PROCEDURE -CONVERSION OF LIMITED LIABILITY PARTNERSHIP/FIRM INTO PRIVATE COMPANY
IN COMPANIES ACT 1956 DOES NOT CONTAIN PROVISION REGARDING CONVERSION OF LIMITED LIABILITY PARTNERSHIP INTO A PRIVATE LIMITED COMPANY. NOW UNDER COMPANIES ACT, 2013 LIMITED LIABILITY PARTNERSHIP CAN BE CONVERTED INTO A PRIVATE LIMITED COMPANY.
BENEFIT FOR CONVERSION
FINANCAIL INCLUSION AND RAISING NEW CAPITAL
Company enjoys better avenues for borrowing of funds
Banking and financial institutions prefer to render large financial assistance to a company rather than any other business entity.
Companies are able to raise capital at any time by issuing new shares. (PRIVATE PLACEMENT) FREE & SIMPLE TRANSFERABILITY OF SHARES
Companies limited by shares are transferable by a shareholder to any other person. The transfer is easy as compared to the transfer of interest in any other business entity. LIABILITY CLAUSE
Generally limited to the amount required to be paid up on each share.
In LLP to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner.
Private Limited Company offers its promoters a better image than any other business entity.
INTRODUCTION
As per section 366(1) of the Companies Act, 2013 the company includes the following types of the concerns capable to be registered under the Part XXI as a company:
(a) Partnership firm,
(b) LIMITED LIABILITY PARTNERSHIP,
(c) Cooperative society,
(d) Society; or
(e) Any other business entity formed under any other law for the time being in force which applies for registration under Part XXI of the Companies Act, 2013.
BASIC REQUIREMENTS FOR REGISTRATION AS A COMPANY
A company shall be registered in pursuance of Section 366 of the Companies Act, 2013 as a company limited by shares only if:
- It has a permanent paid-up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other, and formed on the principle of having for its members the holders of those shares or that stock, and no other persons;
- The assent of a majority of such of its members as are present in person, or where proxies are allowed, by proxy, at a general meeting summoned for the purpose not provided;
- Where a company not having the liability of its members limited by any Act of Parliament or any other law for the time being in force is about to register as a limited company, the assent of not less than three-fourths of the members present in person, or where proxies are allowed, by proxy, at the meeting has not been obtained;
APPLICABILITY OF THE PROVISIONS OF INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO (CHAPTER II)
The Companies (Authorised to Register) Rules, 2014 provides that for the provision of Chapter II relating to incorporation of a company and matters incidental thereto shall be applicable mutatis mutandis for such registration.
FILING OF DOCUMENTS FOR REGISTRATION AS A COMPANY LIMITED BY SHARES
After obtaining availability of name in terms of the provisions of section 4 of the Act, shall attach the required documents and information to the Registrar along with Form No.URC. 1 in the following manner, namely:—
For registration as a company limited by shares:
(a) List showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them respectively, showing separately shares allotted for consideration in cash and for consideration other than cash alongwith the source of consideration) and distinguishing, in cases where the shares are numbered, each share by its number, who on a day, not being more than six clear days before the day of seeking registration, were partners of the Limited Liability Partnership or firm.
(b) List showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN, passport number (if any) with expiry date, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;
(c) Affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under sub-section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;
(d) List containing the names and addresses of the Partners of the Limited Liability Partnership of firm.
(e) In case of a firm, deeds of partnership, bye laws or other instrument constituting or regulating the company and duly verified in the manner provided in sub-rule (4) and in case the deed of partnership was revised at any time in the past, copies of the principal and all subsequent deeds including the latest deed, along with the certificate of the registration issued by Registrar of firms, in case the firm is registered
(f) Statement specifying the following particulars:—
- Nominal share capital of the company and the number of shares into which it is divided;
- Number of shares taken and the amount paid on each share;
- Name of the company, with the addition of the word "Limited" or "Private Limited" as the case may require, as the last word or words thereof;
(g) Written consent or No Objection Certificate from all the secured creditors of the applicant;
(h) Written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under this part.
