Companies Looking at LLPs as new holding ways

The Indian government allowed the formation of Llps in India through an Act of Parliament in 2009. While it was originally meant to enefit entrepreneurial ventures y doing away with unlimited lia ility and giving etter ta! treatment" its worth as a holding company was reali#ed over time. $everal ig usiness houses are considering holding at least a part of their sta%e in flagship companies through limited lia ility partnership &Llp' firms" see%ing oth to save ta!es and smoothen succession planning. (urrently" most Indian promoters hold sta%es in their company through a clutch of private limited firms that are lia le to pay ta!es such as the dividend distri ution ta! and minimum alternate ta!. Llp firms in India are e!empt from such ta!es" ma%ing them an attractive holding vehicle for corporate houses. )y transferring their sta%e to Llp firms" holding companies can reduce ta! lia ilities such as dividend distri ution ta! and minimum alternate ta!. Also" Llp companies can help in ma%ing the process of succession within a company smoother. *At least a do#en usiness houses have as%ed us for advice on how they could utili#e the Llp structure in the promoter group holding"+ said ,inesh -ana ar" deputy chief e!ecutive officer and chairman of ta!ation at -P./ India Pvt. Ltd. 0e refused to identify the usiness houses" citing client confidentiality. The ta! savings from adopting an Llp structure could e considera le" according to 1.(. 0egde" mergers and ac2uisitions and ta! leader at consulting firm ,eloitte Touche Tohmatsu India Pvt. Ltd. *As per the present law and factoring for different situations li%e surcharge and cess" there could e a difference of 334 in ta! rates in case of Llp" as the company has to pay surcharge and also a dividend distri ution ta!"+ The concept of Llp firms was rought to India through the enactment of the Limited Lia ility Partnership Act y Parliament in 2009. An Llp firm is defined y the ministry of corporate affairs &.(A' as an alternative usiness vehicle that provides the enefits of limited lia ility" ut allows its mem ers the fle!i ility of organi#ing the internal structure as a partnership ased on a mutual agreement. According to the .(A we site dedicated to disseminating details a out the Llp format" the structure was introduced to *ena le professional e!pertise and entrepreneurial initiative to com ine" organi#e and operate in a fle!i le manner+. 5ver time" people have reali#ed the enefits that can accrue to a company6s holding structure through Llps. Aravali Polymers" one of the holding firms of 7I0 Ltd that sold a sta%e to 8eliance Industries Ltd &8IL' on .onday" had een classified as a private limited firm on the )om ay $toc% 7!change &)$7' until the 9une 2uarter. In its announcement on .onday" Aravali Polymers was categori#ed as an Llp firm" which will help it save ta!es. In August" .u%esh Am ani:controlled 8IL re;igged its promoters6 shareholding y transferring a <=.3>4 sta%e from <2 promoter group entities to ?3 such companies.

The ac2uirer firms included 2> Llps" all of which were formed in the 9une 2uarter. The 3.0@9 illion shares transferred would e valued at 8s9>"<0?.23 crore ased on the closing price of 8IL6s shares on the )$7 on Tuesday. *Though the ta! enefits are o vious" a lot of ac%:end planning also went into the restructuring that would help smoothen out succession within the group"+ a person familiar with 8IL6s plans said. Without divulging how e!actly any future succession process would ecome easier with Llp firms holding the promoters6 sta%e" the person" who did not want to e identified" said the re;ig had een structured in such a manner that any *log;am+ at the holding firm:level" arising out of any potential dispute in the future etween successors" would not have any impact on the operational firm" which is 8IL. According to /irish Aanvari" e!ecutive director at -P./" since any transfer of shares during a succession would e seen as a transfer etween the partners of the firm" it would also e e!empt from any ta!ation. 9ayant Tha%ur" a chartered accountant at .um ai: ased 9ayant . Tha%ur and (o." said a lot of companies would loo% at the Llp holding structure although there were certain grey areas that needed clarity. *1orms such as allowing foreign investment into Llps and 8eserve )an% of India6s guidelines on Llps are still eing wor%ed out. $o there may e some issues when it comes to Llps securing an% credit or settling legal disputes in a court of law" compared with a private limited firm" where regulations are well:defined"+ said Tha%ur. As%ed if firms will continue to enefit if the government ever decided to ta! Llp firms as well to shore up its revenue ase" analysts said it wouldn6t ma%e much of a difference. *The worst that can happen is that the ta! advantages would e lost" ut it would not ma%e much difference to the ownership pattern or the way in which the company operates"+ Tha%ur said. Aanvari said ta!ing Llps at par with private limited firms would go against the government6s philosophy ehind introducing them in the first place. *The Llp form was allowed in India to help promoters conduct usiness without fear of unlimited lia ility and facilitate etter pass: through ta!ation treatment. 8eliance 8ealty is the managing partner of 8eliance 8ealty LLP. It will manage the activities of 8eliance 8ealty LLP and its usiness on ehalf of all the partners. This shall involve oth a pro;ect:specific role and an administrative role" said a note circulated to prospective investors. 8eliance (apital Asset .anagement P.$" a su sidiary of 8eliance (apital and also the investment manager to 8eliance .utual Bund" is the advisor to the realty fund. The fund was launched a few wee%s ago. CAll profits and losses would e shared in a ratio as set out in the partnership agreements and all partners have similar rights. 8eliance 8ealty LLP has an independent governance committee. The provisions pertaining to e!it mechanism forms an important part of the partnership agreement. The said e!it mechanism not only facilitates an e!it for a partner without undue restrictions" ut also ensures that the interests of other remaining partners are duly and ade2uately safeguarded"C said a 8eliance /roup spo%esperson. 0owever" the person did not disclose the amount mo ilised y the fund so far.

