Convert Company to LLP

Conversion of a Company into LLP

The LLP Act contains enabling provisions to convert a company into an LLP. The present day scenario, especially the legal changes happened in corporate legal side, the conversion of a company into LLP give more operational convenience to the promoters. The provisions contained in clause 58 and Schedule II to Schedule IV to the Act provide the procedures to which a firm (set up under Indian Partnership Act, 1932) and private company or unlisted public company (incorporated under Companies Act) would be able to convert themselves into LLPs.

The following procedure is need to follow.

  • Obtain the DIN Numbers and Digital signatures.
  • In case some of the shareholders being directors already posses the DIN and those persons are appointed as designated partners of the new LLP, that DSC can also be used for new LLP.
  • The name with which LLP is to be incorporated is to be decided.
  • Application shall be made in e form LLP1for the availability of the proposed name with the Registrar
  • The registrar will approve the name applied for provided the name is not either undesirable in the opinion of the Central Government or that is identical with or that which too nearly resembles to the name of any existing partnership firm or a LLP or a body corporate or a trade mark registered or pending registration under the Trade Marks Act, 1999.
  • Application for conversion has to be made in form LLP18.
  • In case the registrar is satisfied that the application is in order and that it complies such regulations, procedures as may be applicable he will register the conversion.
  • Registrar will issue the certificate of registration on conversion of the public limited company into LLP in Form 19 of the LLP Rules & Forms 2008.
  • On issue of certificate of registration the new LLP thus formed shall within 15 days from the date of registration inform the concerned Registrar of Companies with whom the erstwhile public limited company was registered under Companies Act, 1956 about such conversion in Form 14 of the LLP Rules & Forms 2008.

Conversion Under Part IX of the Companies Act,1956

A partnership firm consisting of at least seven partners may be registered as an unlimited Company or as a company limited by shares or as a company limited by guarantee under Part IX of the companies Act. On conversion and registration of the partnership firm into a Company under Part IX, all the properties movable and immovable (including actionable claim), of the partnership firm would pass to and vest in the company as incorporated under the provisions of the Companies Act, 1956. On such registration, the partnership firm existed before such registration would now be considered as a Company. The erstwhile entity would shed its garb of a firm and assume the mantle of a company. All the property hitherto owned by the partnership firm would be statutorily vested in the company on such registration without the act of any agency. Thus, the requirement of a transfer being effected would not be satisfied. As a consequence, conversion into and registration of the partnership firm as a Company under Part IX would not be considered as a transfer under section 45(1) of the Income Tax Act, 1961.

 The firm may be converted into a company by following the provisions of Part IX of the Companies Act, 1956. Sections 565 to 581 deal with conversion of firms into a company under the Companies Act, 1956.

For the purpose of Part IX so far as it relates to the registration of companies limited by shares, a joint stock company means a company having 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. Such a company, when registered with limited liability under the Companies Act, 1956 shall be deemed to be a company limited by shares.

A company cannot be registered under part IX unless the assent of majority of its members as are present in person or where proxies are allowed, by proxy, at a general meeting summoned for the purpose is obtained.

Since the liability of the members of the firm is unlimited, when a firm desires to register itself as a company under Part IX as a limited company, the majority required to assent as aforesaid shall consist of not less than ¾ of the members as are present in person or where proxies are allowed, by proxy, at a general meeting summoned for the purpose.