by Law Distinct entity Is a separate legal entity under the Companies Act, 1956. Is a separate legal entity under the Limited Liability Partnership Act, 2008. Name of Entity Name to contain 'Limited' in case of Name to contain 'Limited Liability Public Company or 'Private Limited' Partnership' or 'LLP' as suffix. in case of Private Company as suffix. Cost of Formation Minimum Statutory fee for incorporation of Private Company is Rs.6,000/- and minimum Statutory fee for incorporation of Public Company is Rs. 19,000/- Minimum cost of Formation of LLP is Rs. 800 only, comparatively much lesser than the cost of formation of Company Perpetual Succession It has perpetual succession and It has perpetual succession and members may come and go. partners may come and go Charter Document Memorandum and Article of Association is the charter of the company which defines its scope of operation. LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. Common Seal It denotes the signature of the company and every company shall have its own common seal It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement Formalities of Incorporation Various eforms along the Memorandum & Articles of Association are filled with Registrar of Companies with prescribed fees Various eForms and the LLP Agreement are filed with the Registrar of LLP along with the prescribed Fee. Time line It will take 10 days (approx.) to It will take 10 days (approx.) to incorporate (inclusive of time taken to incorporate (inclusive of time taken to obtain DIN) obtain DPN) Legal Proceedings A company is a legal entity which can A LLP is a legal entity can sue and sue and be sued be sued Foreign Participation Foreign Nationals can be a member in a Company. Foreign Nationals can be a Partner in a LLP. Number of Members 2 to 50 members in case of Private Company and Minimum 7 members in case of Public Company. Minimum 2 partners and their is no limitation of maximum number of partners. Ownership of Assets The company independent of the members has ownership of assets The LLP independent of the partners has ownership of assets Rights / Duties / obligation of the Partners / Managing Partners / Directors Rights / Duties / obligation of the Rights / Duties / obligation of the directors are governed by AOA and partners are governed by LLP resolution passed by shareholders or Agreement. directors. Liability of Partners/Members Generally limited to the amount required to be paid up on each share. Limited, to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner. Tax Liability Income of Company is Taxed at a Flat rate of 30% Plus surcharge as applicable. Income of LLP is taxed at a Flat rate of 30% plus education cess as applicable. Principal/Agent Relationship The directors act as agents of the company and not of the members Partners act as agents of LLP and not of the other partners. Transfer / Inheritance of Rights Ownership is easily transferable. Regulations relating to transfer are governed by the LLP Agreement . Transfer of Share / Partnership rights in case of death In case of death of member, shares are transmitted to the legal heirs. In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners Director Identification Number(DIN) Each director is required to have a Each Designated Partners is required Director Identification Number before to have a DIN before being appointed being appointed as Director of any as Designated Partner of LLP. company. Digital Signature As eforms are filled electronically, As eforms are filled electronically, atleast one Director should have Digital Signatures atleast one Designated Partner should have Digital Signatures. Dissolution Voluntary or by order of National Company Law Tribunal. Voluntary or by order of National Company Law Tribunal. Transferability of Interest A member can freely transfer his interest A partner can transfer his interest subject to the LLP Agreement Admission as partner / member A person can become member by buying shares of a company. A person can be admitted as a partner as per the LLP Agreement Cessation as partner / member A member / shareholder can cease A person can cease to be a partner to be a member by selling his shares. as per the LLP Agreement or in absence of the same by giving 30 days prior notice to the LLP. Requirement of Managerial Personnel for day to day administration Directors are appointed to manage the business and other statutory compliances on behalf of the members. Designated Partners are responsible for managing the day to day business and other statutory compliances. Statutory Meetings Board Meetings and General Meetings are required to conducted at appropriate time. There is no provision in regard to holding of any meeting. Maintenance of Minutes The proceedings of meeting of the board of directors / shareholders are required to be recorded in minutes. A LLP by agreement may decide to record the proceedings of meetings of the Partners/Designated Partners Voting Rights Voting rights are decided as per the number of shares held by the members. Voting rights shall be as decided as per the terms of LLP Agreement. Remuneration of Managerial Personnel for day to day administration Company can pay remuneration to its Directors subject to law. Remuneration to partner will depend upon LLP Agreement. Contracts with Partners/Director Restrictions on Board regarding some specified contracts, in which directors are interested. Partners are free to enter into any contract. Maintenance of Statutory Records Required to maintain books of Required to maintain books of accounts, statutory registers, minutes accounts. etc. Annual Filing Annual Financial Statement and Annual Return is required to be filed with the Registrar of Companies every year. Annual Statement of accounts and Solvency & Annual Return is required to be filed with Registrar of LLP every year. Share Certificate Share Certificates are proof of ownership of shares held by the members in the Company The ownership of the partners in the firm is evidenced by LLP Agreement. Audit of accounts Companies are required to get their accounts audited annually as per the provisions of the Companies Act, 1956, All LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008. Applicability of Accounting Standards. Companies have to mandatorily comply with accounting standards The necessary rules in regard to the application of accounting standards are not yet issued. Compromise / arrangements / LLP’s can enter into Compromise / merger / amalgamation arrangements / merger / amalgamation Oppression and mismanagement No provision relating to redressal in case of oppression and mismanagement Credit Worthiness of organization Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company. Whistle Blowing Provision has been made to provide protection to employees & partners, providing useful information during an investigation or convicting any partner or firm. Comparison between existing Business Forms and LLP Result Category Partnership LLP Prevailing Law Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under Registration Registration is optional Registration with Registrar of LLP required. Creation Created by Contract Created