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1.

he FIDIC 'Rainbow Suite' of New Contracts was published in 1999 and includes:
the Red Book: Conditions of Contract for Construction for Building and Engineering Works
Designed by the Employer;
the Yellow Book: Conditions of Contract for Plant and Design-Build;
the Silver Book: Conditions of Contract for EPC/Turnkey Projects;
the Green Book: Conditions of Short Form of Contract.
These 'new' forms were first editions and designed to be user-friendly, with a standardized
approach and a reduction in the general conditions from over 60 to 20 clauses.
Additional forms in use since 1999 include:
the Blue Book: Contract for Dredging and Reclamation Works;
MDB/FIDIC Contract: FIDIC conditions incorporated in the standard bidding documents of
multilateral development banks;
the White Book: Client/Consultant Model Services Agreement;
the Gold Book: FIDIC Design, Build and Operate Projects.
5 COLOR INCLUDING 1 BIS HARMONIZED EDITION - IN FIDIC
1. RED BOOK - FOR CONTRUCTION
2. PINK BOOK - FOR CONTRUCTION IN RED BOOK
3.YELLOW BOOK- FOR PLANT & DESIGN-BUILD
4. SILVER BOOK - FOR EPC TURNKEY PROJECT
5. GREEN BOOK - FOR SHORT FORM OF CONTRACT

Conditions of Contract for Works of Civil Engineering Construction (Red Book 4th) -First Edition 1957
Fourth Edition 1987 -Reprinted 1988 with editorial amendments -Reprinted 1992 with further amendments
Supplement to the 1992 Red Book published in 1996
2. Conditions of Contract for Electrical and Mechanical Works including erection on site (Yellow Book) -First
Edition 1963 -Third Edition 1987
3. Conditional of Contract for Design-Build and Turnkey (Orange Book) -First Edition 1995
4. Conditions of Sub-contract for Works of Civil Engineering Construction -First Edition 1994
5. Client/Consultant - Model Services Agreement (White Book) -Third Edition 1998 -Fourth Edition 2006
6. Short Form of Contract (Green Book) -First Edition 1999
7. Conditions of Contract for Construction, for Building and Engineering Works, Designed by the Employer (Red
Book 1999) - First Edition 1999
8. Conditions of Contract for Plant and Design-Build for Electrical and Mechanical Plant, and for Building and
Engineering Works, Designed by the Contractor (Yellow Book) First Edition 1999
9. Conditions of Contract for EPC Turnkey Projects (Silver Book) -First Edition 1999
10. Form of Contract for Dredging & Reclamation Works (Blue Book) -First Edition 2006.
11. The Harmonised Multilateral Development Banks Form of Contract (Pink Book) -First Edition 2005 -Third
Edition 2010
12. Conditions of Contract for Design, Build and Operate Projects (Gold Book) -First Edition 2008
13. Conditions of Subcontract for Construction (compatible with the 1999 Red Book) -First Edition 2011

The New FIDIC Forms


Daniel Atkinson 01 January 1997
KEYWORDS: The New FIDIC Forms, test editions, Allocation of Risks, Yellow Book, Red Book, Silver Book, IChemE Green Book, ECC
Options D and E , Green Book (Short Form), Communications, Impossibility, Design Liability ,

