Conversion of LLP into Company

The concept of Limited Liability Partnership (LLP), was introduced in India by way of Limited Liability Partnership Act, 2008 and LLP Rules, 2009. As name suggest, in case of LLP, all partners have limited liabilities. 

LLP is hybrid of Partnership Firm and Company, it is an alternative corporate form of business organization which gives the benefits of limited liability of a Company and the flexibility of a Partnership. As per LLP Act, read with relevant Rules, any other form of business such as a partnership set up under the provisions of Indian Partnership Act, 1932, a private limited company and an unlisted public limited company can convert itself into LLP pursuant to the provisions of LLP Act, 2008. However, neither of LLP Act nor Companies Act, 1956 provided a provision for conversion of LLP into Private Limited Company. However, with Companies Act, 2013 a provision of conversion of LLP into Private Company was introduced under Section 366 of the Companies Act, 2013.

Section 366 of the Companies Act, 2013 provides 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 by following the procedure laid down in Companies (Authorized to Register) Rules, 2014. 

Before filing application for conversion, please ensure followings:

·       That secured creditors have given their consent for such conversion;

·       A notice in newspaper about such conversion, one in English and in vernacular language seeking objections must be published;

·       There are minimum seven or more members in the existing LLP for converting the LLP in to a Company.

·       A general meeting must be held where majority of partners have given their consent for such conversion.

Procedure to be followed for Conversion of LLP Into Company

1)      Ensure DIN & Digital Signature Certificate of all the partners proposed to be appointed as a Director are availed and valid as on date of filing of an Application.

2)      File form INC 1 for Name Availability for the new name with word Private Limited or Limited in the end. It is important to note that approved Name Availability is valid for 60 days from the date of Application.

3)      Preparation and Filing of Form No. URC – 1 :

Purpose of filing of form URC 1: Any partnership firm, limited liability partnership, cooperative society, society or any other business entity formed under any other law for the time being in force consisting of seven or more members, may at any time register itself under Companies Act, 2013 as a Part I Company. For this purpose, Form URC-1 shall be filed along with Form INC-7.

List of documents required to be file with Form URC-1:

·       An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under section 164(1) and that all the documents filed with the Registrar for registration of the Company contain information that is correct and complete and true to be best of his knowledge and belief.

·       Particulars of members/partners along with the details of shares held by them.

·       A Copy of LLP Agreement and Certificate of Registration duty verified by at least two designated partners of LLP.

·   A statement specifying the following particulars; a) the nominal share capital of the company and the number of shares into which it is divided; b) the number of shares taken and the amount paid on each share; c) 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 at a general meeting agreeing for registration under section 366 of the Companies Act, 2013.

·       An affidavit duly notarised, from all the members or partners providing that in the event of registration as a company under Part I Chapter XXI of the Companies Act, 2013.

·       Statement of accounts of the company, prepared not later than 6 days preceding the date of application duly certified by auditor, if applicable.

·       Declaration of two or more directors verifying the particulars of all members/partners.

·       Copy of Newspaper advertisement.

·       Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Stamp Act, to the extent applicable.

·       No objection certificate from the concerned Registrar of LLP.

4)      Filing of Incorporation Forms: Filing of Incorporation forms like INC 7, INC 22 and DIR 12 as may be applicable need to be filed with Form URC -1. Also, the LLP need to approve Memorandum and Articles of Association of the proposed Company.

5)      Certificate of Incorporation:

Once all documents are filed and if ROC is satisfied with the documents, the Certificate of Incorporation will be issued by the ROC and the company is deemed to be incorporated from the date of issuance of Certificate of Incorporation.

After obtaining the registration under Section 367 of the Companies Act, 2013, intimation to this effect shall be given, within fifteen days of such registration to the concerned Registrar (LLP) under which it was originally registered, along with necessary documents or papers for its dissolution as Limited Liability Partnership.