15 May 2013

Circular 31/2013

TO ALL ACCOUNTANTS THE LIMITED LIABILITY PARTNERSHIP FOR PROFESSIONAL PRACTICE Members are hereby be informed that subsequent to the meeting with the Companies Commission of Malaysia (SSM), the Institute is pleased to clarify the process, requirement and other consideration which may affect the decision of potential practitioners who wish to set-up Limited Liability Partnership (LLP). LLP is an alternative business vehicle which is a hybrid between a company and a conventional partnership. An LLP may be formed by any business group with at least two or more persons, consisting of, wholly or partly, individuals or bodies corporate, associated for carrying on any lawful business with a view to make profit. Section 8 of the LLP Act 2012 provides that an LLP may be formed for the purpose of carrying on a professional practice which partners1 shall: - Consist of natural persons who are practising the same professional practice only; and - Have in force professional indemnity insurance cover for an amount of not less than the amounti. Approved by the Registrar; or ii. Where the professional practice is governed by a governing body as specified under the third column of the first schedule of the LLP Act 2012, approved by the Registrar upon consultation with the governing bodies. Process for Registration of New LLP together with new Professional Practice The Malaysian Institute of Accountants (MIA) as the statutory body established under the Accountants Act 1967 has been tasked to regulate and develop the accountancy profession in Malaysia. In this respect, for members who wish to set-up new LLP for either an audit or non-audit practice, the processes are: (i) Members are required to register with the SSM via MyLLP Portal by submitting to the SSM the following: 1) Information as required under section 10 of the LLP Act 2012; 2) Approval letter together with the proposed name from MIA; and 3) The prescribed registration fee. (ii) Upon approval of the registration, SSM will issue the notification of registration of the LLP. (iii) In the case of an audit practice, members are required to register the LLP as an audit firm to obtain the AF number in which the existing requirements of setting up an audit firm will still be applicable. Upon obtaining the AF number, such information relating to the LLP must be updated with the SSM accordingly.

Note: The LLP in this context functions as the business vehicle for the professional services. Process for Registration of New LLP for Existing Professional Practice For existing audit firm which wishes to set-up LLP, the existing audit firm is required to be maintained. In addition, the audit firm will be required to register with the SSM via MyLLP Portal and submit to the SSM the following documents: 1) 2) 3) Information as required under Approval letter together with The prescribed registration fee. SSM will issue the section 10 of the the proposed name LLP from Act 2012; MIA; and

Thereafter,

notification

of

registration

of

the

LLP.

Note: Existing professional firm where the partners who wish to set up LLP, the partner is required to submit application to MIA of the intention and for obtaining the approval letter. For members information, the registration of LLP would mean that the exist ing audit firm transfers its existing interests, rights, privileges, liabilities, obligations and any undertakings to LLP which would be the business vehicle to run the professional practice. To effect the transfer, some legal documentations are mandatory which may be subject to stamp duty or real property gains tax. Other Important Considerations 1. Section 68 of the LLP Act 2012 states that the LLP needs to lodge an Annual Declaration which states the ability of the LLP to repay its debts as they become due in the normal course of doing business or otherwise. The Institute is made to understand that the annual declaration may contain document, as determined by the Registrar, require the LLP to disclose its revenue, profit, assets, liabilities and particulars of indebtedness of the LLP. Such information will be made accessible through SSMs search portal. 2. The existing professional indemnity insurance will still be applicable i.e. RM250,000 per partner per LLP and LLP will be governed by MIAs By-Laws which will be amended in due course. The MIAs By-Laws is obligatory to be abide by all MIA members. 3. Other provisions in the LLP Act 2012 will apply to all LLP Professional Practice in addition to the existing by-laws and rules governing the professional practice. 4. Closure of the LLP will imply the dissolution of the business entity for professional practice. Practitioners who wish to continue their professional practice will be required to register a new business entity before undertaking any future audit assignment with the AF number being allocated.

5. For the purpose of issuance of audited report, a report or notice shall be : (a) signed in the name of the audit firm and in his own name by the partner of the firm who is an approved company auditor; and (b) the firm number (AF number) and the approval number of the partner is legibly written or printed either under or alongside the signature of the firm and the partner respectively. The LLP number shall not be shown for the purposes of issuance of audit report. However, the LLP must still be required to state the LLPs registration number in compliance with the requirements under section 20 of the LLP Act 2012 in relation to publication of names. Please be guided accordingly. HO FOONG MOI (MS) Chief Executive Officer
1
Partner means any person admitted as a partner in accordance with the LLP agreement, and includes salaried partner whether or not he is an employee of the LLP.