Brief Procedure And Checklist of Works To Be Performed For Conversion of Partnership Firm Into Company

This Part is governed by Chapter XXI, Part I of Companies Authorized to register under this Act of Companies Act, 2013 from Section 366 to 374.

Corporatization is the need of the hour. Government is taking so many effective steps in order to make the Indian market more corporate and effective in order to compete with the world and to gain the trust of global investors in the Indian market.

A domestic company is taxable at 25% if turnover or gross receipt of the company does not exceed Rs.250 crore in the previous year however if you are a partnership firm or LLP the same will be taxable at Flat 30%. This difference is not a small difference this can save lakhs and crores of revenue for the organization. Furthermore unincorporated organization led by few partners cannot think of growth on large scale without corporatizing itself. Corporatization has its own advantages such as Limited Liability, Perpetual Succession, Transferability of shares, easy access to funds etc.,

Benefits of Conversion of Partnership firm into Company.

1. No Capital Gain Tax.

2. Carry forward all your Input GST

3. Carry forward and Set off all your losses and unabsorbed Depreciation.

4. All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, on such registration, pass to and vest in the company as incorporated under this Act for all the estate and interest of the company therein.

5. Tax rate would be 25% if turnover or gross receipt of the company does not exceed Rs.250 crore.

Pre- requisites for conversion of Partnership firm into Company

1. Partnership deed must be registered with the Registrar of firms.

2. There must be a clause in the Partnership deed for Conversion of firm into company as and when needed, if the same is not available then the deed needs to be amended for addition of that clause.

3. Minimum 2(two) or more partners.

4. Minimum Two directors is required. The existing partner can be the directors.

5. There should not be revaluation of the assets of the Partnership firm in the previous preceding three years.

6. NOC from all the Secured Creditors.

7. All the Partners shall become the shareholders of the company in the proportion of their capital contribution in the Partnership firm.

Step by Step process for Conversion of Partnership firm into Company

1. Hold the meeting with the Partners to take the Assent/ consent of all or the majority of the Partners.

2. Adding the conversion Clause in the deed of Partnership if the same is not there in the existing Partnership deed.

3. Inform the Registrar of firms to take on record the amendment or execution of Supplementary deed mentioning the Partnership firm can be converted into Company with the mutual consent of all or majority of partners.

4. Apply for DSC and DIN of All the directors and shareholders of the Company.

5. Apply to reserve the name of the Company through Form RUN Reserve Unique Name.

6. Publish an advertisement in E-form URC -2 about registration in two newspaper (English daily & Vernacular) for seeking any objection within 21 days of Publish.

7. A copy of the notice, as published in the newspaper and the copy of the notice served on to the concerned Registrar of firms along with proof of service, is required to be submitted.

8. Filing of Various Forms and Documents with the Registrar of Companies for conversion. Likewise form URC-1, INC-32, INC-33, INC-34 and AGILE. Along with the earlier mentioned forms so many other documents are required to be filed as an attachment. The detail list of attachments these forms will be described further for your understanding.

9. If the Registrar in satisfied on the basis of documents and information filed by the applicants, decides that the applicant should be registered, he shall issue a certificate of incorporation in Form No. INC.11.

10. After obtaining the certificate of registration under section 367 of the Act, an intimation to this effect shall be given within fifteen days of such registration to the concerned Registrar of Firms, under which it was originally registered, along with documents for its dissolution as a firm.

List of Attachments required to be filed with the Form_URC-1

1. 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 or firm as the case may be;

2. 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;

3. in case of a firm, deed of partnership, bye-laws or other instrument constituting or regulating the firm and in case the deed of partnership was revised at any time in the past, copies of the principal and all subsequent deeds including the latest deed, along with the certificate of the registration issued by the Registrar of Firms, in case the firm is registered;

4. Written consent or No Objection Certificate from all the secured creditors of the applicant;

5. written consent, from the majority of members whether present in person or by proxy at a general meeting, agreeing for such registration;

6. an undertaking that the proposed directors shall comply with the requirements of the Indian Stamp Act, 1899 (2 of 1899) as applicable;

7. A copy of the latest income tax return of the Limited Liability Partnership or firm, as the case may be.

8. An undertaking from all the members or partners or trustees providing that in the event of registration as a company under Part I of Chapter XXI of the Act, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution:

Provided that no such undertaking shall be required to be submitted in case the application for registration under Part I of Chapter XXI of the Act has been made by a Limited Liability Partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009).

9. The list of members and directors and any other particulars relating to the company which are required to be delivered to the Registrar shall be duly verified by the declaration of any two or more proposed directors.]

10. A copy of the notice, as published in the newspaper and the copy of the notice served on to the concerned Registrar of firms along with proof of service, is required to be submitted.

11. Statement of accounts, prepared not later than fifteen days preceding the date of seeking registration and certified by the Auditor together with the Audited Financial Statements of the previous year, wherever applicable shall be attached with the Form URC-1.

12. A statement of proceedings, if any, by or against the firm, as the case may be which are pending in any court or any other Authority shall be attached with Form No. URC1

List of Attachments / Documents / Information’s required to be filed with the Form_INC-32, INC-33, INC-34

1. DIR-2 Consent to Act as Director.

2. INC-9

3. KYC document of Directors and shareholders of the proposed converted company.

4. Utility Bill (not older than two months).

5. Lease deed/ title deed for the regd. office address of the company.

6. Detail of main and other objects of the company.

Checklist of Works to be performed after the conversion.

1. Application for New GST Registration of the company.

2. Filing of Form for transfer of Input Credit available in the Partnership firm to company.

3. Surrender of GST registration of the Partnership firm.

4. Intimation to Banks and secured creditors.

5. Intimation to all the concerned institutions and organizations likewise electricity board, Customs, Pollution Control board, Telephone exchange etc.,

Author Bio

Qualification: CS
Company: KT & Associates (PCS Firm)
Location: Delhi, New Delhi, IN
Member Since: 03 Apr 2019 | Total Posts: 3
CS Kartikay Tripathi is a Practicing Company Secretary based on Delhi/ NCR with a post qualification experience of 2 years with huge exposure in assignments of Listed Companies, Unlisted Companies, Multi Level Marketing Companies, NBFCs, Trademarks, FSSAI, Trust & Societies and Many More. View Full Profile

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3 Comments

  1. vswami says:

    OFFhand:

    ‘Conversion’ of …INTO…<
    On the first blush, the write-up is seen to have proceeded on the premise that a conversion of one torm of legal entity into another entails a 'transfer' ; so much so, is certain to have the mentiioned consequences . However, for a contrarion view, examined/discussed in-depth, may look up article @https://taxguru.in/author/vswami/
    < https://taxguru.in/income-tax/conversion-business-entity-another-tax-implications.html

  2. mANOJ says:

    (1) What about Stamp Duty on the properties held by partnership concern when it is transferred to Company – This would be payable ? (2) In a company, the profits are distributed and Dividend Distribution Tax is payable at approx 20% which is not applicable to Partnership /LLP – So how is converting a partnership/LLP into company beneficial ?

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