The Changing Aspect of Partnership Business Structure in Malaysia

Authors

  • Hamizah Abdul Rahman
  • Nurul Syahira Othman
  • Tengku Adida Tengku Zainal Mulok
  • Liziana Kamarul Zaman
  • Wan Murshida Wan Hashim

DOI:

https://doi.org/10.24191/ji.v16i1.383

Keywords:

Partnerships, Limited Liability Partnerships, Partnership Agreement

Abstract

Partnership business structures have been accepted as a major venture capital vehicle, which is generally opted for by small and medium businesses, or by professionals that are prohibited from incorporating under the respective laws. The main objectives of this paper are first to highlight the changes in the legal attributes of general partnership structures, resulting from its evolution to limited liability partnerships (LLP). Secondly, it investigates the suitability of the LLP structure for some business partners, particularly professionals, as businesses grow with rising trade costs and litigation issues that have forced partners to take precautions regarding business liabilities. These situations have led to a tendency for existing partnerships to change from general to a hybrid entity (LLP). Thirdly, it also analyses the benefits and drawbacks of LLPs as an option for general partnerships. This paper adopts doctrinal and statutory analysis as the research methods, whereby secondary analysis of relevant documents and legal acts that govern partnership businesses are referred to. Some interviews were conducted with the LLP partners, registration bodies, and bankers, to review the current implementation issues related to LLPs. This research found that the general partnership business structure has many problems, mainly related to unlimited liability and accounting procedures, which affect the obligations and protections of partners’ benefits. To conclude, the question of whether LLPs is the best alternative for partners to opt for from a general partnership finds that it is the easiest choice, compared with incorporation, but many impediments occur in its implementations that must be considered by partners.  although partners can protect themselves in LLPs with the partnership agreement, there are still many loopholes in its business implementation when it comes to integrity, trust, financing, reporting, sharing of profits, and other issues. 

References

Abd. Ghadas, Z. A. (2013). Professionals LLP-Limited Liability Regime for Professionals: The Business and Ethical Issues. Journal of Applied Sciences Research, 7 (13), 2342–2349.
Agnich, R. J., Goldstone, S. F., Jacobs, J. B, du Pont, P.S., & Goldman, M.D. (2000). What Business Will Look for in Corporate Law in the Twenty-First Century. Delaware Journal of Corporate Law, 25(1), 6–34
Anti-Corruption Act 2009. (Malaysia).
Chan, W. M., Susela, D. S., Ng, K. T., & Lee, S. L. (2008). Limited liability partnership: is Malaysia ready? Proceedings of the 3rd International Borneo Business Conference, 274–280.
Chaudhry, S. (2010). Limited Liability Partnership in India. National Law School of India University (NLSIU), National Seminar ‘Emerging Issues in Commerce and Management', February 5-6.
Clark, W. H. Jr. (2002). Rationalizing Entity Laws. The Business Lawyer, 58, 1005–1021
Gandhi, U., & Thakur, R. A Study on Limited Liability Partnership as an Emerging Business Form for Entrepreneurs. International Seminar SME, 301–317.
Morse, G. (2002). Partnerships for the 21st Century-Limited Liability Partnerships and Partnership Law Reform in the United Kingdom. Singapore Journal of Legal Studies, 455–488
Goforth, C. R. (1996). Limiting the Liability of General Partners in LLPs: An Analysis of Statutory Alternatives. Oregon Law Review, 75, 1139.
Goh, K. S. (2008). Corporate governance practices of Malaysian Chinese family-owned business [Doctoral dissertation, Southern Cross University].
Bank Negara Malaysia (2020). List of companies and websites that conduct illegal activities. Retrieved from http://www.bnm.gov.my
Freedman, J. (2000). Limited Liability Partnerships in the United Kingdom-Do They Have a Role for Small Firms. Journal Corporate Law, 26, 897.
Meggitt, G. (2012). Limited liability partnerships in Hong Kong: Challenges and conundrums. Hong Kong Law Journal: Law Lectures for Practitioners, University of Hong Kong Faculty of Law Research Paper No. 2013/027.
Limited Liability Partnership Act 2012. (Malaysia).
Miller, C. J. (1997). LLPs: How Limited Is Limited Liability? Journal of Missouri Bar, 53, 154-169.
Salim, M. R. (2013). Limited Liability Partnership in Malaysia: A Corporate Governance Perspective. International Company & Commercial Law Review, 421–427.
Mohd-Sulaiman, A. N., Abd Ghadas, Z. A., & Khan, M. A. (2011). Corporations and Partnerships in Malaysia. Kluwer Law International, 1–161.
Porter, J. B. (1998). Modern Partnership Interests as Securities: The Effect of RUPA, RULPA, and LLP Statutes on Investment Contract Analysis. Washington and Lee Law Review, 55(3), 955.
Ribstein, L. E. (1999). Limited liability unlimited. Delware Journal of Corporate Law, 24, 407.
Ribstein, L. E. (2001). The Evolving Partnership. The Journal of Corporate Law, 819, 823–824.
Spedding, L. S. (2004). Due diligence and corporate governance. UK: Elsevier.
Vena and Chris. ‘More than best friends: expansion of global law firms into the Indian legal market (2011) North western Journal International Law & Business 31, p.195.
Vena, C. (2011). More than best friends: expansion of global law firms into the Indian legal market. North western Journal International Law & Business, 31, 195.
Walker, J. (1998). Limited Liability Partnerships: True Partnerships? Jersey Law Review, 2(1), 1–13.
Ying, Y. H. (2007). Nature and Liability Shield of Limited Liability Partnerships in Singapore. Singapore Academy of Law Journal, 19, 409.

Downloads

Published

2021-01-26