by Law Distinct entity Not a separate legal entity Is a separate legal entity under the Limited Liability Partnership Act, 2008. Name of Entity Any name as per choice Name to contain 'Limited Liability Partnership' or 'LLP' as suffix. Cost of Formation The Cost of Formation is negligible Minimum cost of Formation of LLP is Rs. 800 only, comparatively much lesser than the cost of formation of Company Perpetual Succession It does not have perpetual It has perpetual succession and partners may come and succession as this depends go upon the will of partners Charter Document Partnership Deed is a charter of the firm which denotes its scope of operation and rights and duties of the partners LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. Common Seal There is no concept of common seal in partnership It denotes the signature and LLP may have its own common seal, dependant upon the terms of the Agreement Formalities of Incorporation In case of registration, Various eForms and the LLP Agreement are filed with Partnership Deed along the Registrar of LLP along with the prescribed Fee. with form / affidavit required to be filled with Registrar of firms along with requisite filing fee Time line It will take 7 days (approx.) to incorporate Legal Proceedings Only registered partnership A LLP is a legal entity can sue and be sued can sue third party Foreign Participation Foreign Nationals can not form Partnership Firm in India Foreign Nationals can be a Partner in a LLP. Number of Members Minimum 2 and Maximum 20 Minimum 2 partners and their is no limitation of maximum number of partners. Ownership of Assets Partners have joint ownership of all the assets belonging to partnership firm The LLP independent of the partners has ownership of assets Rights / Duties / obligation of the Partners / Managing Partners / Directors Rights / Duties / obligation of the partners are governed by Partnership Deed. Rights / Duties / obligation of the partners are governed by LLP Agreement. Liability of Partners/Members Unlimited. Partners are Limited, to the extent their contribution towards LLP, severally and jointly liable except in case of intentional fraud or wrongful act of for actions of other partners omission or commission by the partner. and the firm and liability extend to their personal assets. Tax Liability Income of Partnership is taxed at a Flat rate of 30% plus education cess as applicable. Income of LLP is taxed at a Flat rate of 30% plus education cess as applicable. Principal/Agent Relationship Partners are agents of the firm and other partners. Partners act as agents of LLP and not of the other partners. Transfer / Inheritance of Rights Not transferable. In case of Regulations relating to transfer are governed by the LLP death the legal heir Agreement . receives the financial value of share. It will take 10 days (approx.) to incorporate (inclusive of time taken to obtain DPN) Transfer of Share / In case of death of a Partnership rights in case partner, the legal heirs of death have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners In case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners Director Identification Number(DIN) The partners are not required to obtain any identification number Each Designated Partners is required to have a DIN before being appointed as Designated Partner of LLP. Digital Signature There is no requirement of As eforms are filled electronically, atleast one obtaining Digital Signature Designated Partner should have Digital Signatures. Dissolution By agreement, mutual Voluntary or by order of National Company Law Tribunal. consent, insolvency, certain contingencies, and by court order. Transferability of Interest A partner can transfer his interest subject to the Partnership Agreement A partner can transfer his interest subject to the LLP Agreement Admission as partner / member A person can be admitted as a partner as per the partnership Agreement A person can be admitted as a partner as per the LLP Agreement Cessation as partner / member A person can cease to be a A person can cease to be a partner as per the LLP partner as per the Agreement or in absence of the same by giving 30 days agreement prior notice to the LLP. Requirement of No requirement of any Managerial Personnel for managerial; personnel , day to day administration partners themselves administer the business Designated Partners are responsible for managing the day to day business and other statutory compliances. Statutory Meetings There is no provision in regard to holding of any meeting There is no provision in regard to holding of any meeting. Maintenance of Minutes There is no concept of any minutes A LLP by agreement may decide to record the proceedings of meetings of the Partners/Designated Partners Voting Rights It depends upon the partnership Agreement Voting rights shall be as decided as per the terms of LLP Agreement. Remuneration of The firm can pay Remuneration to partner will depend upon LLP Managerial Personnel for remuneration to its partners Agreement. day to day administration Contracts with Partners/Director Partners are free to enter into any contract. Partners are free to enter into any contract. Maintenance of Statutory Records Required to maintain books Required to maintain books of accounts. of accounts as Tax laws Annual Filing No return is required to be Annual Statement of accounts and Solvency & Annual filed with Registrar of Firms Return is required to be filed with Registrar of LLP every year. Share Certificate The ownership of the partners in the firm is evidenced by Partnership Deed, if any. The ownership of the partners in the firm is evidenced by LLP Agreement. Audit of accounts Partnership firms are only required to have tax audit of their accounts as per the provisions of the Income Tax Act All LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008. Applicability of Accounting Standards. No Accounting Standards are applicable The necessary rules in regard to the application of accounting standards are not yet issued. Compromise / arrangements / merger / amalgamation Partnership cannot merge with other firm or enter into compromise or arrangement with creditors Companies can enter into Compromise / arrangements / merger / amalgamation LLP’s can enter into Compromise / arrangements / merger / amalgamation or partners Oppression and mismanagement No remedy exist , in case Provisions providing for of oppression of any remedy against Oppression partner or mismanagement and mismanagement exists of Partnership No provision relating to redressal in case of oppression and mismanagement Credit Worthiness of organization Creditworthiness of firm depends upon goodwill and creditworthiness of its partners Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company. Whistle Blowing No such provision is No such provision is provided under Partnership provided under the Act, 1932 Companies Act, 1956. Due to Stringent Compliances & disclosures under various laws, Companies enjoys high degree of creditworthiness. Provision has been made to provide protection to employees & partners, providing useful information during an investigation or convicting any partner or firm.