Ministry says trusts can become partners in LLPs

New Delhi: Any trust set up under the law governing the capital markets regulator can become a partner in a limited liability partnership, the government said on Tuesday.

“Clarifications have been sought on whether a trust or a trustee representing a trust in the case of real estate investment trust (REIT) or infrastructure investment trust (InvITs) or such other trusts set up under the regulations prescribed under the Securities and Exchange Board of India Act, 1992, can become a partner in an LLP,” the corporate affairs ministry said in a statement.

On 27 September, the Securities and Exchange Board of India (Sebi) allowed property funds to invest in limited liability partnerships.

The government has also allowed boards of not-for-profit companies to decide whether they will forfeit the security deposit of ₹ 1 lakh in case a person is not elected as a director on the board of such a partnership.

The government has granted a year’s exemption to auditors from validating the effectiveness of the internal audit systems of the company they are preparing the audit report for. This exemption has been granted till 1 April.

The government has also given a relaxation in the case of consolidation of accounts. While holding companies will continue to have to consolidate their accounts with all their step-down subsidiaries, the latter have been exempted from mandatory consolidation of accounts with their own immediate subsidiaries during the current fiscal year.

Further, joint venture and associate companies have also been exempted from mandatory consolidation of accounts with the parent companies till 1 April 2015, provided the parent companies do not have any subsidiaries.

Ambar Maheshwari, managing director, corporate finance at property advisory Jones Lang La Salle India, said that with trusts being allowed to partner in LLPs, it brings about much-awaited clarity on a matter that was mired in uncertainty till now.

“Most domestic funds are structured as trusts that act on behalf of its trustees but most of them couldn’t invest in them and were looking to invest through other structures such as private limited companies,” said Maheshwari.

Madhurima Nandy in Bagalore contributed to this story.