CS Divesh Goyal

CONVERSION OF COMPANY INTO LLP, AS PER COMPANIES ACT AND LLP ACT

Before starting with anything we shall have the overview of Limited Liability Partnership (LLP) its enactment, features, constitution etc.

BACKGROUND OF LLP:

LLP is a unique form of legally recognized corporate entity, which integrates the features of both the limited corporations and the traditional partnership firms. As it is a unique Hybrid Combination of both Company and Partnership, this LLP is especially suitable for small to medium-sized business enterprises and professionals particularly.

One hugely popular and highly preferred category of entity for doing business in almost all economic sectors in the majority of the countries worldwide is the Limited Liability Company (LLC), along with the Private and Public Limited Corporations. In India and many other countries, these limited liability Companies are better known as the Limited Liability Partnerships (LLPs). LLP as a structure is not new in the International Scenario, most western economies have provisions for hybrid business entities like the LLP’s.

LLP is governed by Limited Liability Partnership Act- 2008 which came in to force on 1st day of April 2008. This Act was introduced with the idea of promoting MSME Sector (Micro Small Medium Enterprise) with the advantage of self governance and less compliance.

LLP Act, 2008 constitute 81 Sections and 4 schedules. So far LLP Rules 2009 has prescribed many forms to be filed with MCA.

LLP is an alternate corporate body, comprising the benefit of both Company and Partnership.

  • It contains the benefit of Limited liability to partner and Flexibility of Partnership.
  • LLP is a corporate body and granted the legal status same as that of company.
  • Unlike the partnership in LLP the liability of the partner is limited up to the contribution made by them.

The Limited Liability Partnership (LLP) Act is a well-thought-out legislation. It codifies the inherent concepts of a LLP by combining best practices seen in private companies while protecting the inherent freedom of partners to decide the manner in which the firm has to be managed. It took time for the people to start switching to the LLP model. Earlier, not many people were interested in starting or investing in an enterprise like LLP.

LLP is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.

Owing to flexibility in its structure and operation, it would be useful for small and medium enterprises, in general, and for the enterprises in services sector and professional firms, in particular. Internationally, LLPs are the preferred vehicle of business, particularly for service industry or for activities involving professionals.

CONVERSION OF PRIVATE LIMITED COMPANY INTO LLP:

As all of us are aware that Companies Act-2013 came into force w.e.f. 01st April, 2014. Under Companies Act, 2013 there are very much compliances and many complications, which are cost consuming for small enterprises. Therefore, Small enterprises are thinking to switch their Companies into Limited Liability Partnership (LLP’s) Firm.

A registered limited company in India (Private or Public) has a lot of complex formalities and incurs additional overheads for managing affairs including mandatory board meeting, maintenance of statutory records, filling of e-forms with MCA etc. Absence of such mandates for LLP combined with advantages such as non-applicability of dividend distribution tax on profit repatriation, transfer of profit rules and deemed dividend profit issues, MAT provisions (discussed below).

In India, formation, registration, and regulation of an LLP is exclusively governed and controlled by the rules, provisions, and regulations provided in the LLP Act of 2008 and the LLP Rules of 2009. The Ministry of Corporate Affairs (MCA), Government of India, and its well-equipped web portal [www.llp.gov.in] is directly concerned for establishing an LLP.

HOW TO TAKE DECISION OF CONVERSION OF COMPANY INTO LLP.

For Conversion of Private Limited Company and Unlisted Public Company into LLP we must do Cost and Benefit analysis of same.

BENEFITS OF LLP AS COMPARED TO CORPORATE FORM:

COMPARATIVE ANALYSIS

Particulars LLP Private Company
Members Minimum 2 Partner Minimum 2 Member,Maximum 200 Members
Liability Limited, Except in case of Fraud and wrongful Act Limited Liability
Forms to be filled Regular-E-form-8 & Eform-11 Regular-MGT-14 (two times), 23AC, 23ACA, 20B, GNL-2
Transfer/ Inheritance of Shares Transfer, But transferee may not have management right By court order once the company have been wound up
Easy to Form, Run and manage No Minimum Capital requirement for Incorporation Minimum Capital for Incorporation of Private Limited Company is Rs. 1,00,000/- and for Public Limited Company is Rs. 5,00,000/-
Requirement as to maintenance of Statutory Records NO such Requirement. It is must to maintain statutory records as per Companies Act-2013.
Audit of Accounts Require only if Turn over above 40 lacs or Contribution more than 25 lacs. Audit is Compulsory.
Management through LLP agreement. Memorandum of Association and Article of Association of company.