Background
The Federation International des Ingnieurs - Conseils (FIDIC) is the leading body for the development of
model standard forms of contract for use in the international construction industry. The standard forms
are generally accepted by Employers and Contractors as providing a balanced allocation of risks and
providing fair procedures for administration of contracts.
In September 1998 FIDIC published "test editions" of its forms of contract in a new livery of colours Red
and Yellow to update the existing Red, Yellow and Orange Books. FIDIC also introduced a short form of
contract in another primary colour - the Green Book. A metallic colour has now been added in the Silver
Book which is likely to be the most controversial form.
The new Red Book is the traditional form for civil engineering construction in which the Contractor
constructs to the Employer's design. There is however provision for the Contractor to carry out design
where specified. The form maintains the role of the Engineer and the payment mechanism is based on
measure and value. The new Red Book revises the previous Red Book version and incorporates current
thinking on the management of contracts.
The new Yellow Book replaces the existing Yellow and Orange Books. It is intended to be used for Design
and Build contracts and for Plant Contracts. The Engineer administers the contract and payment is on
periods or installments of the Lump Sum.
The Green Book is an entirely new FIDIC form and adopts the overall risk philosophy of the Red and
Yellow Books. It is intended for contracts of low capital value or simple contracts of short duration such as
dredging works. There is no Engineer and the payment mechanism is required to be specified in the
Appendix to the Form of Agreement, but payment is at monthly intervals.
The new Silver Book is an entirely new FIDIC form for BOT and similar projects. It is intended to be used
on fixed-price turn key projects. There is no Engineer, instead the Employer deals directly with the
Contractor. Risk is placed largely with the Contractor. Payment is on periods or installments of the Lump
Sum.
One form of contract missing from the new livery is the Target Cost Reimbursable form of contract. This is
not widely used internationally but is used extensively in the UK and particularly on tunnelling contracts.
Available standard forms are the IChemE Green Book and the ECC Options D and E which have all been
used with some success.
Allocation of Risks
In many projects one of the significant risks is that of changed Site and Ground conditions. The starting
point is the responsibility for supply of information.
Clauses 4.10 and 4.11 are the relevant provisions in the Red and Yellow Book. Clause 4.10 requires the
Employer to have made available, 28 days prior to the latest date for submission of the Tender, all
relevant data in his possession on sub-surface conditions at the Site. The Contractor is only responsible
for interpreting the data. Under Clause 4.11(b) the Contractor is deemed to have based the Contract
amount on such data, and in the case of the Yellow Book any further data relevant to the Contractor's
design. This effectively means that the Employer warrants the accuracy of the information he has
provided.
Under Clause 4.10 the contractor is also deemed to have obtained all necessary information as to risks
which may influence or affect his Tender or the Works. He is deemed to have inspected and examined
the Site and other available information. However, these "deeming" provisions are limited to the extent
that the investigation by the Contractor is practicable, taking into account cost and time.

