Summary: The conversion of a Limited Liability Partnership (LLP) into a Private or Public Company is governed by Section 366 of the Companies Act, 2013, and the Companies (Authorized to Registered) Rules, 2014. Under Section 366(2), any entity formed under an Act other than the Companies Act, with two or more members, can register as an unlimited company, or as one limited by shares or guarantee. Companies with fewer than seven members must register as a private company. Conversion from an LLP to a company can be beneficial for several reasons, including exemptions from capital gains tax, the ability to raise funds through various means, carry forward of losses, greater investor attraction, business growth opportunities, and lower tax rates compared to LLPs. The conversion process involves several steps, including publishing a notice seeking objections (Form URC-2), obtaining name approval from the Registrar of Companies (ROC) via SPICe+ Part A form, and filing necessary documents through URC-1, SPICe Part B, and related forms. These documents include consent from partners, a declaration from directors, the latest tax return, a no-objection certificate from the Registrar, and other required documents. Once the process is completed, and all objections are resolved, the ROC issues a Certificate of Incorporation, officially converting the LLP into a Private Limited Company.
Applicable Sections: – Section 366 of Companies Act, 2013
Applicable rule: – Companies (Authorized to Registered) Rules, 2014
As per the Section 366 (2) of Companies Act 2013, any company formed in pursuance of any Act of Parliament other than Companies Act, consisting of two or more members may at any time register under Companies Act as Unlimited company, limited by share, limited by guarantee.
Provided that company with less than seven members shall register as a private company
Here, “Company” includes any partnership firm, limited liability partnership, cooperative society, society or any other business entity formed under any other law.
WHY TO CHOOSE CONVERSION: –
- If the limited liability partnership is converted to a company, then the capital gains tax arising therefrom will be exempted subject to some conditions.
- Private company can raise funds from public via Right issue, preferential allotment etc.
- To carry forward unabsorbed looses and depreciation of last year
- Private company attracts more investors as compared to LLP
- Conversion can be opted for growth and to extend its existing business
- LLP attracts higher income tax rate as compared to company.
Now the process of Conversion of LLP/ Partnership into company is stated under rules 3,4 and 5 of The Companies (Authorized to Registered) Rules, 2014
Step-1 Form URC-2 (Advertisement)
- A notice seeking objections for conversion of LLP into company must be published in form URC-2 in atleast 2 newspapers one in local language wherein registered office is situated and another in English language newspaper
Step-2 Filing of SPICe+ Part A form
- Name must be approved from ROC, (word LLP will be replaced by Private company).
Step-3 Filing URC-1 & SPICe Part B form, INC-33, INC-34, Agile , INC-9
- After getting the approval of name from Registrar of Companies and after 21 days from the publication of newspaper advertisement (URC-2), Form No URC-1 & SPICE along with the following documents shall be filed: –
For URC-1 :-
- Written consent/NOC from all partners for conversion of company
- Declaration of director for verifying the particulars of Directors
- Copy of Latest Income tax return
- NOC from Registrar to convert from LLP to company
- LLP with Supplementary Agreement signed by partners
- PAN Card of LLP signed by partners
- Certificate of Incorporation of LLP signed by partners
- List of Particulars of partner in LLP on the letterhead
- List showing the particulars of persons proposed as the First Directors of the Company
- Auditor certificate
- Latest statement of Accounts 6 days preceding the date of application
- Resolution for Conversion of LLP into Company
- NOC (No Objection Certificate) must be taken from all the applicant’s secured creditors.
- A statement containing the given below particulars-
- The company’s nominal share capital and in how many shares it is divided;
- How many shares are taken and how much amount is paid on each of the shares;
- Company’s name along with the ‘Limited’ or ‘Private Limited’ words added after the name as per the requirement of the directors.
For SPICE :-
- ID Proof and address of the Directors
- DIR-2
- Resolution of Partners for conversion of LLP into Company
- Proof of regd. Office like Rent Agreement/Sale deed 6. Latest Electricity bill (Not older than 2 Months)
- NOC of Owner of Office, If Regd office is rented.
After completion of above steps , LLP will be converted into a Private Limited Company, and the ROC will issue the Certificate of Incorporation of such a new Private Limited Company.
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