MEMBERSHIP OF LLP
Who can become a partner in a LLP
- An individual unless other disqualified
- A company incorporated under the Companies Act 1956 or Companies Act 2013 A LLP incorporated under LLP Act 2008 A LLP incorporated outside India
- A company incorporated outside India
Who cannot become a partner in LLP
I. An individual,
if: - he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force; - he is an undischarged insolvent; or - he applied to be adjudicated as an insolvent and his application is pending.
- A minor A HUF A Partnership Firm
- An Association of Persons (AOP) or Body of Individuals (BOI)
- An Artificial Judicial Person A Corporate Sole
- A Co-operative Society registered under any law for the time being in force
- A body corporate which the Central Government may, by notification in the Official Gazette, specify in this behalf;
Qualification to become a member of LLP
Any individual or body corporate may be a partner in a LLP. However an individual shall not be capable of becoming a partner of a LLP, if—
- he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
- he is an undischarged insolvent; or
- he has applied to be adjudicated as an insolvent and his application is pending.
Appointment of designated partner in LLP
A Limited Liability Partnership (LLP) is governed as per the rules of Limited Liability Partnership Act, 2008. In today's era, an LLP is gaining more popularity than a Private or a Limited Company form of business because of its easy nature and the lesser compliances. Every LLP should have a minimum of 2 partners and out of them, 2 shall act as designated partners who work on behalf of the partners and participate in the day-to-day activities. Once appointed, a partner or a designated partner can be changed, removed or appointed.
Procedure to add a designated partner:
Apply for Digital Signature Certificate:
The proposed designated partner shall apply for a DSC. The following documents are required for the application:
- PAN Card of the applicant
- Aadhaar Card of the applicant
- Photo of the applicant
- Email Id of the applicant
- Phone number
- Apply for DIN Number- After the DSC, the Director Identification Number of the Director will be applied in the form DIR - 3 along with the address proof and the identity proof of the applicant.
- Once the DIN is allotted to the designated partner, all the existing partners of the LLP will call a meeting and pass a resolution to add a designated partner in the partnership deed.
- A supplementary partnership deed will be drafted in which the new partner's name will be added.
- Then the consent of the incoming partner will be taken in writing.
- After these documents are prepared, Form - 4 of LLP will be filed within 30 days of the appointment.
- After filing this form, FORM - 3 will be filed, along with the supplementary and the original partnership deed within 30 days of appointment.
- After the filing of all these forms, the name of the designated partner will be added and will be seen on the site if the Ministry of Corporate Affairs.
- If Form - 3 and Form - 4 are filed within 30 days there is an additional fee.
CONVERSION OF LIMITED LIABILITY PARTNERSHIP INTO COMPANY
Several businesses started in India as Limited Liability Partnership (LLP), may now wish to convert into a private limited company for more growth in business or for infusing equity capital. An LLP can be converted into company as per the provisions contained in Section 366 of the Companies Act, 2013 and Company (Authorised to Register) Rules, 2014.
However, there are various requirements which need to be satisfied for converting an LLP into a Private Limited Company, for instance, an LLP must have at least 7 partners, approval from all the partners is required, advertisement in the newspaper is to be done in a local and a national newspaper, a No Objection Certificate (NOC) is required from the ROC where such LLP is registered and then all the incorporation process has to be undertaken which includes:
- Approval of name
- Securing DSC and DIN
- Filing form no. URC - 1
- Memorandum of Association & Articles of Association
Approval of name
Name Approval has to be obtained from the ROC (Registrar of Companies) by submitting an application in e-format. To apply for this, you need to choose various items that are mentioned in the RUN FORM. The name once accepted by the authority will be valid for 60 days.
Securing DSC and DIN
In case all 7 members, who are future directors of the company after conversion, do not have the Digital Signature Certificate (DSC) and Director Identification Number (DIN) for all the future directors of the company must be obtained. For obtaining the DIN, an application form must be filed on MCA portal. DIN application is processed & approved by central government via the office of regional director, the ministry of corporate affairs. The form must be accompanied by self-attested address proof and identity proof with 1 recent passport size color photo of the applicant. All the required documents should be attested by a practicing cost accountant or a practicing chartered accountant or a practicing company secretary.
