Can the lawyers' firm be a private limited company ?
Shiv Raaj Ratnam
(Querist) 04 September 2011
This query is : Resolved
Can the lawyers' firm be a Private Limited Company ?
prabhakar singh
(Expert) 04 September 2011
Lawyers can be.. Advocates can't be..is the right answer
Shailesh Kumar Shah
(Expert) 04 September 2011
Que: Can the lawyers' firm be a Private Limited Company?
Ans: No, Since company have separate entity.
However, you can incorporate LLP.
Advocate. Arunagiri
(Expert) 04 September 2011
See the bar council rules for forming an advocates firm.
Shiv Raaj Ratnam
(Querist) 04 September 2011
My dear Learned Advocates , My question was very simple .....Can the lawyers' firm or Solicitors' firm be a private limited company or even say public limited company ? The people who will appear in the Courts to fight cases of the client have to be of course Advocates and they can be hired .But can the ownership benefits be also distributed to the legal professionals apart from the fees .I think now my question will be better answered .
Shailesh Kumar Shah
(Expert) 04 September 2011
Dear Shiv raj,
i refer to my earlier post against your detailed query.
prabhakar singh
(Expert) 04 September 2011
YES ! A PRIVATE OR PUBLIC COMPANY CAN BE CREATED TO GIVE LEGAL SERVICES AS SOLICITORS FIRMS RENDER AND ANY PERSON CAN HOLD ITS SHARES AND RECEIVE DIVIDEND INCLUDING PERSONS ENROLLED AS ADVOCATES.
DO NOT AS OF NOW ADVOCATES HOLD SHARES, DEPOSIT MONEY,EARN DIVIDEND AND INTEREST,OWN HOUSES EARN RENT????????????????
Shiv Raaj Ratnam
(Querist) 04 September 2011
Dear Sir , Exactly .You are on the bull's eye .
The idea is to have a Company preferably a Public Limited Company to provide professional legal services to people .For the cases to be contested any Advocates can be hired .The idea is to also make these Advocates shareholders in the Company so they get the benefits of ownership of the Company as well as it is not hired and fired situation , but they feel to be a part of the Organization for a long term . Thanks .
prabhakar singh
(Expert) 04 September 2011
THANKS ! My view came home on premise that when it is lawful to render legal services as proprietor, as partnership then how can it be unlawful as a company/private or public/listed/unlisted????????????????
Shailesh Kumar Shah
(Expert) 04 September 2011
Mr. Shiv Raaj,
Can i know that in compnay who will be directors ? I mean Advocate or Non-advocate.
Shailesh Kumar Shah
(Expert) 04 September 2011
Mr. Shiv Raaj,
Can i know that in compnay who will be directors ? I mean Advocate or Non-advocate.
Shailesh Kumar Shah
(Expert) 04 September 2011
Dear Shiv Raaj
Your object is very good.
Can we know that in the said company directors are advocate or non advocate.
Shiv Raaj Ratnam
(Querist) 04 September 2011
Dear Shailesh , The ownersip and the directorship issue are two different things .The owners need not be directors .In any case I can have all the advocates of India as shareholders in a public limited company but I can not have more than 12 directors .If the Bar Council permits them to be directors they can be made directors , if not they need not be .In any case we dont want Advocates to sit in the company office running the Company but fight the cases in the courts .
The reason we are doing this .... in some big real estate (lands) disputes we want to take fees from the client only after they win the case ,in case we lose the case the Company will pay fees to the advocate but will not take it from the client .I think now the discussion becomes more interesting .
Shailesh Kumar Shah
(Expert) 04 September 2011
Dear Shiv Raaj,
Very goo object.
Can we know that in the said compnay, directors will be Advocate or non-advocate ?
Shailesh Kumar Shah
(Expert) 04 September 2011
Dear Shiv Raaj,
Very good object.
Can we know that in the said compnay, directors will be Advocate or non-advocate ?