Clause 4.12 defines the allocation of risk forchanged ground which in the Red and Yellow Books follows
the traditional forseeability test. The Employer carries the risk of physical condition which could not have
reasonably been foreseen by an experienced contractor by the date for submission of the Tender.
Physical Conditions is defined as both natural physical conditions as well as man-made and other
physical obstructions and pollutants. The definition excludes climatic conditions, but includes hydrological
conditions.
The Green Book (Short Form) is silent on the matter of supply of information. Clause 6.1 defines the
Employer's risks which include changed ground . Sub-clause 6.1(b) includes as an Employer's risk any
operation of the forces of nature affecting the Site and/or the Works which were either unforeseeable or
against which an experienced contractor could not reasonably have been expected to take precautions.
Sub-Clause 6.1(e) defines as the Employer's Risks physical conditions or obstructions other than climatic
conditions where were not reasonably foreseeable by an experience contractor.
The Silver Book adopts a different approach. The Employer is required to have made available to the
Contractor all relevant data in the Employer's possession on hydrological and sub-surface conditions at
the Site. The Contractor however is responsible for verifying as well as interpreting the data. There is
therefore no warranty by the Employer of the accuracy of the information.
The Silver Book allocates all the risk of changed ground conditions to the Contractor. Clause 4.11
provides that the Contractor is deemed to have satisfied himself as to the sufficiency of the Contract
Price, and states that it covers all things necessary to design, execute and complete the Works. Clause
4.12 provides that the Contractor accepts responsibility for having foreseen all difficulties and costs of
successfully completing the Works.
Controversially the Silver Book at Clause 5.1 also passes to the Contractor responsibility for the accuracy
and completeness of the Employer's Requirements. The Employer is expressly stated not to be
responsible for any error, inaccuracy or omission in the Employer's Requirements. The Employer is only
responsible for the definition of the intended purpose of the Works and the criteria for testing/performance
of completed Works.
The more usual provision for responsibility for the Employer's Requirements is to be found at Clause 5.1
of the new Yellow Book. This allows the Contractor within a specified period after Notice of
Commencement, to notify the Engineer of any error, fault or defect in the Employer's Requirements. The
Engineer then decides whether to issue a variation. The Contractor is entitled to extension of time and
adjustment of the Contract Price, unless the error was one which an experienced contractor would have
discovered before submitting his Tender, had he used reasonable skill and care.
The Silver Book therefore clearly envisages that the Contractor will carry our a rigorous check of the
Employer's Requirements before submitting his tender and take the risk of any errors whether it is
reasonable or not for the Contractor to identify the errors.
Communications
There has been a significant shift in current thinking in the UK on the nature, timing and effect of
communications in construction contracts. The trend is towards more detailed programming, early
warning of the potential consequences of events and the adoption of notices as a condition precedent to
the contractor's entitlement under the contract. A further recent development has been the adoption of
"exhaustive remedy" clauses, which provide that the only remedies available to the parties are those
stated in the contract, to the exclusion of any other legal remedies. The FIDIC forms have adopted only
some of these new ideas.
The provision in the Red, Yellow and Silver Books in relation to programme are not radical. Clause 8.3
simply requires the Contractor to submit a programme and to revise the programme when it is no longer
consistent with actual progress. The Contractor is required however to give prompt notice of specific
probable future events or circumstance which may adversely affect the work, increase the Contract Price
or delay execution of the Work. There is no direct sanction for failure to warn, but it is to be noted that in
making a fair determination under Clause 3.5, due regard is to be taken of all relevant circumstance. It
may be argued that this would include the contractor's failure to warn when he could have done, although
this is not so expressly stated.

The Green Book under Clause 7.,2 simply requires the Contractor to submit a programme but does
provide for Early Warning at Clause 10.3. If the contractor fails to notify as soon as he becomes aware of
any circumstance which may delay or disrupt the Works or give rise to a claim for additional payment,
then the Contractor's entitlement is reduced if the Engineer as a result is unable to keep relevant records
or take steps to minimise the effects of the events.
One of the features of the new forms is the stringent notice provisions. Under the Red, Yellow and Silver
forms, Clause 20.1 requires the Contractor to give notice as soon as practical, and not later than 28 days
after the event or circumstance giving rise to the claim for extension of time or additional payment. Within
42 days of the event or circumstance the contractor is required to submit a fully detailed claim with full
supporting particulars.
If the event or circumstance has a continuing effect then the Contractor is required to send further claims
at monthly intervals giving the accumulated delay and/or amount claimed. The final claim is to be sent
within 28 days after the end of the effects.
The Contractor is only entitled to payment for such part of the claim as he has been able to substantiate.
If the Contractor fails to comply with the provisions, then there will be no entitlement to extension of time
nor to additional payment.
In the Red and Yellow Books any notice for unforseen physical conditions is required to described the
physical conditions so they can be inspected by the Engineer, and set out the reasons why the Contractor
considers them to be unforeseeable.
None of the FIDIC forms adopt an "exhaustive remedy" clause, so the absence of notice may not cause
the contractor to lose all entitlements, but clearly will have a significant effect on the administration of the
contract.
Impossibility
The FIDIC forms have kept the impossibility provisions found in many standard forms.
The new Red, Yellow and Silver Books at Clause 19.7 release the parties from further performance if any
event or circumstance outside the control of the Parties make it impossible or unlawful for either or both
parties to fulfill its obligations.
The Green Book at Clause 1.1.14 goes further and defines "Force Majeure" as any event or circumstance
which makes performance of a Party's obligations illegal or impracticable and which is beyond that
Party's reasonable control. Clause 13.2 allows the Contractor to suspend the execution of the Works but
only "if necessary". If the event continues for a period of 84 Days then either Party may give notice of
termination.
Design Liability
A significant feature of all the new forms is that the Contractor has a fitness for purpose obligation for any
design which is his responsibility.
The new Red Book at Clause 4.1(c) makes the Contractor responsible for any part of the Permanent
Works which the Contract specifies is to be designed by the Contractor. When the Works are completed,
that part designed by the Contractor is required to be fit for such purpose for which that part was
intended.
The new Green Book at Clause 5.2 also provides that the Contractor's design is fit for the purpose
intended defined in the Contract.
The Yellow and Silver Books has a similar provision, but since the Contractor is responsible for all design
Clause 4.1 provides that the Works are to be fit for their purpose. Any error in the design in the
Employer's Requirements is subject to Clause 5.1 described above.
Conclusions

