While considering the scope of expansion of business, the shortcoming of the existing structure may act as hindrance whereas remarkable benefits offered by another type of organization which draws the attention of the promoters to consider the option to change from one business type to another.
An LLP can be converted into Private Limited Company by complying with the Provisions prescribed in this regard. The conversion of the LLP into Private Limited Company is combined with various factors such as the transfer of Goodwill of the LLP to the company, main operations of the LLP etc.
Indian Companies Act, 2013 has introduced Section 366 providing that any Partnership Firm, Limited Liability Partnership, cooperative society, society or any other business entity formed under any other law consisting of seven or more members may at any time register under Companies Act, 2013 as an unlimited company, or as a company limited by shares, or as company limited by guarantee. Procedure in this regard is provided under The Companies (Authorized to Register) Rules, 2014.
The conversion of Limited Liability Partnership into Private Limited Company with share capital can be processed in following way:
Requisites to be complied before applying for conversion:
The Primary condition for the conversion of LLP into Private Company is seven or more members in the LLP at the time of conversion. Where at the time of conversion, the number of Partners is not as per the limit prescribed, required procedure is to be followed to fulfill this requirement before commencing the procedure of Conversion.
- After ensuring the required number of members in the LLP, the consent of majority of Partners is required to be accorded by conducting General Meeting of Partners for the proposed conversion of LLP into Private Limited Company.
- Consent of Secured Creditors of the LLP shall also be accorded for the Conversion.
- In addition to above, a notice seeking any objection for the proposed conversion is to be given in News Papers (One English and one in vernacular language).
- DSC and DIN of the proposed Directors:
In case, where the proposed directors in the company do not hold Director Identification Number (DIN), one shall apply for the same in e-from DIR - 3 by submitting requisite Documents along with a Certification from Practicing Professional.
Procedure of Conversion:
Application for Name Approval:
Before making an application for Incorporation of Private Limited Company, an application seeking name approval for the proposed company shall be made with the Ministry of Corporate Affairs by filing e-form INC-1. The intention of the conversion of LLP into Private Limited Company shall be expressed in the form by providing required information.The name once approved, will be valid for 60 days from the receipt of approval from the Ministry.
Filing of e-Form URC-1:
E-Form URC - 1 is prescribed for Application by a company for registration under section 366. Here, the word 'Company' includes LLP, which applies for registration under Section 366 of Indian Companies Act, 2013.
Following Documents/information to be furnished for filing e-form URC-1
1. A list showing the names, addresses, and occupations of all persons named therein with details of shares held by them respectively, classifying the shares held as cash or other than cash separately, 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;
2. A list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;
3. An 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;
4. A list containing the names and addresses of the Partners of the Partnership Firm or Limited Liability Partnership Firm.
5. A Copy of LLP Agreement and Certificate of Registration duty verified by at least two designated partners of LLP;
6. A statement specifying the following particulars: -
- The nominal share capital of the company and the number of shares into which it is divided;
- The number of shares taken and the amount paid on each share;
- The 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;
- Written consent or No Objection Certificate from all the secured creditors of the applicant.
- Written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under Section 366 of Indian Companies Act, 2013.
7. Statement of accounts of the company, prepared not later than 30 days preceding the date of application duly certified by auditor, if applicable;
8. Declaration of two or more directors verifying the particulars of all members/partners;
9. Copy of Newspaper advertisement;
10. No objection certificate from the concerned Registrar of Firms or Registrar of Companies(LLP);
11. Declaration of two or more directors verifying the particulars of all members/partners;
Filing of other e-Forms:
The company is required to file e-forms INC - 7, DIR - 12, INC - 22, as linked forms along with e-form URC - 1. The attachments in these forms are same as required while filing application of incorporation of normal companies such as MoA - AoA, DIR - 12, INC - 9, etc.
While drafting the MoA, the object of the company must include the object of conversion of the LLP into Private Limited Company.
After due verification of all aspects of the application made for conversion of Limited Liability Partnership into Private Limited Company, a Certification of Incorporation will be issued by the Registrar of Companies.
Once registration under section 367 of Indian Companies Act, 2013 is obtained, intimation in this regards shall be given within 15 days of such registration to the concerned Registrar of Companies (LLP) under which it was originally incorporated and registered.
The author is co-founder at LegalWiz.in, India's premier online Legal Service Provider and can also be reached at support@legalwiz.in, for conversion of LLP into Private Limited Company.
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