Shailesh Kumar Shah
(Expert) 04 September 2011
Dear Shiv Raaj,
Very Good Idea...
can you tell us that in the said company, directors will be Advocate or non-advocate.
R.Ramachandran
(Expert) 04 September 2011
The objective can be achieved by forming an LLP.
The moment it is a public limited Company, it means its shares are open to acquisition by any member of a public. Once a public limited company, no restrictions can be placed by the Company about the shareholding that it can be held only by Advocates!
However, there is an embargo in the Advocates Act that an Advocate cannot share his revenue with a non-Advocate. Therefore, for practising law, formation of Public Limited Company will not fit in within the prevailing conditions of laws.
prabhakar singh
(Expert) 04 September 2011
Yeah!really.what an idea sir ji!
well conceived and thoughtful,more particularly in a sector which is still not regulated which enables developers and builders to harass and frustrate people desirous of owning a home of peace.
Shailesh Kumar Shah
(Expert) 04 September 2011
Dear Shiv Raaj,
You have great idea and object.
Can we know that in the said company directors are Advocate or Non-Advocate.
R.Ramachandran
(Expert) 04 September 2011
You say: "The reason we are doing this .... in some big real estate (lands) disputes we want to take fees from the client only after they win the case ,in case we lose the case the Company will pay fees to the advocate but will not take it from the client .I think now the discussion becomes more interesting."
The practice of charging fee only on winning is called "Champarty". Though this is legal in U.S. it is not legal in India.
prabhakar singh
(Expert) 04 September 2011
Dear Mr. Shailesh Kr. Shah !
@author Shiv Raaj Ratnam did not ask us whether or not an advocate become a director full/part/time in a company rendering legal services ???? is not so????
prabhakar singh
(Expert) 04 September 2011
Yes a "Champarty" in India may be treated as 'wagering' contract.
Shiv Raaj Ratnam
(Querist) 04 September 2011
Dear Friends ,
We purchase lands for SEZs and it is in multiples of one thousand acres .We have already acquired at some places .But many times when we give Public Notice frivolous objections come and the deals get stuck for nothing as we don’t purchase land and pay to the owners unless the title is clear and possession vacant .These landowners may be owning big lands but they sometimes don’t have enough cash to contest cases and sometimes feel that the Advocate will just take the fees and leave them to the mercy of DATES .
So we have decided to float a public limited company of our own to provide legal services , take the best advocates and solicitors in it and help the landowners to get their title cleared .We will pay fees to the advocates and if we win , we deduct the fees and all expenses from the price we will pay for the lands and if we lose the case we pay to the Advocates but don’t recover from the landowners .This strategy has instilled a lot of confidence in the landowners . That how I wanted to discuss this matter in this Forum .Thanks to everyone and I will inform you after the Company is registered . Cheers !!!
Shailesh Kumar Shah
(Expert) 04 September 2011
Sorry for many posts due to some technical issues in Laptop....
Mr. Prabhkar Singh
if all directors are advocate.... it would wrong. Please read BCI Rules read with Section 5 of the companies Act, 1956, you will surely got my point.
prabhakar singh
(Expert) 04 September 2011
i am aware but his question was not that ,Mr. Shah!!!!
Shailesh Kumar Shah
(Expert) 04 September 2011
yes admitted, but in this forum, i am always trying to provide best advise to solve the issues of the querist.
Shailesh Kumar Shah
(Expert) 04 September 2011
i agreed with Mr. R Ramachandran.
See my first post, in that, I have already gives you idea for LLP.(Limited Liability Partnership).
prabhakar singh
(Expert) 04 September 2011
Who will be director is an other issue??not before the author as in his address to you he commented "If the Bar Council permits them to be directors they can be made directors , if not they need not be .In any case we dont want Advocates to sit in the company office running the Company but fight the cases in the courts ."
Shailesh Kumar Shah
(Expert) 04 September 2011
that is the answer of my question. Please see from starting.
DEFENSE ADVOCATE.-firmaction@g
(Expert) 04 September 2011
Mr Shiv raj ratnam you are very clear in your idea and project.