The new FIDIC forms have adopted much of current thinking in the administration of contracts and shifted
risk and responsibility to the Contractor. Many of the changes will cause controversy.
Unfortunately there is no radical thinking in the mechanism for dealing with the evaluation and settlement
of claims, which are an inevitable result of the changes. The adoption of a Dispute Adjudication Board is a
welcome change, but the procedure is unwieldy for all but the most complex disputes. It is unfortunate
that the opportunity was not taken to introduce a mechanism for evaluating entitlement which would
reduce the most costly part of disputes resolution.

What Does LLC Mean for a Company?


A limited liability company (LLC) is a type of business in which the owners, called members, have
much less liability for company actions and debts than a company like a corporation, according to
the Internal Revenue Service. Many new business owners form their companies as an LLC instead
of traditional C and S corporations because of the LLC's legal and tax advantages.

Function
Up until the mid-1970s, companies only had the choice of forming a corporation or partnership,
and both had severe disadvantages. Partnerships have little legal protection from company debt
obligations and lawsuits, but are taxed only once. Corporations, on the other hand, face double
taxation because the tax code applies to net profits and capital gains, but offer legal protection to
their shareholders. LLCs essentially combine the best features of corporations and partnerships.

Benefits
Under LLC statutes, a company automatically qualifies for a "tax pass-through." Tax pass-through
means that the company does not pay taxes on net profits; the owners pay taxes on income from
the business that's shown on their personal tax returns. The biggest benefit is that shareholders
and owners retain no responsibility for debts unless someone specifically signs an agreement
taking liability for a debt.
Related Reading: What Does LLC Mean As a Professional Designation?

Disadvantage
Despite LLCs' popularity, you may still want to form an S or C corporation in certain
circumstances. LLC companies are a relatively new type of business entity as of 2010, so many
investors are hesitant to invest in an LLC until they are better understood, according to the
Gaebler website, a resource for entrepreneurs. In addition, LLCs usually have higher legal fees
because S and C corporations already have pre-made agreements.

Misconceptions
As of 2010, LLC businesses are not recognized by the federal government, according to the IRS.
An LLC has to file as a corporation, partnership or sole proprietorship on its tax returnmost LLCs

are automatically considered a corporation. Certain types of business, such as banks and
insurance companies, cannot form an LLC, but actual restrictions on forming an LLC depend on
the laws of the state in which the company resides.

Tip
You can quickly convert any business into an LLC in most states by filling out a simple form called
a "certificate of conversion," according to legal information website Nolo. Other states require
formal articles declaring the formation of an LLC. In addition, every potential LLC must transfer all
pertinent business information, such as identification numbers and sales tax permits, to the new
entity. A few states require a newspaper article declaring the end of a partnership and the
formation of an LLC.

