Updated: Dec 10, 2020
Features of an LLP
An LLP is a body corporate and has legal personality separate from its partners. Like any other body corporate, LLP has perpetual succession. Any changes in the partners will not affect the existence, rights or liabilities of the LLP. LLP has unlimited capacity and capable of suing and being sued, acquiring, owning, holding and developing or disposing of property. LLP may do and suffer such other acts and things as bodies corporate may lawfully do and suffer. An LLP is a business vehicle which would offer simple and flexible procedures in terms of its formation, maintenance and termination.
The registration fee for a new LLP and conversion is RM500. The fee for the application of name is RM30.
Who may form an LLP?
An LLP may be formed by a minimum of two persons (wholly or partly individuals or bodies corporate) for any lawful business with a view of profit and in accordance with the terms of the LLP agreement. Any individual or body corporate can be a partner.
However, an LLP formed for professional practice must consist of natural persons of the same profession and have in force professional indemnity insurance as approved by the Registrar.
Thus, LLPs may be set up by the following:
i. Start Ups; or
ii. Small & Medium Sized Businesses; or
iii. Professionals; or
iv. Joint Ventures; or
v. Venture Capitals.
Procedure for Registration
To register an LLP, an applicant must provide the following information:
i. proposed name of LLP;
ii. nature of business;
iii. address of the registered office;
iv. name and details of the partners;
v. name and details of the compliance officer;
vi. the approval letter (in cases of professional practice).
The application for registration must be accompanied by a payment of RM500. Upon satisfaction of application to register LLP, the Registrar shall register the LLP and issue a notice of registration together with a registration number to the LLP. Notice of registration serves as conclusive evidence that the LLP has been registered. Registration does not mean that requirements of other written law relating to the business of the LLP have been fulfilled. The name of the LLP shall end with "Perkongsian Liabiliti Terhad" or abbreviation of "PLT".
Conversion to an LLP
Apart from new registration, existing entities may also convert into an LLP. The entities which are allowed to convert are:
i. Conventional partnerships; or
ii. Private companies incorporated.
The eligibility criteria for a conventional partnership to convert into an LLP are as follows:
i. Same partners and no one else;
ii. At the date of application, the conventional partnership appears to be able to pay its debts;
iii. In cases of professional practice, the approval letter from the governing body.
The eligibility criteria for a private company for conversion are:
i. Same shareholders and no one else;
ii. There is no subsisting security interests in its assets;
iii. At the date of application, the private company is solvent;
iv. All outstanding statutory fees to government agencies has been settled;
v. Advertisement has been placed in a widely circulated newspaper and the Gazette;
vi. All creditors agreed to the conversion.
The effects of conversion are as follows:
i. Vesting of assets, rights, privileges, obligations and liabilities of the conventional partnership or the private company into the LLP;
ii. Pending proceedings may be continued, completed and enforced against or by the LLP;
iii. Existing agreements, contracts shall have effect as though the LLP were a party;
iv. In the case of the conversion of a conventional partnership, the partners shall continue to be personally liable (jointly and severally with the LLP) for liabilities and obligations incurred prior to the conversion.
v. In the case of the conversion of a private company, the LLP will continue to be liable for the liabilities and obligations incurred prior to the conversion
Requirements of an LLP
An LLP must appoint at least one compliance officer who may be either one of the partners or persons qualified to act as a secretary under the CA 2016. The compliance officer must be either a citizen or permanent resident of Malaysia and ordinarily resides in Malaysia. A person is disqualified to act as a compliance officer if he is an undercharged bankrupt or is disqualified to act as a director or secretary under the CA 1965.
An LLP must maintain a registered office in Malaysia where communications and notices may be addressed. The LLP has the obligation to keep at the registered office, a notice of registration issued under this Act, a copy of the LLP agreement, the register of name and address of each partners and compliance officer, a copy of the latest annual declaration and if any, a copy of any instrument creating a charge.
An LLP is required to keep accounting records as to show the true and fair view of the state of affairs of the LLP. There is no requirement for the appointment of auditor unless specifically provided for in the LLP agreement.
If you would like to know more, please contact Bestar.