You can form any company pvt ltd or public limited but not listed company. All the members should be advocates that is the shareholding should be offered to advocates only and few of them can be directors.
Partnerships and LLP s are just miniature models of more than people of same profession coming together.
girish shringi
(Expert) 04 September 2011
PRECAUTIION ::::::::::::::
Banks are not financing the Advocates and greedy to get Doctors as Loanee.
The reason is uncertainty in result,while any doctor takes the case he is solving it immediately and Lawyer takes the case,he is dependant on others,which is not certain how many years would it takes to realize the result.
That'swhy first Indian hospital company in 1979 was Apollo Hospitals was oversubscribed by 10 times.
Imagine.
Shiv Raaj Ratnam
(Querist) 04 September 2011
Hi Dear Experts ,
Considering the globalization of the Indian industry and present trend the foreign companies can not be stopped for long in India to carry on legal profession .One day it is bound to happen .
I would like to correct a few aberrations which have taken place during the discussion . Firstly companies can be formed to provide any services which are NOT illegal ,immoral or opposed to public policy .Providing legal help or services is neither in these 3 categories and nothing can stop a public limited company from proving legal services for free or for consideration .There is intrinsic and substantive difference between LLP and Public Limited Companies .The market value of shares depends on market forces at the stock exchange and the share prices are not connected with the net worth of the Company .So a share of Rs.10 can become of Rs. 10,000 .Corporatizing is in the interest of legal profession .Further the nature of the profession is of lot of advantage to corporatizing it because this profession does not need high-tech and imported machines as needed in medical field . There is nothing which absorbs money except getting efficient and dedicated lawyers .It is not difficult .So forming a company to provide legal services is much cheaper than forming Apollo hospital .Further it is not technically correct that if the shares are listed you lose control over the shareholding .There is principle of sweat equity and you can issue only a certain portion of capital for public issue .
During the discussion a point also came up about wager . The Company will hire lawyers and pay them the fees whether or not the case is won or lost .It is not wager .If the company gifts fully paid –up shares of the Company to a lawyer who wins an important case .... There is nothing illegal in this .It is not fees , fees was already paid .
The Company I wanted to discuss is very much feasible .It is not necessary to have the shareholding only for the lawyers .A company running a hospital is NOT confined to ownership by doctors alone .Let people pump-in money , let lawyers pump-in expertise and let this profession prosper. I think what we are planning is very much realistic and achievable . Let us see .
R.Ramachandran
(Expert) 04 September 2011
In your zeal, you seem to ignore a very vital point that an Advcate cannot share his revenue with a non-advocate.
When you say that it is not necessary to have the restriction to shareholding only for the lawyers (which you cannot restrict even if you so want, in case of a public limited company), you directly run into conflict with the provisions of the Advocates Act, 1961.
The only impediment in your clamour for forming a Public Limited Company for legal services is the above point. Till such time you overcome this hurdle, the forming of a public limited company for rendering legal services is not possible.
Shiv Raaj Ratnam
(Querist) 04 September 2011
Dear Expert Ramachandran ,
The Company is different , the lawyers are different .When this company will hire Advocates , it will pay them fees .They are nor sharing this fees with anyone Advocates or Non-Advocates . Ownership of Company has nothing to do with fees paid and received .The profit on shareholding is dividend .It is not fees .How does it violate provisions of the Advocates Act, 1961? I shall be grateful if you can explain .Fees is earned by the professional Advocate .Profit is earned by the Company , Dividend is earned by Company and distributed to shareholders .Dividend is not fees . Please explain .
Raj Kumar Makkad
(Expert) 04 September 2011
There cannot be a Private or Public Limited Company concerning to lawyers in India as per Advocates Act, 1961 so all arguments in favour are misconceived and illogical.
prabhakar singh
(Expert) 04 September 2011
author : Shiv Raaj Ratnam does have the answer to question posed by Expert : R.Ramachandran similar to mine.a lawyer earns fees, saves a part of that, then buy share either through IPO or through open market,then his money earned by fees gets involved as capital of company and earns profit which lawyers get as the dividend is an usual phenomena,and the same will happen in the proposed case too,then how Advocate Act comes to play as hurdle when already it is not for a similar prevalent situation.
