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Corporate Law Cell @ Corp

Speak
CRUX
Faculty’s Message
 Faculty Co-
ordinator‘s Message

 The week that was … ―EXCELLENT EFFORT. KEEP IT UP, HAVE A

LEGAL ARTICLE EVERY WEEK OR A
 Law Focus LEGISLATIVE COMMENT OR A CASE COMMENT.‖

…… Professor Smitha Sabne

 Bone of Contention

The week that was ….

IPR – Hilton can‘t use its trade name in India says Rajasthan High
Court after finding that US Based Hospitality Chain has a deceptively
similar trade name to a local hotel group Hilltone. (30 th July, 2010 –
TOI)
Investments – FII inflows crossed $ 10 billion mark according to data
available with capital markets watchdog SEBI shows FII‘s were gross
domestic buyers of domestic equities worth Rs. 60,687 Crores, while

Corporate Law Cell Newsletter Volume 1 Issue 1

© Corporate Law Cell. 2010. ALL RIGHTS RESERVED
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they sold shares worth Rs. 44,070 Crores, resulting in a net flow of
Rs. 16, 617 Crores. (2nd August, 2010 - TOI)
Court Watch – SC asks HCs to keep off debt recovery proceedings –
―interfere only when borrowers have exhausted all alternative
remedies: Apex court‖ (3rd August, 2010 – Economic Times)
Supreme Court has ordered mobile telecom operators to give their
revenue sharing agreements to CAG (3rd August, 2010 – TOI)
Bombay HC to resume hearing in Vodafone – IT matter – verdict to
impact past dealings & define Mergers and Acquisitions road map in
India (2nd August, 2010 – Economic Times)
Legislation of the week – LS passes bill to replace ULIP ordinance –
The Securities and Insurance Laws (Amendment) and Validation Bill
2010 all set to create a ―super regulator‖ (Read More) (3rd August,
2010 – TOI, Economic Times)
Others – GST all set to rollout from 1st April, 2011(Read More) (5th
August, 2010 – Economic Times)
Did You Know ?
―Bombay Stock Exchange (BSE) is the oldest stock exchange in Asia,
and the largest in South – Asia.‖
Rate Card -
Bank Rate – 6.0% 1 Euro – Rs. 61.0700

Repo Rate – 5.75% Prime Lending Rate – 7.5% –

8.00%

Cash Reserve Ratio – 6.0% Base Bank Rate – 3.5%

Statutory Liquidity Ratio – 25% BSE SENSEX – 18114 .83

1 USD – Rs. 46.2200 Call Rates – 3.50% – 6.05%

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Law Focus
This week on Law focus we will discuss the Limited Liability
Partnership Act, 2008.
Overview of LLP
The Limited Liability Partnership Act, 2008 was enacted after much
discussion and debate. Limited Liability Partnership (LLP) is viewed
as an alternative corporate business vehicle that provides the benefits
but allows its members the flexibility of organising their internal
structure as a partnership based on mutually arrived agreements.
Salient Features
Body corporate and Legal entity separate from its partners –
perpetual succession – mutual rights and duties of partners similar to
partnership act – separate legal entity, hence liability of partners is
limited to only their agreed contribution in the LLP.
Comments
―In the background of the global economic trends which enable investment and
services o flow across borders, the growing role of services and knowledge
based enterprises and emerging international competitions it is necessary to
enable entities also to have the requisite choice in corporate organizations to
compete internationally on the level playing field.‖

…. Anagha I BSL

“The advantage of LLP is it combines flexibility of partnership with advantages

of limited liability of a company at low compliance cost.”

…. Saumya Jambhekar II BSL

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“The concept of designated partners to the LLP has been explained in Section 7
following with their responsibilities stated in Section 8 & 9. Section 7 states that
a LLP shall have at least two designated partners who are individuals of which
at least one shall be a resident of India.”

…..Isha Parasnis II BSL

“The liability of a LLP will be meted out of the property of LLP. A partner will
not be personally liable directly or indirectly for an obligation of the LLP solely
by reason of being a partner of the LLP.”

….. Parvathy Tharamel II BSL

“One key condition for the conversion of a company (Private or unlisted

Public) to a LLP is that the company may convert into a LLP provided there is
no security interest subsisting on its assets or in force at the time of application.
But, it is difficult for most companies to be in a scenario where there is no
security interest subsisting on any assets.”

