Conversion of LLP to Private Company
On 31 May 2016, the Ministry of Corporate Affairs notified in that notification that it had authorized the conversion of LLP to Company. For this conversion, a list of documents must be prepared and the same must be filed with ROC in forms such as URC-1, INC-32, INC-33 and INC-34, etc. While conversion, consideration must also be given to the implications of income tax provisions, such as capital gain. In the following article, the author seeks to cover the provisions of the Company Act and the capital gain implications of the conversion from LLP to Company.
Who is eligible to become an LLP partner?
- A individual has been rejected
- Company dealt with in the company law 1956 or in the company law 2013.
- An LLP under the 2008 LLP Law
- An LLP as a foreigner
- An globally known business
Who can't count as an LLP Partner?
- A individual with a condition that he may be unintelligent and declared to be competent authorities and competence.
- A minor HUF/ Alliance Business
- An AOP or BOI (Personal Association) (Body of Individuals)
- An automated judge/business sole
- In the aforementioned time frame a cooperation company registered under law
- A body which, via notification in the Official Gazette, the Central Government can mention on behalf of it.
Conversion advantages for LLP into a private limited enterprise
Brand Worth Conservation
Transforming LLP into a private limited company encourages the continuation of the brand name by corporate organizations without any attempts at brand ads.
Unabsorbed Losses and Depreciation Carry Forward
Following transition, no bookkeeping costs are incurred as loss and depreciation in LLP for the conversion of the company are carried forward.
Staff ownership strategy for staff
Converting the LLP into a private company allows companies to sell equity and ESOP plans.
Simple raise of funds
If the procedure of registering a company is comprehensive, the structure of the company is among others more reliable. This makes it possible for external sources to raise funds.
Legal life separate
The company's conversion makes it easier to focus on its ownership and management. Without losing power by voting, the shareholders delegate responsibility for the operation of the company.
Owners' Limited Liability
Conversion prohibits owners' responsibility to the subscribed and unpaid capital only.
Procedure of converting an LLP into a Private Limited Company in India
Many businesses that have been founded in India as a limited liability partner (LLP) might now want to turn into a private limited enterprise for further corporate growth or capital infusion. A PVT can translate an LLP. Company Ltd. as given in the Company Law, 2013 and Company Registry Rules of 2014 in Section 366 of the Company Act.
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 form INC-1. The name once accepted by the authority will be valid for 60 days
DSC and DIN security
In the event of not obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN) of all future managers of an organization, all seven members who are future managers after the conversion must be acquired. A request form has to be submitted on the MCA portal for receiving the DIN. The central government processes and approves the DIN application via a Regional Director's Office, a Corporate Relations Agency. The form must be accompanied by an authenticated proof of address and identity with an image of the applicant's recently issued passport size.
Filing form No. URC - 1 1
- Once the name of the business registration has been accepted, in addition to the corresponding documentation the applicant must prepare and file the form No URC-1.
- Members' list with different info viz. Names, emails, shares properly owned by them, etc.
- List of the first private company directors with different details viz. Names, emails, DINs, expiry date passport numbers, etc.
- An affidavit from each person that was offered as first manager to be not prohibited under section 164 shall include full and reliable details and the best of his or her belief and expertise in all documents required for the registration of an undertaking.
- It should include a list of the names and addresses of LLP partners and a copy of the LLP Registration Agreement and Certificate properly confirmed by two designated LLP partners.
- A written permission or no certificate of objection from all creditors.
- Copy of the newspaper advertising, business accounts not to be 6 days prior to the date of request and must be properly approved by the auditor.
MOA & AOA
Association memorandum (MoA) & Association articles (AoA) are to be formulated and sent to RoC after approval of name and type no approval has been obtained. URC-1 – from the recording officer.
For instance the same shareholding of partners as in the previous LLP when the change takes place, for the first five years from the conversion the former partners in such LLP who are now shares of the new business cannot have a shareholding total The transition mechanism offers some tax advantages but for the use of the same additional needs to be met.
Necessary documentation for the conversion of LLP to a limited private company
- Address Proof of the claimant
- Identity Proof of the claimant
- Passport size of the applicant's photograph
Required documents at the time of Form URC-11 filing
- Details such as the name, address and shares owned by the members, along with the list of members.
- Provide information such as name, address, DIN, passport number, along with the expiry date of all Private Limited Company directors.
- Filing all mandatory documents for the company's registration with the Registrar of Companies
- A copy of the Limited Liability Partnership Agreement is required with an attached list indicating the name and address of the LLP partners and a certified copy of the registration, properly checked by at least two LPP partners.
- The document, containing the specifics of the company's nominal share capital and the number of shares, divided the number of shares taken and the sum charged for each of the shares and the name of the company with the term private limited to be issued.
- There must be a certificate of no objection from all creditors.
- A properly certified statement of the company's accounts is requested by the auditor, which should not be less than six days from the date of the request and a copy of the newspaper advertising.
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Frequently Asked Questions
All partners are responsible for statutory compliance under the Partnership Act. Only designated partners are responsible for statutory compliance as required under the LLP Act (not necessarily in respect of other Acts). He can offer LLP loans, too. Any business partner is an agent of the company and of other partners as well.
In the case of more than 7 partners in the LLP at the time of the company's conversion, the company must file a physically prepared MOA & AOA scan copy.
In above mentioned situation company have to file 1. URC-1 and 2. INC-32. No need of INC-33 and INC 34.
- Name Worth Preservation
- Bring unabsorbed losses and depreciation forward
- Employee Stock Ownership Scheme for workers
- Simple Raising of Fund
- Legal life independent
- Owners' Limited Liability