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Make LLP model friendly for MSMEs 

ICSI Told To Suggest Changes In LLP Structure 

THE ministry of corporate affairs has asked the Institute of Company Secretaries of India (ICSI) to suggest changes to make the limited liability partnership (LLP) model more apt for the small and medium sector enterprises in the country. 
The government wants the small and medium enterprises to adopt the LLP structure, which has several advantages such as limited liability for partners apart from lower compliance costs. 
The idea of getting SME sector to adopt the LLP model is to make them more competitive by extending them the benefits of this model. 
As per the proposal, ICSI will also reach out to smaller firms in order to apprise them of the benefits of the LLP form of business while also making a realistic estimation of the problems faced in converting to the new model. "We will be conducting chain programmes to take the benefits of the LLPs to the SMEs," said ICSI president Vinayak Khanvalkar. 
Converting to a LLP structure will also help SME units get easier access to credit from banks, the official said. 
LLPs registrations were opened in April last year but the response has been very poor, with only 677 entities being registered till date. 
The official further points out that the present number mainly comprises big consulting groups and law firms, with a relatively small portion of small-sized entities and new entrants showing interest. "This (LLP form of business) is a fantastic new opportunity and will inevitably give a whole new profile to the MSME sector. It will be possible for the sector to reach out to venture capital. This can be the stepping stone for partners becoming much larger industrialists and logging bigger growth," according to a recent statement by minister for corporate affairs Salman Khurshid on the advantages SMEs can derive from the LLP model. 
The report of the task force on SMEs, which was recently presented to Prime Minister Manmohan Singh, had highlighted the need for giving wide publicity to the LLP model, which it said will provide SMEs an interim solution to move from the informal to the formal economy. 

Economic Times, New Delhi, 04-02-2010.

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