Conversion of Partnership firm/LLP into company

CS Deepshikha Garg

1. E-form URC-1 for Conversion of Partnership firm/LLP into company

E-form URC-1 is required to be filed by a Partnership firm/LLP under section 366  of the Companies Act, 2013 read with Rule 3(2) of the Companies (Authorised to Register) Rules, 2014 for conversion of partnership firm or LLP into Company.

2. Purpose of eForm URC-1

Any partnership firm, limited liability partnership, formed under any other law for the time being in force consisting of seven or more members, may at any time register itself under Companies Act, 2013 as a Part I Company. For this purpose, E-form URC-1 shall be filed along with E-form SPICe.

3. Extract of Rule 3(2) of Companies (Authorised to Register) Rules, 2014

(1) For the purposes of sub-section (2) of section 366, the provision of Chapter II relating to incorporation of a company and matters incidental thereto shall be applicable mutatis mutandis for such registration:

Provided that there shall be seven or more members for the purposes of registration of a company under this sub-rule.

(2) A company after obtaining availability of name in terms of the provisions of section 4 of the Act, shall attach the required documents and information to the Registrar along with Form No. URC-1 in the following manner, namely:-

(i) For registration as a company limited by shares:

(a) A list showing the names, addresses, and occupations of all persons named therein with details of shares held by them (including shares held as cash or other than cash separately) respectively, 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 Partnership Firm or Limited Liability Partnership;

(b) A list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN , residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company; (c ) 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;

(d) A list containing the names and addresses of the Partners of the Partnership Firm or Limited Liability Partnership Firm.

(e) a copy of any Act of Parliament or other Indian law, deed of partnership, Bye laws or other instrument constituting or regulating the company and duly verified in the manner provided in Rule 7;

(f) A statement specifying the following particulars:2

(i) The nominal share capital of the company and the number of shares into which it is divided;

(ii) The number of shares taken and the amount paid on each share;

(iii) The name of the company, with the addition of the word ” Limited” RUEPfivate Limited” as the case may require, as the last word or words thereof;

(g) Written consent or No Objection Certificate from all the secured creditors of the applicant. (h) Written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under this part.

(ii) For registration as a company limited by guarantee or as an unlimited company:

(a) a list showing the names, addresses and occupations of all persons, who on a day, not being more than six clear days before the day of seeking registration, were members of the company with proof of membership;

(b) A list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;

(c) An affidavit from each of 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;

(d) A list containing the names and addresses of the Partners of the Partnership Firm or Limited Liability Partnership Firm

(e) a copy of any Act of Parliament or other Indian law, deed of partnership, bye-laws or other instrument constituting or regulating the company duly verified in the manner provided in Rule 7;

(f) in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of the guarantee.

(g) Written consent or No Objection Certificate from all the secured creditors of the applicant.

(h) Written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under this part.

(3) An affidavit, duly notarized, from all the members or partners providing that in the event of registration as a company under Part I of Chapter XXI of the Companies Act, 2013, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution as partnership firm or limited liability partnership.

(4) The list of members and directors and any other particulars relating to the company required to be delivered to the Registrar shall be duly verified by the declaration of any two or more directors of the company or Designated Partner of the Limited Liability Partnership or two partners of a partnership firm.

4. Extract of Section 366 of Companies Act, 2013

Section 366:

(1) For the purposes of this Part, the word “company”includes any partnership firm, limited liability partnership, cooperative society, society or any other business entity formed under any other law for the time being in force which applies for registration under this Part.

(2) With the exceptions and subject to the provisions contained in this section, any company formed, whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than this Act or of any other law for the time being in force or being otherwise duly constituted according to law, and consisting of seven or more members, may at any time register under this Act as an unlimited company, or as a company limited by shares, or as a company limited by guarantee, in such manner as may be prescribed and the registration shall not be invalid by reason only that it has taken place with a view to the company’s being wound up:

Provided that—

(i) A company registered under the Indian Companies Act, 1882 or under the Indian Companies Act, 1913 or the Companies Act, 1956, shall not register in pursuance of this section;

(ii) a company having the liability of its members limited by any Act of Parliament other than this Act or by any other law for the time being enforce, shall not register in pursuance of this section as an unlimited company or as a company limited by guarantee;

(iii) a company shall be registered in pursuance of this section as a company limited by shares only if it has a permanent paid-up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other, and formed on the principle of having for its members the holders of those shares or that stock, and no other persons;

