Conversion

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Khushbu (Querist)
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17 August 2013 Can a Company limited by guarantee be converted into a Company limited by shares?? If yes...what is the procedure??

Rajat Poddar

Rajat Poddar (Expert)
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17 August 2013 There is no statutory procedure for re-registering a company limited by guarantee to a one limited by shares. It is not possible to to convert the same corporate entity from one type of limited liability to the other. It is possible, however, to create a new company limited by shares under the same name and then to transfer the undertaking and assets from the 'old' company to the new one. The new company will be a separate legal entity, with a different company number from the previously existing company. It will need a new VAT registration and existing long-term contracts, such as leases, bank arrangements, etc. will have to be transferred to the new company.

The procedure would be:

change the name of the existing company so that it may be used for the new one
register the new company as a company limited by shares
the two companies approve a contract between them under which all or some of the assets and all or some of the liabilities are transferred from one company to the other. Care must be taken with this as the contract will be a substantial property transaction in which all the directors of both companies are interested. See directors' conflicts of interest for more information

From an accounting point of view the most convenient date for the transfer will usually be at the end of the existing company's financial year so that accounts can be drawn up for whole years. The company's accountant should be consulted on this matter.