References (5)

Meaning
Limited Liability Partnership entities, the world wide recognized form of business organization has been introduced in
India by way of Limited Liability Partnership Act, 2008. A Limited Liability Partnership, popularly known as LLP
combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one
partner is not responsible or liable for another partner's misconduct or negligence, this is an important difference from
that of a unlimited partnership. In an LLP, all partners have a form of limited liability for each individual's protection
within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders,
the partners have the right to manage the business directly.An LLP also limits the personal liability of a partner for the
errors, omissions, incompetence, or negligence of the LLP's employees or other agents.
Limited Liability Partnership is managed as per the LLP Agreement, however in the absence of such agreement the
LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which
describes the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership
and its partners.
LLP has a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to
their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by
another partners wrongful business decisions or misconduct.
Limited Liability Partnership Act, 2008 came into effect by way of notification dated 31st March 2009.

Renowned and accepted form of business worldwide in comparison to Company.

Low cost of Formation.

Easy to establish.

Easy to manage & run.

No requirement of any minimum capital contribution.

No restrictions as to maximum number of partners.

LLP & its partners are distinct from each other.

Partners are not liable for Act of partners.

Less Compliance level.

No exposure to personal assets of the partners except in case of fraud.

Less requirement as to maintenance of statutory records.

Less Government Intervention.

Easy to dissolve or wind-up.

Professionals can form Multi-disciplinary Professional LLP, which was not allowed earlier.

Audit requirement only in case of contributions exceeding Rs. 25 lakh or turnover exceeding Rs. 40 lakh.

Any act of the partner without the other partner, may bind the LLP.

Under some cases, liability may extend to personal assets of partners.

Cannot raise money from Public.

Comparison between existing Business Forms and LLP Result


Category

Company

LLP

Prevailing Law

Companies are prevailed by


Companies Act, 1956

Limited Liability Partnership are


prevailed by The Limited Liability
Partnership Act, 2008 and various
Rules made there under

Registration

Registration with Registrar of


Companies required.

Registration with Registrar of LLP


required.

Creation

Created by Law

Created by Law

Distinct entity

Is a separate legal entity under the


Companies Act, 1956.

Is a separate legal entity under the


Limited Liability Partnership Act,
2008.

Name of Entity

Name to contain 'Limited' in case of


Name to contain 'Limited Liability
Public Company or 'Private Limited'
Partnership' or 'LLP' as suffix.
in case of Private Company as suffix.

Cost of Formation

Minimum Statutory fee for


incorporation of Private Company is
Rs.6,000/- and minimum Statutory
fee for incorporation of Public
Company is Rs. 19,000/-

Minimum cost of Formation of LLP is


Rs. 800 only, comparatively much
lesser than the cost of formation of
Company

Perpetual Succession

It has perpetual succession and

It has perpetual succession and

members may come and go.

partners may come and go

Charter Document

Memorandum and Article of


Association is the charter of the
company which defines its scope of
operation.

LLP Agreement is a charter of the


LLP which denotes its scope of
operation and rights and duties of the
partners vis--vis LLP.

Common Seal

It denotes the signature of the


company and every company shall
have its own common seal

It denotes the signature and LLP may


have its own common seal,
dependant upon the terms of the
Agreement

Formalities of Incorporation

Various eforms along the


Memorandum & Articles of
Association are filled with Registrar
of Companies with prescribed fees

Various eForms and the LLP


Agreement are filed with the
Registrar of LLP along with the
prescribed Fee.

Time line

It will take 10 days (approx.) to


It will take 10 days (approx.) to
incorporate (inclusive of time taken to incorporate (inclusive of time taken to
obtain DIN)
obtain DPN)

Legal Proceedings

A company is a legal entity which can A LLP is a legal entity can sue and
sue and be sued
be sued

Foreign Participation

Foreign Nationals can be a member


in a Company.

Foreign Nationals can be a Partner in


a LLP.

Number of Members

2 to 50 members in case of Private


Company and Minimum 7 members
in case of Public Company.

Minimum 2 partners and their is no


limitation of maximum number of
partners.

Ownership of Assets

The company independent of the


members has ownership of assets

The LLP independent of the partners


has ownership of assets

Rights / Duties / obligation of the


Partners / Managing Partners /
Directors

Rights / Duties / obligation of the


Rights / Duties / obligation of the
directors are governed by AOA and
partners are governed by LLP
resolution passed by shareholders or Agreement.
directors.

