UK TO NATIONALISE BANKS
The failure of US financial market has created a havoc in all countries. The most affected countries are US and European countries. In an attempt to save the major financial industry the US outline for $ 700 bn bailout deal. Just like US government saved AIG, UK government has decided to nationalize the troubled banks. Britain’s troubled mortgage lender Bradford & Bingley and is discoing the sale of its saving book and branches, people in banking industry. Branches could be sold: B&B’s ₤ 24 billion($ 44 billion) of savings and its 200 branches could be sold to its rival or rivals. B&B’s books show 3.4% of UK Mortgages.
BIGGER THE SIZE, GREATER THE FALL
Are you one of those who are wondering how the woes of a handful of companies can create a global
financial crisis? Perhaps you should for starters consider just how huge they are. The total revenue of Freddie Mac, Fannie Mae, AIG, Lehman Brothers and Merrill Lynch added up to nearly $322 billion in 2007. There are 185 countries, including fairly developed economies like Denmark or Greece, whose GDP cannot match that size.
In fact, even the combined GDP of the 96 smallest economies doesn’t add up to the aggregate revenues of these Wall Street giants, which were often considered too big to collapse. Between them, the CEOs running these firms had an annual compensation package of close to $118 million last year. In the past decade, which was considered the golden era of the financial industry, most of these companies made pots of money, particularly through real estate loans. Increasing property values were only adding to the profits of these companies who experienced an exponential surge in their revenues.
Things started going sour towards the end of 2006, with the bursting of the housing bubble in the US. Fannie Mae was the first to feel the heat, incurring a whopping $2.3 billion or 26% drop in net income. However, net incomes of the others were still surging.
Freddie Mac even witnessed a recovery after a slowdown in 2005. But, by 2007-end the decrease in inco
mes turned into real losses. Freddie Mac, Fannie Mae and Merrill Lynch started incurring loss from the third quarter of 2007. In the calendar year, Merrill Lynch lost $7.8 billion, which was more the $7.5 billion it has earned as net income in 2006.
The losses of Freddie Mac and Fannie Mae were respectively $3.1 billion and $2.1 billion.Although AIG still made profits for the year as a whole, it had also started incurring losses from the last quarter of 2007. As a result its net income over the year fell 56% from the $14 bn it made in 2006.
Lehman Brothers was the only exception, because it did not incur any loss in 2007. In fact, there was a
slight increase in the yearly profits from $4 billion to $4.2 billion. But it also joined the loss makers league when it lost $2.8 billion in the first quarter of 2008, a loss which was more than half the net income generated in all of 2007.
This dramatic roller coaster of profits and losses is perhaps best summed up by a quote of former Morgan Stanley MD Anson Beard: “If you’re betting with other people’s money, you’re more willing to take risk than if it’s your own.”
Given that mindset, it’s also easy to see why some have characterized what’s happened as ‘privatisation of profits and nationalization of losses’.
To Americans who were already debating the waste of taxpayer’s money in waging wars in Iraq and Afghanistan, the $900 billion and more of taxpayer money used for bailing out some of America’s largest financial giants is a staggering burden. This amount is nearly five times the $182.2 billion estimated as the expenditure for the war on terror for FY 2008. (TOI)
Limited Liability Partnership – An Overview – III
(..cont.)
How LLP would be taxed?
The aspect of tax treatment of LLP is not clear. The bill tabled in Rajyasabha on 15th Dec. 2006 states that a LLP will be treated as a firm as defined under Income Tax Act 1961. This means that a LLP shall be liable to tax on profits after charging interest on capital and salary to partners. However, Naresh Chandra Committee and the concept paper on LLP, which was released by Ministry of Corporate Affairs in Nov. 2005, had clearly advocated tax transparency for LLP’s. This means that only LLP partners will be taxed and not the LLP itself. This committee, as per clause no.5 of the First Schedule has suggested that no remuneration or salary will be paid to LLP’s partners. There would only be sharing of profits and the partners would be taxed as per the tax rates prescribed by the government. Concept paper on LLP also advocates the deeming provisions which mean that the every activity carried on by LLP with a view of profit earning shall be deemed to be carried on by its partners. The property of LLP shall be deemed to be the property of its partners in their capital contribution ratio. Any dealing by LLP will be treated as by partners and will be subject to capital gains tax on the sale of any assets. Contribution made by partners irrespective of its nature i.e. tangible (money) or intangible assets (goodwill) should be disclosed in the books of accounts. There is an ambiguity in the Bill relating to the methodology of valuation of assets as well as the provisions of taxation of LLP. There is also uncertainty regarding the stamp duty in the event of amalgamation or merger. If their will be stamp duty then at what rates it will be levied and are there any concessional rates provided by the government?
What is the difference between LLC and LLP?
|
Particulars |
Limited Liability Company(LLC) |
Limited Liability Partnership(LLP) |
|
Governance |
The Companies Act, 1956 |
The LLP Bill, 2006 |
|
Name |
Suffix Limited/ Private Limited |
Suffix LLP or Limited Liability Partnership. |
|
Minimum members/ partners |
Private LLC: Min. 2 members & Max. 50 members as per sec 3 of Companies Act, 1956 |
Minimum 2 and no limit for maximum number. |
|
Designated partners/ Directors |
Two persons. Citizenship not necessarily be Indian. |
Two partners. One must be Indian citizen. |
|
Identification Number |
DIN (Director Ident. No.) |
PIN (Personal Ident. No.) |
|
Management |
Board of Directors (BOD) |
Designated Partners |
|
Liability |
Liability of Shareholders is limited to the extent of total amount due on shares subscribed |
Liability of a Partner limited to the extent of his capital contribution or agreed to be contributed as per LLP agreement |
|
Common seal |
Yes |
Yes |
How to convert an existing entity into LLP?
The LLP Bill provides flexibility of conversion of existing entities into LLP as under:
§ Clause 54 of schedule II deals with the provisions of converting existing professional firms or business firms to LLP.
§ Clause 55 of schedule III shall apply at the time of conversion of a private limited company to a LLP.
§ Clause 55 of schedule IV shall apply at the time of conversion of an unlisted public company to a LLP.
Epilogue
This kind of business organization has been structured keeping in mind the present day needs of business. It is the form of business entity which assigns limited liability to the partners. No doubt that the bill will benefit the businessmen as well as professionals. Introduction of LLP in India will open the avenues for professionals where the services rendered will be of global standards. It will lead to more productivity and will definitely help in the overall growth of economy as well.
Extension of due date of filing income tax returns and tax audit reports for J&K & Bihar
The Central Board of Direct Taxes have extended the last date of filing of income tax returns and obtaining tax audit report under section 44AB of the Income Tax Act, 1961, due by 30th September 2008, to 30th November 2008 in the states of J&K & Bihar, in view of the dislocation caused due to law and order problem in the J&K. Where as in Bihar after considering the disruption caused by the floods in the state. (Order of CBDT)