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Conversion of LLP to Private Company

CS Sangeetha 
on 22 May 2020

LinkedIn


Any organization registered as Limited Liability Partnership ('LLP') can be converted into Private Limited Company under Companies Act, 2013 ('CA 2013). One of the main reasons to convert LLP into Private Company is to avail the benefit of Tax as the percentage of tax is less in Company compared to LLP. Hence, organization who is registered as LLP may prefer to convert it into Private Limited Company.

This article will give you a glimpse of provisions prescribed, the procedure involved, practical difficulties and time involved in conversion of LLP into a private limited company.

I. Provisions to refer:

  • Section 366 of CA 2013 to Section 374 of CA 2013
  • Chapter XXI PART-1 Companies Authorised to register under CA 2013

II. Procedure:

  • Go through the LLP documentation and agreement to understand the number of partners and contribution involved
  • Check whether LLP has filed its statutory returns upto date and file all LLP agreements including supplementary agreements with Registrar of Companies ('RoC')
  • All filed forms should be in the approved status
  • If not, please complete all filings prior to start conversion procedure
  • Obtain name by filing SPICE+ with the RoC
  • Publish an Advertisement about conversion and seeking objection if any in a newspaper in English and in vernacular language where the registered office of the LLP is situated.
  • Copy of notice is required to be send to RoC and keep the acknowledgement of serving notice
  • After 15 days and before 30 days from the date of publication, file SPICE+(incorporation form), URC-1, MOA and AOA and all other documents with Central Registration Centre ('CRC') for approval
  • Obtain certificate of registration
  • File commencement business form with a letter informing LLP is converted into company and hence, no subscription money shall be deposited (Author's suggestion)
Conversion of LLP to Private Company

Attachments

I. Name application form :

  • Resolution passed by partners of LLP for approval of conversion
  • Main objects of LLP

II. URC-1:

  • Statement of accounts, prepared not later than 15 days preceding the date of seeking registration and certified by the Auditor together with the Audited Financial Statements of the previous year, wherever applicable
  • A declaration by the LLP that it has filed all documents which are required to be filed under the LLP Act
  • A statement of proceedings, if any, by or against the LLP which are pending in any court or any other Authority
  • A copy of the notice, as published and the copy of the notice served on Registrar along with proof of service
  • A list showing the names, addresses, and occupations of all persons named therein as partners with details of shares held by them respectively, showing separately shares allotted for consideration in cash and for consideration other than cash along-with the source of consideration and 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
  • a list showing the particulars of persons proposed as the first directors of the company, along with Director Identification Number (DIN), passport number, if any, with expiry date, residential addresses and their interests in other firm or body corporate along with their consent to act as directors of the company
  • written consent or No Objection Certificate from all the secured creditors of the applicant (In case no secured creditors, declaration by Designated partner that there are no secured creditors)
  • Declaration by the Directors that they are not disqualified under Section 164(2) of CA 2013
  • written consent, from the majority of partners whether present in person or by proxy at a Partners meeting, agreeing for such registration;
  • an undertaking that the proposed directors shall comply with the requirements of the Indian Stamp Act, 1899
  • a copy of the latest income tax return of the Limited Liability Partnership
  • LLP registration certificate and LLP agreements including all supplementary and amendment agreements
  • affidavit, duly notarised, from all the members or partners to provide that in the event of registration under this Part, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution as partnership firm, limited liability partnership, cooperative society, society or any other business entity, as the case may be.
  • Certificate from Professional (CA/CS) regarding compliance of stamp act
 

III. SPICE FORM:

  • MOA & AOA
  • DIR-2 by Directors
  • ID and address proof of Subscribers
  • INC-9
  • LLP resolution for approval of conversion
  • DIN declaration
  • PAN of Subscribers

III. Practical challenges:

  • The provisions of sections or rules have not prescribed the time limit of publication in the newspaper. However, the form URC-2 has prescribed 15 days' time to wait after publication and file within 30 days. Hence, please make sure to follow the timeline
  • Attachments size issue may happen in case of many partners and several amendments in the LLP agreements. All attachments should be in order for getting approval
  • There is no separate notice required to be sent to registrar for dissolution of LLP

IV. Time involved:

Time frame depends on the number of partners involved and documentation execution. Generally, it might take 1 to 2 months to complete entire procedure

 

V. Important Points to be noted

  • Name of LLP can not be changed while obtaining name for conversion. Only LLP word will be changed to Private limited. Ex: ABC Services LLP to ABC Services Private Limited
  • The amount of contribution shall be equal to amount of capital and there can not be change in such amount
  • All the partners shall become the shareholders of the Company

Conclusion:

Thus, aforesaid are the detailed procedure and documents involved in conversion of LLP into a Private Limited Company. The attachments will play a major role in conversion approval and all attachments are to be in order for getting the approval.

Disclaimer:

The views and opinions expressed in this article are those of the authors and it is not biding on any person or on any regulatory authorities. My article is based on the Act/rules at the time of publication and the same should not be construed as legal opinion on the application of the provisions.


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