Liability of Partners/Members

Generally limited to the amount


required to be paid up on each
share.

Limited, to the extent their


contribution towards LLP, except in
case of intentional fraud or wrongful
act of omission or commission by the
partner.

Tax Liability

Income of Company is Taxed at a


Flat rate of 30% Plus surcharge as
applicable.

Income of LLP is taxed at a Flat rate


of 30% plus education cess as
applicable.

Principal/Agent Relationship

The directors act as agents of the


company and not of the members

Partners act as agents of LLP and


not of the other partners.

Transfer / Inheritance of Rights

Ownership is easily transferable.

Regulations relating to transfer are


governed by the LLP Agreement .

Transfer of Share / Partnership


rights in case of death

In case of death of member, shares


are transmitted to the legal heirs.

In case of death of a partner, the


legal heirs have the right to get the
refund of the capital contribution +
share in accumulated profits, if any.
Legal heirs will not become partners

Director Identification
Number(DIN)

Each director is required to have a


Each Designated Partners is required
Director Identification Number before to have a DIN before being appointed
being appointed as Director of any
as Designated Partner of LLP.
company.

Digital Signature

As eforms are filled electronically,

As eforms are filled electronically,

atleast one Director should have


Digital Signatures

atleast one Designated Partner


should have Digital Signatures.

Dissolution

Voluntary or by order of National


Company Law Tribunal.

Voluntary or by order of National


Company Law Tribunal.

Transferability of Interest

A member can freely transfer his


interest

A partner can transfer his interest


subject to the LLP Agreement

Admission as partner / member

A person can become member by


buying shares of a company.

A person can be admitted as a


partner as per the LLP Agreement

Cessation as partner / member

A member / shareholder can cease


A person can cease to be a partner
to be a member by selling his shares. as per the LLP Agreement or in
absence of the same by giving 30
days prior notice to the LLP.

Requirement of Managerial
Personnel for day to day
administration

Directors are appointed to manage


the business and other statutory
compliances on behalf of the
members.

Designated Partners are responsible


for managing the day to day business
and other statutory compliances.

Statutory Meetings

Board Meetings and General


Meetings are required to conducted
at appropriate time.

There is no provision in regard to


holding of any meeting.

Maintenance of Minutes

The proceedings of meeting of the


board of directors / shareholders are
required to be recorded in minutes.

A LLP by agreement may decide to


record the proceedings of meetings
of the Partners/Designated Partners

Voting Rights

Voting rights are decided as per the


number of shares held by the
members.

Voting rights shall be as decided as


per the terms of LLP Agreement.

Remuneration of Managerial
Personnel for day to day
administration

Company can pay remuneration to


its Directors subject to law.

Remuneration to partner will depend


upon LLP Agreement.

Contracts with Partners/Director

Restrictions on Board regarding


some specified contracts, in which
directors are interested.

Partners are free to enter into any


contract.

Maintenance of Statutory Records

Required to maintain books of


Required to maintain books of
accounts, statutory registers, minutes accounts.
etc.

Annual Filing

Annual Financial Statement and


Annual Return is required to be filed
with the Registrar of Companies
every year.

Annual Statement of accounts and


Solvency & Annual Return is required
to be filed with Registrar of LLP every
year.

Share Certificate

Share Certificates are proof of


ownership of shares held by the
members in the Company

The ownership of the partners in the


firm is evidenced by LLP Agreement.

Audit of accounts

Companies are required to get their


accounts audited annually as per the
provisions of the Companies Act,
1956,

All LLP except for those having


turnover less than Rs.40 Lacs or
Rs.25 Lacs contribution in any
financial year are required to get their
accounts audited annually as per the
provisions of LLP Act 2008.

Applicability of Accounting
Standards.

Companies have to mandatorily


comply with accounting standards

The necessary rules in regard to the


application of accounting standards
are not yet issued.