(i) Undertaking that the proposed directors shall comply with the requirements of Indian Stamp Act, 1899;
(j) Statement of assets and liabilities of the Limited Liability Partnership or the firm, duly certified by a chartered accountant in practice made as on a date not earlier than thirty days of the filing of form No.URC-1;
(k) Copy of latest income tax return of the Limited Liability Partnership or firm.
REQUIREMENT FOR PUBLICATION OF NOTICE FOR SEEKING OBJECTION
Every company seeking registration under the provisions of Part I of Chapter XXI shall publish an advertisement about registration for seeking objections
(i) Company seeking registration under the provision of Chapter XXI shall publish an advertisement about registration under the said Part, seeking objections, if any within twenty one clear days from the date of publication of notice and the said advertisement shall be in Form No.URC. 2, which shall be published in a newspaper and in English and in the principal vernacular language of the district in which Limited Liability Partnership is in existence and circulated in that district or the firm is situated.
(ii) A copy of the notice, as published and the copy of the notice served on Registrar (LLP) along with proof of service shall be attached with Form No.URC. 1.
(iii) The Registrar shall, after considering the application and the objections, if any, received by him within thirty days from the date of publication of advertisement, and after ensuring that the company has addressed the objections, suitably decide whether the registration should or should not be granted.
REQUIREMENT FOR OTHER COMPLIANCES
AFFIDAVIT CONFIRMING FOR FILING OF DOCUMENTS
LLP/firm has obtained a certificate of registration under section 367, an intimation to this effect shall be given, within fifteen days of such registration to the concerned Registrar of firms under which it was originally registered, along with papers for its dissolution as a firm
STATEMENT OF ACCOUNTS OF THE COMPANY
Statement of accounts prepared not later than fifteen days preceding the date of seeking registration and certified by the Auditor together with the Audited Financial Statements of the previous year, wherever applicable shall be attached with Form No.URC. 1
NOC FROM THE REGISTRAR OF LLP FOR CONVERSION INTO COMPANY
Notice shall be given to the concerned Registrar (LLP) under which it was originally registered and shall require that objections, if any to be made by such concerned Registrar of Companies (LLP) to the Registrar, shall be made within a period of 21 days from the date of such notice, failing which it shall be presumed that they have no objection and the notice shall disclose the purpose and substance of matters in relation to objections.
DECLARATION BY THE PARTNERS OF LLP
Registration of Limited Liability Partnership into a company under these rules, a declaration by the said Limited Liability Partnership that it has filed all documents which are required to be filed under the Liability Partnership Act with the Registrar (LLP) and the declaration shall be attached with Form No. URC. 1;
STATEMENT OF PROCEEDINGS
Statement of proceedings, if any, by or against the Limited Liability Partnership or the firm as the case may be which are pending in any court or any other Authority shall be attached with Form No. URC. 1.
EFFECT OF REGISTRATION UNDER PART XXI
ON PROPERTY
All property, movable as well as immovable belonging to or vested in the company at the time of registration shall, on such registration pass to and vest in the company.
ON RIGHTS AND LIABILITIES
The Registration of a company under Part IX shall not in any manner affect its rights or liabilities in respect of any debt or obligation incurred or any contract entered into, by, to, with or on behalf of the company before registration.
ON LEGAL PROCEEDINGS
All suits and other legal proceedings taken by or against the company or any public officer or member thereof which where pending at the time of registration may be continued in the same manner as if registration had not taken place
APPLICABILITY OF COMPANIES ACT, 2013
All provisions of the Companies Act, 2013 relating to the company, its members, contributories and creditors shall apply in the same manner as if the company was formed under the Companies Act, 2013.
