Kavita K Bhaskaran

New Delhi, April 6: THE government is considering an amendment in the Companies Act to increase the number of lawyers permitted to practice as partners in law firms. Top level sources in the department of company affairs (DCA) said the government would either increase the existing limit of 20 partners in a law firm or completely remove this ceiling.

This would require amendment to Section 11 (2) of the Companies Act. This section stipulates that a law firm in the country cannot have more than 20 partners.

The Society of Indian Law Firms and Bar Council of Delhi wants the government to completely do away with the ceilings. However, the government may raise the cap on the number of partners. The government is considering this change as there have been repeated requests for it by domestic law firms and various bar councils. These requests come in the wake of the government’s decision to allow foreign law firms into the country in the future.

He said the Society of Indian Law Firms has stated that the existing clause restricts the area of operation and expansion of a law firm. Siddharth Mridul, vice president, Bar Council of Delhi (BCD) said: “The upper cap on the number of partners definitely hampers the growth of a law firm.

The Society of Indian Law Firms has taken up this issue with law, justice and company affairs minister Arun Jaitley. BCD would also be taking up this issue with the minister.

“We feel it is essential that this clause is done away with,” he added. According to Mr Mridul, this change is essential if a law firm needs to have specialised departments and have a national presence. ‘‘Initially there were cases of cheating and fraud and entity of a partner could not be extended to his professional partnerships. Therefore, the government had introduced this clause. But today it has to be removed,” he said.
This is absolutely imperative for lawyers to work on a larger denomination of population and function across the country, he added.

Section 11 (2) of the Companies Act says that no company, association or partnership consisting of more than 20 persons shall be formed for the purpose of carrying on any other business besides banking, that has for its object the acquisition of gain by the company, association or partnership or by the individual members thereof, unless it is registered as company under this Act or is formed under pursuance of some other Indian law.