Conversion of LLP into Private Limited Company

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Conversion of LLP into Private Limited Company

Limited Liability Partnership is one of the well recognised business models which was came into existence in 2008 with the advent of Limited Liability Partnership Act, 2008. As the two words Limited Liability have a great significance because only this features of LLP deviates it from the traditional firm. In other words, LLP is the alternative to the corporate form which gives the twin benefits of limited liability and flexibility of the partnership.

Some of the basic features of an LLP

1. LLP can hold the properties in its own name.
2. LLP is separate legal entity which means that LLP and its partners are considered to be different.
3. One partner can not be held liable for the action of the other partner.
4. Normally LLP is governed by the provisions of the LLP agreement but in case there is no agreement, then LLP is governed by the schedule 1 of the LLP Act, 2008.

Conversion of LLP into Private Limited Company

Conversion of Limited Liability Partnership into Private Company looks like a grey area of law where the exact picture was not clear till 2013 because companies act 1956 did not have any enabling provisions of conversion of LLP into private limited company. When the new companies act, 2013 was enacted, it specifically has those provisions which were missing under the companies act, 1956. Section 366 contain this power which provides that any partnership firm, LLP, cooperative society, or any other business entity formed under any other law consisting of seven or more members, may at anytime register under the companies Act, 2013 as an unlimited company or company limited by shares by following the procedures as provided under the rules.

Procedures to be followed

Please ensure the following things before going for conversion:

• That LLP obtain the consent of the secured creditors;
• Publish a notice about such conversion; one in English and one in vernacular language to seek objections;
• There must be minimum 7 persons or more in the existing LLP

2. Apply for DIN and DSC: If any member out of the 7 person does not have DIN or DSC, then apply for the same because having a DIN by the proposed director is a prerequisite to become a director in the company. To apply for DIN, you have to file DIR-
3. Name approval:

Apply for the name by filing form number INC-1. Once the name has been approved, then it is valid for next 60 days

3. Preparation and filing of form URC-1:

Following documents are attached with the form URC-1:

• A list which contains the names , address, and occupations of all persons named therein as members.
• Details about the proposed directors of the company which include their names including surnames, DIN, residential address, and their interest in other firms or bodies corporate along with their consent to act as director of the company;
• An affidavit by each of the directors to state that he is not disqualified to be a director under section 164(1);
• Partners details of the LLP;
• A copy of the LLP agreement and certificate of registration duly verified by atleast two designated partners;
• A statement showing the particulars of the share capital;
• No objection certificate from all the secured creditors of the LLP;
• Certificate from a Company Secretary in Practice/Cost Accountant in Practice/Chartered Accountant in Practice certifying the compliance with all the provisions of Stamp Act, to the extent applicable?

4. MOA & AOA:

After getting approved of the form URC-1, file MOA and AOA with concerned ROC. Following forms are required to be filed with ROC:

• E-form INC-7: (Company Incorporation Application)
• E-form INC-22: (Registered office details)
• E-form DIR-12: (appointment of directors of the proposed company)

ROC may also ask for any further clarification, if required. Once all the clarifications are provided, the certificate of the incorporation is issued by the registrar of the companies which is the conclusive evidence of company incorporation.

Section 366 of the Companies Act, 2013 has provided existing LLPs an option to convert themselves in a Company, which is a welcome move by the Ministry of Corporate Affairs.

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