R.Ramachandran
(Expert) 04 September 2011
There is a saying in Tamil - one tries to make an idol of Lord Ganesh out of clay, but ends up in making a monkey!
Here, what was the starting point.
Can the lawyers' firm be a Private Limited Company?
It means, the lawyers have to engage in business. As per Advocates Act, the lawyers can engage only in the legal business and nothing else. At present the form of such business are (i) solitary practice (ii) partnership and (iii) LLP.
The question thereafter posed was whether it can be done by forming a Public Limited Company?
The First premise that is not to be lost sight of is the fact that the lawyers have to conduct the business. That business is sought to be conducted through formation of a Public Limited Company, for the purpose of rendering legal service. That means, the revenues earned are by rendering legal service and the same cannot be shared with anybody else. In other words, the entire revenue must be shared (both in the form of payments plus the profit sharing) only between the lawyers - who will be the shareholders in the Public Limited Company - and nobody else.
So far there can be no quarrel with the legal position.
The next question that is to be answered is: when it is a public limited company, is it possible to ensure that the shares do not fall into anybody else's hands who is not an ADVOCATE? If it falls, then he becomes part of the business and the legal revenue is being shared with a non-Advocate. WILL NOT THEN BE INFRINGING THE PROVISIONS OF THE ADVOCATES ACT, according to which a lawyer cannot share his revenue with a non-Advocate?
For this we get an answer from the author that:
The Company is different, the lawyers are different. HOW? The basic premise is that the lawyers have to do the business. If so, how both are different?
Further it is said that The Company will hire advocates and the fee will be paid to them. OK agreed. So far so good.
But what will happen to the profit that remains after defraying all the expenses and costs?
It will be distributed (you may call it dividend, bonus etc. etc.). What is being distributed - it is nothing but the surplus of the revenue earned for legal services. This revenue cannot be shared with anyone other than an Advocate.
Whether this can be possible to adhere to in a Public Limited Company where anybody (including a non-Advocate) can hold the share?
That's the crux.
An anology is being drawn between dividend etc.
If someone else (a non-advocate) is doing business by forming a Public Limited Company (certainly it cannot be for rendering legal services), a lawyer can definitely take shares in the same. Here the Advocate is investing and whatever dividend that he may get is perfectly OK. If that company engages the services of the lawyer for whatever legal services that it requires either for itself or on some one's behalf, then in that event the Company is not rendering any legal service, but only the lawyer is rendering the legal service. He is entitled to his fee. Here the lawyer is doing the practice on individual basis. Not even on partnership basis. If he does on partnership basis the partners can only be lawyers. If he is doing the business under LLP then there again the partners can only be lawyers. Here the lawyer whose services have been hired by the Company has not formed a Public Limited Company. Rather he is an independent investor in a separate Public Limited Company (which is not rendering legal service).
But, lawyers setting up business, and sharing the revenue earned through legal services, with a non-advocate is a taboo according to Advocate's Act.
I rest my case here.
vswaminathan
(Expert) 05 September 2011
The discussion on the mooted point is too mind-boggling to be taken to provide any clear=cut answer to be of any real or ready guidance. Going by one's limited understanding of the provisions of the Companies Act,however, the given proposition of any two or more 'Advocates' constituting themselves as a LLC or PLLC,to carry on the practice as such (i.e. as members of the stated 'profession) is a non-starter.
May be, the newly brought in concept of LLP provides such scope.
For an insightful and better understanding of other related aspects,one may read the write-up @ the cyber link -http://vswaminathan-vswaminathan-swamilook.blogspot.com/2011/09/knowing-of-advocates-and-ofgoverning.html
girish shringi
(Expert) 05 September 2011
Misunderstanding is that a company Limited is made for the business or industry.
