Limited Liability Partnerships for Lawyers – A Long Wait

The Limited Liability Partnerships Act 2012 came into force in  Malaysia on 26 December 2012. Limited liability partnerships (LLPs) is a useful business vehicle which combines the characteristics of a partnership and a company.

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Introduction to LLPs

Cheng Leong explains in more detail some of the features of the LLPs. But in summary, LLPs can be a good option for startups, small and medium enterprises, and in particular, LLPs were also geared towards professionals like lawyers and accountants. This can be seen in the Companies Commission of Malaysia (CCM) website where one of the aims of the LLP Act was to allow professionals to make use of the benefit of the LLP structure.

An LLP offers the protection of limited liability to its partners and also flexibility of the partners regulating their business. Like a company, an LLP is a separate legal entity that can own and transfer assets. Debts of the LLP will be borne by the LLP’s assets and not that of the partners.

The Long Wait

Malaysian lawyers are unable to utilise the LLP structure due to the provisions of our Legal Profession Act 1976 (LPA). The LPA restricts a lawyer to only practice through a sole proprietor or a partnership (or to be employed by a sole proprietor or a partnership).

Therefore, what is clear is that the LPA needs to be amended to recognise and to allow for the LLP vehicle. That is after all one of the aims of the LLP Act: to allow for professionals such as lawyers to form the LLP. In fact, CCM’s LLP registration form already lists lists lawyers as a professional practice for their registration.

What is less clear is why it has taken so long for the law to be changed to allow for lawyers to form a LLP.

Until now, we do not know when the changes to the LPA will be introduced. We know that the Malaysian Bar, through the Bar Council, had engaged in the public consultation process for the LLP Bill in 2003 and 2008, and the Bar should be ready to request for the appropriate changes to the LPA.

I had a browse through the Bar Council Corporate and Commercial Law Committee annual reports for 2014 and 2015 to find out more about the anticipated changes. Undoubtedly, some progress has been made to formulate the appropriate amendments to the LPA. There are also tax issues surrounding LLPs, especially upon conversion from a partnership to a LLP.

It is just hoped that the wait will not go on that much longer.

Comparison with the Accountants and Singapore

I was also curious to see how other professions or other jurisdictions have dealt with the introduction of LLPs. For the Malaysian accountants, the Malaysian Institute of Accountants (MIA) issued a circular in 2013 explaining the requirements for their members to form a LLP and now has a section on the MIA website setting out the procedure and forms.

In Singapore, the Singapore Legal Profession Act had a similar restriction in only allowing for practicing through sole proprietors and partnerships. But, as seen on the Law Society website, the LLP Act came into force in Singapore in February 2005 and the amendments to the Singapore Legal Profession Act came into force in December 2006 to allow for LLPs.

Alternative Business Structures

The LLP model may not completely replace sole proprietorships or partnerships. Every business model would have its pros and cons. But the LLP would offer more options and lawyers can then choose the best option to carry on their practice of law. And different options continue to grow and spread across the globe.

We have seen Singapore allow for law firms to operate through limited liability corporations since 2000.

The UK allows for the Alternative Business Structures (ABS) which is a model allowing non-lawyers and entities that are not law firms to become managers or to have ownership interests in law firms.

Recently, Singapore is taking an incremental approach in allowing for a limited form of ABS.

Here in Malaysia, the practice of law has to keep up with the times. The LLP offers a possible alternative business option for lawyers and there will be many more options in the future. We will have to strive to keep pace.

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4 thoughts on “Limited Liability Partnerships for Lawyers – A Long Wait

  1. Lingesvran a/l Battumalai 19 September 2016 / 3:40 pm

    Hi, I’m looking lawyer to perform legal agreement between partner on LLP. How much the charges and days taken for the Process.

    Like

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