…..Kanwardeep Singh Kapany I BSL

“While you can convert from a firm or a company to an LLP, there are no
provisions for erring and deciding to reconvert back into a partnership or a
company. In such a case, the decision has to be well weighed realising that
there is no “u turn” available down the road.”
…. Shashank Mangal I BSL

(Note: - The following comments have been quoted from articles

received by us from students)
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Bone of Contention
The recent bickering among the regulators namely between the Securities
exchange board of India and the insurance regulatory and development
authority has caused a lot of panic amongst the investors and private life
insurance companies.

The table below attempts to illustrate a systematic highlight of the SEBI –

IRDA dispute.

Government –
Date Sebi Irda Finance Ministry
Abolished entry loads for
August ‗09 mutual fund schemes
Issued show-cause notices
to some life insurers
asking why action should
not be taken against them
December for selling ULIPs without
‗09 its approval
Again questioned Insurers
about not seeking Sebi‘s
January permission over issuance
‗10 of Ulips
―ULIPs are broadly
similar to the mutual
funds, except that they are
required to segregate a
certain part of the
premium towards the life
February insurance of the plan
‗10 holder.‖
―Ulips globally are
managed by insurance
regulators, and under no
circumstance will we let
Ulips to be taken over by
March ‗10 Sebi.‖
Issued order to ban 14
private insurance
9-Apr- companies from
2010 issuing/servicing Ulips
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―…they (Insurers) shall

continue to carry out
insurance business as
usual including offering, Finance Secretary
marketing and servicing Ashok Chawla said
ULIPs in accordance with that it was an issue
the Insurance Act, 1938, between the two
Rules, Regulations and regulators and they
10-Apr- Guidelines issued there should resolve it
2010 under by the IRDA.‖ among themselves
Finance ministry
intervened and status
Talks to order ban on 9 quo was restored.
11-Apr- more insurers including, Matter to be settled in
2010 state owned LIC court.
Asked Irda and Sebi
— to ―jointly seek a
binding legal mandate
12-Apr- from an appropriate
2010 court.‖
Issued second order that
exempted existing Ulips ―It could take another one ―We need to look at
from the ban, but said its or two days to arrive at a both the orders
13-Apr- nod was must for issuing decision‖ – on future internally and discuss
2010 new Ulips. course of legal action. it‖
―There is no fresh
clarification. The earlier
one stands good.‖ – on
14-Apr- ban on issuance of new
2010 Ulip products.
Moved the Supreme Supports Sebi‘s April
Court and some high 13 order; says
courts (including directions issued were
high courts of Delhi, in keeping with the
Bombay and Hyderabad) agreement worked out
15-Apr- to guard against any ex with the insurance
2010 parte decision. regulator.
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The Issue & Facts:

1. Unit linked insurance plans majorly invested the collected premiums into
the securities market, and the securities market naturally fell under the
garb of SEBI.

2. Moreover the agents or investment brokers promoted the ULIP scheme as

that of an investment scheme more than a life insurance policy, which hit
the already traumatised mutual fund companies.

3. The push for ULIP schemes arose because of a higher commission rate
which the agents earned over the mutual fund schemes.

In Furtherance:

Even before this dispute the government had setup the HLCC (high level co-
ordination committee) which supervised and furthered inter regulatory peace.

The chairman for this board was the RBI governor. However following this
dispute the Lok Sabha passed an act known as the Securities and Insurance
Laws (Amendment) and Validation Bill 2010.

Conclusion:

The dispute magnified beyond HLCC and the government had to intervene by
passing an ordinance and subsequently the act. In anticipation of such similar
circumstances the government has appointed Finance Minister as the chairman
of the committee and the RBI governor as the vice-chairman. The government
further pressed on ULIP schemes to be promoted as an insurance policy and not
solely as an investment vehicle

Further Reading –
Conceptualised and Edited
1. Difference between
by –
Endowment Scheme
and ULIP. Team Information Panel of
Corporate Law Cell.
2. The Securities and
Insurance Laws For further queries write to
(Amendment) and us at ilsccell.ip@gmail.com
Validation Bill 2010