Reliance Industries Ltd.

RIL has undertaken a significant restructuring of promoter holdings, under which a significant chunk of shares have been transferred to a limited liability partnership (LLP). The move would reduce the dividend distribution tax before the Direct Taxes Code (DTC) kicks in. A holding under the LLP structure will help to avoid the dividend distribution tax, which is applicable at 16.61 per cent in the case of companies. In the financial year ended March 31, the company paid dividend distribution tax of '346 crore. For FY09, the outgo was '322 crore.

The promoter group, which held shares through 32 entities, would now transfer their shares, representing 34.17 per cent of voting rights, to a total of 61 entities, including 27 LLPs. The transaction was completed on August 11. The transfer and acquisition is part of the inter-se transfer without consideration amongst the group. LLPs are an alternative corporate business vehicle that offers the benefits of not only limited liability, but also allows its members the flexibility to organise their internal structure as a partnership based on an agreement.

Shifting treasury stock to LLPs might help the company save tax, even after Direct Taxes Code is introduced. It will make long-term capital gains taxable.