APPLICABILITY OF INDAIN LAW
All provisions of any Indian law or other instrument constituting or regulating the company shall apply to the registered company in the same manner as if the company had been formed under the Companies Act, 2013 and those conditions were required to be contained and were contained in its Memorandum and Articles of Association
LLP agreement /Partnership Deed shall have following requirements for the purpose of registering the firm/LLP under Part XXI of the Companies Act, 2013
ü There must be at least 7 partners in the firm/LLP;(if no then increase the partner up to 7)
ü Firm shall be registered under of the Indian Partnership Act, 1932
ü There must be a fixed capital divided into units;
ü There must be provision of converting a Firm/LLP into company.
ü There must be an agreement by the partners to convert the firm/LLP to a company.
STEPS FOR INCORPORATION OF COMPANY UNDER PART XXI
Ist Hold a meeting of the partners to transact the following business:
- Consent of majority of its members as are present in person at a general meeting summoned for the purpose of registering the firm/LLP under Part XXI of the Companies Act, 2013.
- To authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents etc. pursuant to registration of the firm/LLP as a Company.
IInd Application for director’s identification number (DIN) & digital signatures certificate (DSC)
IIIrd Apply for reservation of name under INC 1 to Registrar of companies
IVth Filing of forms for Registration of Company:
- Filing of e-Form URC-1: Application for conversion from LLP into company and Attachment required for URC 1. (ANNEXURE 1)
- Filing of Form URC-2 along with e-Form URC-1. (ANNEXURE 2)
- Filing of e-Form INC-7: Application for Incorporation of Company
- Filing of e-Form DIR-12: Appointment of the proposed directors on the Board of directors from the date of incorporation of the proposed company.
- Filing of e-Form INC-22 for verification of the Registered Office
On completion of the formalities, the Registrar shall register the Company under Part XXI of the Act and issue a certificate of incorporation in the Form INC-11.
ANNEXURE 1
ATTACHMENT FOR URC .1
ü Particulars of members/partners along with the details of shares held by them;
ü Declaration of two or more directors verifying the particulars of all members/partners;
ü Affidavit from all the members/partners for dissolution of the entity;
ü Copy of the instrument constituting or regulating the entity;
ü Copy of certificate of registration of the entity;
ü Copy of Newspaper advertisement;
ü Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Stamp Act, to the extent applicable;
ü Consent of majority of members;
ü Consent of at least three-fourth of members agreeing for registration under this part;
ü No objection certificate from the concerned Registrar of Firms or Registrar of Companies(LLP);
ü No objection certificate/Consent given by secured creditors;
ü Statement of accounts of the company, prepared not later than 6 days preceding the date of application duly certified by auditor; if applicable
ü Undertaking for compliance with requirements of Indian Stamp Act, 1899
ü Copy of latest Income Tax Return of the firm
ANNEXURE 2
Text of the Advertisement of Public Notice in the Newspapers
FORM URC-2
Advertisement giving notice about registration under Part I of Chapter XXI
[Pursuant to section 374(b) of the Companies Act, 2013 and rule 4(1) of the Companies (Authorised to Register) Rules, 2014]
1.NOTICE IS HEREBY GIVEN that in pursuance of sub-section (2) of section 366 of the Companies Act, 2013, an application has been made to the Registrar at …………. that ------ a partnership firm/LLP/Co-operative Society/Society/a business entity (delete what is not applicable) may be registered under Part I of Chapter XXI of the Companies Act 2013, as a company limited by shares, or as a company limited by guarantee or as an unlimited company (delete whichever is not applicable)
2. The principal objects of the company are as follows:
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3. A copy of the draft memorandum and articles of association of the proposed company may be inspected at the office at .................] [give the address here].
4. Notice is hereby given that any person objecting to this application may communicate their objection in writing to the Registrar at (address), within twenty one days from the date of publication of this notice, with a copy to the company at its registered office.
Dated this.....................day of...................20...........
Name(s) of Applicant
1.
2.