(SINGAPORE) After mulling over the pros and cons in recent years, three of the Big Four audit firms in Singapore have decided to convert to limited liability partnerships (LLPs), with at least one of them expected to effect the restructuring quite soon.
Deloitte Singapore, KPMG and PricewaterhouseCoopers (PwC) are gearing up to become LLPs, with Deloitte likely to be the first to add the three letters to its name, possibly within weeks. Ernst & Young is understood to be still looking into the issue.
Among other key features, a LLP offers its partners limited liability in the event that the firm is sued. In a traditional general partnership - the current business structure of the Big Four and most other audit firms in Singapore - the partners are personally liable for the acts of fellow partners.
The idea of corporatising professional firms such as accounting and law practices - so as to inject outside capital and expertise, leading perhaps to multi-disciplinary practices - came up back in 1990. But it was only about a decade later that the law allowing the corporatisation of professional firms with limited liability was passed in Singapore. And by that time, the accounting fraternity here - taking the cue from the United States and the United Kingdom - was leaning more towards the LLP option, which affords limited liability along with the flexibility of operating as a partnership.
In 2005, the LLP Act introducing the new business vehicle in Singapore was passed, though it was more than a year later that the Accountants Act was amended to add the LLP option.
The Big Four and other leading audit firms in town have since been weighing the costs and benefits of becoming LLPs.
Chaly Mah, CEO of Deloitte Singapore, told BT late last week: 'We believe that the LLP is a good structure for a partnership model as it is consistent with practices in well-developed markets like the US and UK. We are looking into converting our general partnership into an LLP and will inform our stakeholders in due course.'
He did not say when exactly, but it is believed to be fairly soon, possibly within weeks.
KPMG Singapore is also well along the way to becoming a LLP.
Says its managing partner, Danny Teoh: 'KPMG is planning to move towards a limited liability partnership structure in Singapore, and we are currently at an advanced stage. Operating under this structure is logical for us, and several firms in KPMG's global network have already taken on this form where local legislation permits.'
Likewise, Gautam Banerjee, executive chairman of PwC Singapore, describes LLPs as a 'good vehicle' for professional services organisations.
'Many accounting firms in other jurisdictions, including those in the USA, already operate as LLPs. PwC Singapore plans to convert to a LLP but have yet to firm up the exact timing, probably within the next couple of years,' he says.
While many of the leading law firms in town have become LLPs, most local audit firms here operate as general partnerships or sole proprietorships.
One mid-tier local audit firm cited the high costs of professional indemnity insurance as one reason why the smaller firms may not restructure.
This article was first published in The Business Times on May 13, 2008
