Conversion of LLP into Private Limited Company – A Complete Legal & Procedural Guide under Companies Act, 2013.
The conversion of a Limited Liability Partnership (LLP) into a Private Limited Company has become increasingly common due to business expansion, funding requirements, better credibility, and investor preference for corporate structures. The process is governed primarily by Section 366 of the Companies Act, 2013 read with the Companies (Authorised to Register) Rules, 2014, along with relevant provisions of the LLP Act, 2008.
This article provides a comprehensive legal and procedural overview of the conversion process.
1. Legal Framework
The conversion of LLP into a Private Limited Company is carried out under:
- Section 366 of the Companies Act, 2013 (Part I, Chapter XXI – Companies Authorised to Register)
- Companies (Authorised to Register) Rules, 2014
- Relevant provisions of the LLP Act, 2008
2. Reasons for Conversion
Businesses generally opt for conversion due to:
- Easier access to funding and venture capital
- Enhanced credibility and brand value
- Ability to issue shares and ESOPs
- Better corporate governance structure
3. Eligibility Conditions for Conversion
Before initiating the conversion process, the following conditions must be satisfied:
- The LLP must have at least two partners, who shall become shareholders of the company.
- All existing partners of the LLP must become shareholders in the same proportion.
- No new shareholder can be inducted at the time of conversion.
- All pending statutory filings (Form 8 and Form 11) must be completed.
- Consent of all partners must be obtained.
- Consent/NOC from secured creditors must be obtained, if any.
- The LLP should not have defaulted in statutory compliances.
4. Step-by-Step Procedure for Conversion
Step 1: Obtain DSC and DIN
- Obtain Digital Signature Certificates (DSC) of proposed directors.
- Apply for DIN (if not already allotted).
Step 2: Name Reservation
- File SPICe+ Part A for name approval on MCA portal.
- Ensure the name complies with the Companies Act naming guidelines.
- Attach NOC if the name contains a registered trademark.
Step 3: Publication of Advertisement
As required under Rule 4(1):
- Publish advertisement in Form URC-2
- One English newspaper and one vernacular newspaper
- Advertisement must be published at least 21 clear days before filing URC-1
- The address to be mentioned in URC-2 should be Central Registration Centre (CRC), IICA, Manesar, Haryana, as prescribed under MCA notification.
Step 4: Preparation of Documents
The following documents must be prepared:
- List of partners with details
- List of proposed directors
- Consent of partners
- List of creditors with their consent
- NOC from secured creditors
- Copy of LLP Incorporation Certificate
- Copy of LLP Agreement along with all supplementary agreement (if any)
- Statement of Assets and Liabilities certified by a CA not older than 15 days
- Latest Income Tax Return acknowledgement
- Affidavit from proposed directors confirming compliance
- Incorporation documents-
- Proof of Office address along with NOC, if applicable (Conveyance/ Lease deed/Rent Agreement along with rent receipts)
- Copy of the utility bills (not older than two months)
- DIR-2 Consent to act as Director
- MBP-1 Notice of interest by director
- Subscribers’ sheet
Step 5: Filing of Forms with ROC
URC-1 is filed as a linked form along with SPICe+ incorporation forms.
(A) Filing of SPICe+ Part B
Along with:
- e-MOA (INC-33)
- e-AOA (INC-34)
- AGILE-PRO-S (GST, EPFO, ESIC, Bank Account)
- INC-9 (Declaration)
- DIR-2 (Consent to act as Director) & MBP-1(Notice of interest by director)
(B) Filing of Form URC-1
This is the primary form for conversion under Section 366.
Attachments include:
- List of partners
- Affidavit and declarations
- Statement of assets and liabilities (should not be older than 15 days)
- Copy of newspaper advertisement
- NOC from creditors
- LLP agreement copy
- Approval letter of RUN
- Certificate of Incorporation
- Consent by partners for conversion
- Copy of latest Income Tax Return
- Copy of objection (if received) and if not received a declaration that the LLP has not received any objection for conversion
- Declaration of Compliance by PCS
Step 6: Issue of Certificate of Incorporation
Upon satisfaction, the Registrar of Companies issues a Fresh Certificate of Incorporation.
From the date mentioned in the certificate:
- The LLP is deemed dissolved.
- The company comes into existence as a Private Limited Company.
5. Effects of Conversion
Upon conversion:
- All assets and liabilities vest in the company.
- All contracts, agreements, and legal proceedings continue in the company’s name.
- The LLP stands dissolved without winding up.
- PAN, GST, and other registrations must be updated.
6. Stamp Duty Implications
- Stamp duty on MOA & AOA is payable as per the applicable state stamp laws (e.g., Gujarat Stamp Act if registered in Gujarat).
- Generally, no additional stamp duty is payable on transfer of immovable property due to statutory vesting, unless specifically required under state stamp laws.
7. Post-Conversion Compliances
- Intimation to ROC (LLP) about conversion.
- Update PAN, TAN, GST registration.
- Inform banks and financial institutions.
- Update statutory registers.
- Modify business licenses and contracts.
- Filing of INC-20A within 180 days from date of incorporation is required
8. Practical Considerations
- Ensure clean compliance history before filing.
- Review loan agreements for change-of-entity clauses.
- Obtain professional certification for assets and liabilities.
Conclusion
Conversion of LLP into a Private Limited Company is a structured legal process under Section 366 of the Companies Act, 2013. While it offers strategic advantages in terms of growth, funding, and scalability, it must be carefully executed with due attention to compliance and taxation aspects.
With proper planning and documentation, the conversion process can be smooth and legally secure.
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