$hareholding elonging to 8ILD CPromoter and Promoter GroupC

Total Shares held

Shares pledged or otherwise encumbered

No.Name of the Shareholder 1um er

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-an%hal Investments And Trading (ompany Private Limited

3=F"=90"9@2 3<="?3?"F33 32>"0=3">99 32>"0=3">99 32="@3="3?F 32="@3<"3?F 320"=>3"00< 33F"9>F"33< 30?"<><"0?9 30="900"0>0 F3"099"09< ?0"=09"=3F

2 )huvanesh 7nterprises Llp < A;itesh 7nterprises Llp = )adri (ommercials Llp @ A hayaprada 7nterprises Llp ? Trilo%esh (ommercials Llp Petroleum Trust &Through Trustees Bor > $ole )eneficiary:.G$ 8eliance Industrial Investments And 0oldings Ltd.' F Barm 7nterprises Limited 9 Taran 7nterprises Llp 30 Pitam ar 7nterprises Llp 33 Adisesh 7nterprises Llp 32 8ishi%esh 7nterprises Llp

3< Pavana 7nterprises Llp 3= $mt.- , Am ani 3@ $hree;i (omtrade Llp 3? $hri%rishna Tradecom Llp 3> -amala%ar 7nterprises Llp 3F 1agothane Agrofarms Private Limited 39 $hri.. , Am ani 20 $mt.1ita Am ani 23 .s.Isha . Am ani 22 .aster A%ash . Am ani 2< 8eliance Welfare Association 2= 1arahari 7nterprises Llp 2@ 8eliance Industrial Infrastructure Limited 2? .aster Anant . Am ani 2> 2F $aumya Binance And Leasing (ompany Private Limited 7!otic Investments And Trading (ompany Pvt Ltd

<@"?><"=00 >"<<3"0>= ?"?>>"@00 ?"?>>"@00 ?"<>0"03? @"?00"000 <"?3@"F=? <"<9F"3=? <"<?="<90 <"<?<"390 2"@0@"=?F ?3?"F=0 3>2"000 300"000 23"200 32"9FF @"300 2"@@0 900 F?3 F=@ ?00 <00 200 300

3.3 0.2< 0.23 0.23 0.2 0.3> 0.33 0.33 0.3 0.3 0.0F 0.02 0.03 0 0 0 0 0 0 0 0 0 0 0 0

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29 (arat 0oldings And Trading (o Pvt Ltd <0 7%ansha 7nterprise Private Limited <3 Amudha Aenture (apital Private Limited <2 1eutron 7nterprises Private Limited << Butura (ommercials Private Limited <= 8elcom Aenture (apital Private Limited <@ ,eccan Binvest Private Limited <? 8eliance (onsultancy $ervices Private Limited

<> (ha%radev 7nterprises Llp

<F (ha%radhar (ommercials Llp <9 (ha%resh 7nterprises Llp =0 (hhatra hu; 7nterprises Llp =3 ,evarshi (ommercials Llp =2 0arinarayan 7nterprises Llp =< 9anardan (ommercials Llp == -aruna (ommercials Llp =@ $amar;it 7nterprises Llp =? $hripal 7nterprises Llp => $richa%ra (ommercials Llp =F $var 7nterprises Llp =9 $ynergy $ynthetics Private Limited @0 Tattvam 7nterprises Llp @3 Aasuprada 7nterprises Llp @2 Aishatan 7nterprises Llp Total

300 300 300 300 300 300 300 300 300 300 300 300 300 300 300

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

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