A company can be a service oriented company,which render the services as provided by the OBJECT Clause of the Company,hence it is not compulsory to narrate that a company doing business only;
Business has wide meaning in the management,so we just can't say it as the business transactions it is the services we provide to the clients.
Like any company is recruiting the LEGAL OFFICERS/LAW EXPERTS/LAW OFFICERS,the concept would(I emphasizes "will be" instead of "would be" I can't say "deemed to be")be the same.
Then where does the Companies Act deny it or the BCI.
Thats why I had given example of APOLLO HOSPITALS LTD.,there also it was promoted by the Doctor,...........the MCI also restrict Doctors to do business,so they also could not have promoted the Company.
In legal profession we people had never thought the same line,and even if anyone say that to promote a company is restricted under any Law with sections I can explain the alternate to it.
prabhakar singh
(Expert) 05 September 2011
But Mr. Ramachandran has closed the topic from his end.
girish shringi
(Expert) 05 September 2011
For example Charitable Trusts are also incorporated under the Companies Act.
girish shringi
(Expert) 05 September 2011
This concept was of Shivraj Ratnam and not of Ramchandran,hence if shivraj is still interested to promote I can go with him.
prabhakar singh
(Expert) 05 September 2011
i am already with him with several posts to defend his ideas.
Shiv Raaj Ratnam
(Querist) 05 September 2011
Great !! Let me finish my dinner , I will join you .
Shiv Raaj Ratnam
(Querist) 05 September 2011
Hi Dear Experts ,
All the comments are worth reading and it has really opened a Pandora’s box containing semantics of the issue concerned .Very interesting and informative indeed . However a few submissions if answered may bring the discussion to some fruitful conclusion or provide some clarity .I would request for specific answers to my questions and not blanket reply .
A Company for example say Apollo Hospital or any such capital-intensive unit hires the services of doctors and the doctors are paid for their services .End of the year there is net profit calculated and the Company pays Income tax on that profit .The doctor’s pay the income tax according to their own income .Now I have a specific question .
The net profit of the hospital is because of the doctors’ services or is it because of the investment made by the company in the ultra-modern machines , equipments and building , marketing efforts and goodwill ( of the hospital or of the doctors concerned who may be hired and fired at the will of the hospital ) ?
My one line question is profit is due to what ? just the services provided by the doctors or the services provided by the hospital ? ( Please remember the doctors have already been paid for their services .)
Another question … Expert Girish Shringi said that even charitable trusts can be there .I agree . Under the Indian Trusts Act and Income Tax Act Charitable Trusts are allowed to do business .If a Law college is owned by a Trust and a Practicing Advocate teaches there and takes salary .The profit of the college is revenue of the Advocates or profit of the Institution ? Basically the form of organization has nothing to do with the business it does . Professionals of any field can come together to form an organization from sole proprietorship to public limited companies and provide services . The profit of the Company or the Law College is not earned by the advocate .It is earned by the college as a business profit .
I don’t agree with my Tamilian Brother Expert Ramachandran that “If someone else (a non-advocate) is doing business by forming a Public Limited Company (certainly it cannot be for rendering legal services)” Why so ? If I am a businessman I can form a company or a firm or and hire experts to provide services .If I open a hotel it does not mean that I have to be a cook !!
In nutshell the times are changing and the legal profession if corporatized can bring immense benefit to the profession .No one has commented on my reason for a public limited company .I repeat here that share prices at the stock exchange have nothing to do net worth of the Company .If Advocates are shareholders they will benefit from this , but if you form Private Limited or LLP there will be no such benefit . At some place in the discussion I read that saying in Tamil .Well if I decide to make a Ganesha I will not make a monkey ,if not Ganeha I would be happy even if it becomes “Monkey God” .It is better than having no God .
girish shringi
(Expert) 06 September 2011
Dear Shivraj,
Now you got my point,we can come under one banner and be as in ORGANISED sector instead of unorganised.