(iv) a company shall not register in pursuance of this section without the assent of a majority of such of its members as are present in person, or where proxies are allowed, by proxy, at a general meeting summoned for the purpose;

(v) where a company not having the liability of its members limited by any Act of Parliament or any other law for the time being in force is about to register as a limited company, the majority required to assent as aforesaid shall consist of not less than three-fourths of the members present in person, or where proxies are allowed, by proxy, at the meeting;

(vi) where a company is about to register as a company limited by guarantee, the assent to its being so registered shall be accompanied by a resolution declaring that each member undertakes to contribute to the assets of the company, in the event of its being wound up while he is a member, or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(3) In computing any majority required for the purposes of sub-section (1), when a poll is demanded, regard shall be had to the number of votes to which each member is entitled according to the regulations of the company.

5. Things to be Ensured- for Conversion of Partnership firm/LLP into company

The entity has to get the name reservation by applying in eForm INC-1 and file this eForm along with INC-7 within 60 days from the date of filing eForm INC-1.

• Ensure that secured creditors have given their consent have given their consent for registration under this Part.
• Also ensure that prior to filing this eForm, a notice in newspaper about registration under this Part, one in English and in vernacular language seeking objections must be published. A copy of such notice is to be filed along with this eForm. The entity should address such objections, if any suitably.
• The entity after registration shall submit all necessary documents to registering authority for dissolution as the existing entity under relevant law.

6. Specific Instructions to fill the eForm URC-1 at Field Level for Conversion of Partnership firm/LLP into company

• Enter the approved SRN of RUN
• Enter registration number of the existing entity.
• Enter the number of members in the entity as on the date of application. The number should be greater than or equal to 7.

7. Attachments with eForm URC-1  for Conversion of Partnership firm/LLP into company

The following attachments are mandatory: –

1. Particulars of members/partners along with the details of shares held by them.

2. Declaration of two or more directors verifying the particulars of all members/ partners.

3. Affidavit from all the members/partners for dissolution of the entity.

4. Copy of the instrument constituting or regulating the entity.

5. Copy of Newspaper advertisement.

6. Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Stamp Act, to the extent applicable.

7. Undertaking for compliance with requirements of Indian Stamp Act, 1899

8. A copy of latest Income Tax return of the firm.

9. Copy of certificate of registration of the entity, if any;

10.Statement of accounts of the company, prepared not later than 30 days preceding the date of application duly certified by auditor

Conditional:

11. Consent of majority of members is mandatory to be attached in case company is limited by shares or Unlimited company.

12. Consent of at least three-fourth of members agreeing for registration under this part is mandatory to be attached in case company is limited by guarantee.

13. No objection certificate from the concerned Registrar of Firms or Registrar of Companies (LLP) is mandatory to be attached in case type of entity is Firms/ LLP.

14. No objection certificate/Consent given by secured creditors is mandatory to be attached in case of any secured debt outstanding as on the date of application.

15. Copy of the resolution declaring the amount of guarantee is mandatory in case company is limited by guarantee.

8. E-form SPICe INC-32

Along with URC-1 Company required to file e-form INC-32 with all the attachment as required in normal Incorporation of company:

Attachments to E-form SPICe INC-32

If the address for correspondence is the address of registered office of the company, then following attachments are mandatory:

• Proof of office address, Copy of utility bill as Per Rule 25(2)(d) of Companies Incorporation rules, 2014
• NOC As Per Rule 25(2)(C) of Companies Incorporation rules, 2014
• INC-9 {declaration by first subscriber(s) and director(s)}
• Dir-2 (Consent by the directors)
• MOA & AOA shall be in pdf form only
• Attach Proof of identity (Voters Identity Card/ Passport/ Driving License/Aadhaar Card), copy of PAN card and Residential Proof (Bank / Electricity Bill/ Telephone bill/ Mobile bill) of all subscribers and drectors.

9. Conclusion

Conversion of a firm into a company can also be done through slump sale, itemized sale, dissolution thereof and on dissolution of such firm business being taken over by the company. As per the provisions of the Companies Act 2013 and Companies (Authorized to Registered) Rules 2014, the already running business entity Partnership firm and Limited Liability Partnership may convert their existing business in a Corporate form after complying the Part I of Chapter XXI.

(The author can be reached at csdeepshikhagarg@gmail.com)