Filing form no. URC-1
After getting the approval of name from Registrar of Companies, the applicant must prepare & file the form No URC-1 in addition to the following documents.
The conversion process provides certain tax benefits, however for availing the same several additional requirements needs to be met, for instance, maintaining the same shareholding by the partners as was in the previous LLP when the conversion takes place, for five years from conversion the former partners of such LLP who are now shareholders in the newly formed company cannot in total have shareholding less than 50 percent. There is another option available for the LLP which is to establish a separate private limited company and after that get the whole business transferred to the private company with the help of a written agreement, in such case the restrictions mentioned above such as need for minimum 7 partners, newspaper publication, etc. are not needed to be met. However, in this situation, there is a levy of capital gain tax. Moreover, stamp duty implication is also applicable to such transfer.
STEPS TO BE FOLLOWED FOR CONVERSION OF LLP
Hold a meeting of the partners to take assent of majority of its members summoned for the purpose of registering the LLP under Section 366 of the Companies Act, 2013. To authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents etc. pursuant to registration of the LLP as a Company.
LLP Have to apply for Availability of the Name in RUN. One of the major advantages is that the business can be run under the same name as that of the LLP (subject to availability of name as per Name Availability guidelines of Companies Act) except that in addition to the name of the LLP the words ‘limited' or ‘private limited' has to be added.
Second Step: On obtaining the approval of Name, file the following below Form along with required documents with the registrar of Companies within 20 days from the date of name approval.
List of Documents required filing with ROC for the conversion of LLP into Company:
Company required filing e-form URC- 1 along with all the below mentioned documents:
- A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them
- a list showing the particulars of persons proposed as the first directors of the company
- an affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under sub-section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief
- a list containing the names and addresses of the partners of the Limited Liability Partnership
- Copy of LLP Agreement
- a statement of assets and liabilities of the Limited Liability Partnership duly certified by a chartered accountant in practice which is made as on a date not earlier than thirty days of the filing of form no.URC-1
- a copy of latest income tax return of the Limited Liability Partnership
- an undertaking that the proposed directors shall comply with the requirements of Indian Stamp Act, 1899 (2 of '1899)
- written consent or No Objection Certificate from all the secured creditors of the applicant
- written consent from the majority of Partners
- a statement specifying the following particulars:-
- the nominal share capital of the company and the number of shares into which it is divided;
- the number of shares taken and the amount paid on each share;
- 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;
E-form INC- 33 / INC-33 / INC-34
Company required to file e-form INC-32/ INC-33/ INC-34 along with URC-1 as linked form with all the attachment as required in normal Incorporation of Company like:
Caution to Be Taken by Professionals in conversion of LLP into Company
There are various ways of converting a firm to a company, viz; slump sale, itemized sale, admitting the company as a partner, dissolution thereof and on dissolution, business being taken over by the company etc.,In view of the choices available. Conversion should be made in a manner appropriate to a particular situation and in a way which is most beneficial.
- Obtain engagement letter from subscriber: As per certification in e-form SPICE i.e. INC-32, a professional declares that he has been engaged for the purpose of certification Therefore it is advisable to obtain an engagement letter.
- Verification of original records pertaining to registered office: As per certification in e-form Spice i.e. INC-32, a professional declares that he has verified all the particulars(including attachments) from original records.
- Ensure all attachments are clear enough to read: As per certification in e-form Spice i.e. INC-32, a professional declares that all attachments are completely and legibly attached.
- Ensure registered office of the company is functioning for the business purposes of the company: As per certification in e-form Spice i.e. INC-32, a professional declares that he has personally visited the registered office. Take a declaration to the effect that all the original documents have been handed over after incorporation. Since as per section 7(4) copies all documents/information as originally filed should be preserved at the registered office of the company, therefore a professional should take a declaration while handing over the incorporation documents.
- MCA Circular 10/2014: According to this circular ROC/RD in case of omission of material fact or submission of false/incomplete/ misleading information can after giving opportunity to explain refer the matter toe-governance division of MCA, which in turn may initiate proceedings under section 447 and/or ask the respective professional institute to take requisite disciplinary action.
The author can also be reached at Vinayak.email@example.com
Tags :Corporate Law