Compromise / arrangements /

LLPs can enter into Compromise /

merger / amalgamation

arrangements / merger /
amalgamation

Oppression and mismanagement

No provision relating to redressal in


case of oppression and
mismanagement

Credit Worthiness of organization

Will enjoy Comparatively higher


creditworthiness from Partnership
due to Stringent regulatory
framework but lesser than a
company.

Whistle Blowing

Provision has been made to provide


protection to employees & partners,
providing useful information during
an investigation or convicting any
partner or firm.

Comparison between existing Business Forms and LLP Result


Category

Partnership

LLP

Prevailing Law

Partnership is prevailed by
The Indian Partnership
Act, 1932 and various
Rules made there under

Limited Liability Partnership are prevailed by The


Limited Liability Partnership Act, 2008 and various Rules
made there under

Registration

Registration is optional

Registration with Registrar of LLP required.

Creation

Created by Contract

Created by Law

Distinct entity

Not a separate legal entity

Is a separate legal entity under the Limited Liability


Partnership Act, 2008.

Name of Entity

Any name as per choice

Name to contain 'Limited Liability Partnership' or 'LLP' as


suffix.

Cost of Formation

The Cost of Formation is


negligible

Minimum cost of Formation of LLP is Rs. 800 only,


comparatively much lesser than the cost of formation of
Company

Perpetual Succession

It does not have perpetual It has perpetual succession and partners may come and
succession as this depends go
upon the will of partners

Charter Document

Partnership Deed is a
charter of the firm which
denotes its scope of
operation and rights and
duties of the partners

LLP Agreement is a charter of the LLP which denotes its


scope of operation and rights and duties of the partners
vis--vis LLP.

Common Seal

There is no concept of
common seal in
partnership

It denotes the signature and LLP may have its own


common seal, dependant upon the terms of the
Agreement

Formalities of
Incorporation

In case of registration,
Various eForms and the LLP Agreement are filed with
Partnership Deed along
the Registrar of LLP along with the prescribed Fee.
with form / affidavit required
to be filled with Registrar of
firms along with requisite
filing fee

Time line

It will take 7 days (approx.)


to incorporate

Legal Proceedings

Only registered partnership A LLP is a legal entity can sue and be sued
can sue third party

Foreign Participation

Foreign Nationals can not


form Partnership Firm in
India

Foreign Nationals can be a Partner in a LLP.

Number of Members

Minimum 2 and Maximum


20

Minimum 2 partners and their is no limitation of


maximum number of partners.

Ownership of Assets

Partners have joint


ownership of all the assets
belonging to partnership
firm

The LLP independent of the partners has ownership of


assets

Rights / Duties /
obligation of the Partners
/ Managing Partners /
Directors

Rights / Duties / obligation


of the partners are
governed by Partnership
Deed.

Rights / Duties / obligation of the partners are governed


by LLP Agreement.

Liability of
Partners/Members

Unlimited. Partners are


Limited, to the extent their contribution towards LLP,
severally and jointly liable
except in case of intentional fraud or wrongful act of
for actions of other partners omission or commission by the partner.
and the firm and liability
extend to their personal
assets.

Tax Liability

Income of Partnership is
taxed at a Flat rate of 30%
plus education cess as
applicable.

Income of LLP is taxed at a Flat rate of 30% plus


education cess as applicable.

Principal/Agent
Relationship

Partners are agents of the


firm and other partners.

Partners act as agents of LLP and not of the other


partners.

Transfer / Inheritance of
Rights

Not transferable. In case of Regulations relating to transfer are governed by the LLP
death the legal heir
Agreement .
receives the financial value
of share.

It will take 10 days (approx.) to incorporate (inclusive of


time taken to obtain DPN)

Transfer of Share /
In case of death of a
Partnership rights in case partner, the legal heirs
of death
have the right to get the
refund of the capital
contribution + share in
accumulated profits, if any.
Legal heirs will not become
partners

In case of death of a partner, the legal heirs have the


right to get the refund of the capital contribution + share
in accumulated profits, if any. Legal heirs will not become
partners

Director Identification
Number(DIN)

The partners are not


required to obtain any
identification number

Each Designated Partners is required to have a DIN


before being appointed as Designated Partner of LLP.

Digital Signature

There is no requirement of

As eforms are filled electronically, atleast one

obtaining Digital Signature

Designated Partner should have Digital Signatures.

Dissolution

By agreement, mutual
Voluntary or by order of National Company Law Tribunal.
consent, insolvency, certain
contingencies, and by court
order.

Transferability of Interest

A partner can transfer his


interest subject to the
Partnership Agreement

A partner can transfer his interest subject to the LLP


Agreement

Admission as partner /
member

A person can be admitted


as a partner as per the
partnership Agreement

A person can be admitted as a partner as per the LLP


Agreement

Cessation as partner /
member

A person can cease to be a A person can cease to be a partner as per the LLP
partner as per the
Agreement or in absence of the same by giving 30 days
agreement
prior notice to the LLP.

Requirement of
No requirement of any
Managerial Personnel for managerial; personnel ,
day to day administration partners themselves
administer the business

Designated Partners are responsible for managing the


day to day business and other statutory compliances.

Statutory Meetings

There is no provision in
regard to holding of any
meeting

There is no provision in regard to holding of any meeting.

Maintenance of Minutes

There is no concept of any


minutes

A LLP by agreement may decide to record the


proceedings of meetings of the Partners/Designated
Partners

Voting Rights

It depends upon the


partnership Agreement

Voting rights shall be as decided as per the terms of LLP


Agreement.

Remuneration of
The firm can pay
Remuneration to partner will depend upon LLP
Managerial Personnel for remuneration to its partners Agreement.
day to day administration
Contracts with
Partners/Director

Partners are free to enter


into any contract.

Partners are free to enter into any contract.

Maintenance of Statutory
Records

Required to maintain books Required to maintain books of accounts.


of accounts as Tax laws

Annual Filing

No return is required to be Annual Statement of accounts and Solvency & Annual


filed with Registrar of Firms Return is required to be filed with Registrar of LLP every
year.

Share Certificate

The ownership of the


partners in the firm is
evidenced by Partnership
Deed, if any.

The ownership of the partners in the firm is evidenced by


LLP Agreement.

Audit of accounts

Partnership firms are only


required to have tax audit
of their accounts as per the
provisions of the Income
Tax Act

All LLP except for those having turnover less than Rs.40
Lacs or Rs.25 Lacs contribution in any financial year are
required to get their accounts audited annually as per the
provisions of LLP Act 2008.

Applicability of
Accounting Standards.

No Accounting Standards
are applicable

The necessary rules in regard to the application of


accounting standards are not yet issued.

Compromise /
arrangements / merger /
amalgamation

Partnership cannot merge


with other firm or enter into
compromise or
arrangement with creditors

Companies can enter into


Compromise /
arrangements / merger /
amalgamation

LLPs can enter into


Compromise /
arrangements / merger /
amalgamation

or partners
Oppression and
mismanagement

No remedy exist , in case


Provisions providing for
of oppression of any
remedy against Oppression
partner or mismanagement and mismanagement exists
of Partnership

No provision relating to
redressal in case of
oppression and
mismanagement

Credit Worthiness of
organization

Creditworthiness of firm
depends upon goodwill and
creditworthiness of its
partners

Will enjoy Comparatively


higher creditworthiness
from Partnership due to
Stringent regulatory
framework but lesser than
a company.

Whistle Blowing

No such provision is
No such provision is
provided under Partnership provided under the
Act, 1932
Companies Act, 1956.

Due to Stringent
Compliances & disclosures
under various laws,
Companies enjoys high
degree of creditworthiness.

Provision has been made


to provide protection to
employees & partners,
providing useful information
during an investigation or
convicting any partner or
firm.