COMPLIANCE REQUIREMENT:

 

MINIMUM COMPLIANCE LEVEL & COST SAVING:

After commencement of Companies Act, 2013 cost of compliance has increased many fold in the case of Companies, while a LLP has to comply with a very few compliances.

The comparative chart of compliances to be made by a company and LLP is given below.

Particulars LLP Private Company
Maintenance of Statutory Records No such Registers are required to maintain Many Registers are Required to Maintain Under Company as per Companies Act- 2013
Addition or Deletion of Directors Require to amend LLP Agreement and File e-form- 3 & e-form-4. Require to Pass Resolution in General Meeting, File e-form-DIR-12 and require many documents from the person who is appointed as Director. (As per Section-152 of Companies Act-2013.)
Change in Registered Office Require to amend LLP Agreement and File e-form Form-15 There is Complete lengthy process for change in registered office of company as Per Section-13 of Companies Act-2013
Increase in Capital Only require to amend LLP Agreement and File e-form Form-3. Require to Pass Ordinary resolution in General Meeting and file form SH-7.
Annually form filling requirement Only Two annual formE-form- 8,

E-form-11

There are much formsE-form-23AC, 23ACA

E-form- 20B, E-form- MGT-14

E-form-ADT-1

Disclosure of Interest No such requirement Require to Take disclosure from director under Section-184(1) and to file form- MGT-14.
Convening of Meetings No such requirement Require to hold Meetings as per Section- 173. (At least Two Board Meeting and one Annual General Meeting for Small Company and At least four Board Meeting and One Annual General Meeting for other then Small company).
Audit of Accounts Require only if Turn over above 40 lacs or Contribution more than 25 lacs. Audit is Compulsory.
Loans & borrowings As per LLP Agreement. No other requirements There is Cap for Loans and Borrowings as per section 179 & 180, Require to hold Board Meeting and file form with ROC.
Deposits No such condition. Loan from other then director is cover under deposit as per Definition of Deposit under Companies Act-2013.
Related Party Transactions No Restrictions Transaction to be at arm’s length price only and as per provisions of Secton-188 of Companies Act-2013.

BENEFITS UNDER INCOME TAX LAW:

  • Saving of Dividend Distribution Tax. (There is no provision of Dividend Distribution Tax in LLP)
  • Saving of MAT Tax. (Because LLP don’t give credit of MAT)
  • Saving of Income Tax due to Interest and remuneration payable to partners as salary payable to directors.

INCOME TAX PROVISIONS IN DETAIL:

The finance Act, 2009 amended the Income-tax Act, 1961 to clarify that LLPs will be taxed on the same lines as general/ traditional partnership firms. However the Tax implications upon the conversion of a Private Company or an unlisted company into LLP were not clear by The Finance Act, 2009 and leaves doubts;

  • The levy of Capital Gain Tax on Transfer of assets to LLP on conversion.
  • Availability of carry forward of losses and of unabsorbed depreciation to the successor LLP.
  • Availability of MAT credit to the successor LLP.

Lack of clarity on above matters was a roadblock to conversion of company into LLPL. But The Finance Bill, 2010 Finance ministry addressed the above issues and opened the doors of conversion of Company to LLP. These amendments took effect from assessment year 2011-2012.

Is there any liability on account of capital gain tax on transfer of assets and liability in a company on conversion into llp?

The finance Act, 2010 has inserted a new Clause (xiiib) in section-47 and a new sub-section (4) in section 47A of the Act with effect from assessment year-2011-12.

If the following conditions are satisfied then the transfer of capital asset or intangible asset to LLP or any transfer of share or shares held in company by a share holder on conversion of Company into LLP shall not be regarded as transfer:

S. No. Condition Particulars
         i.              Turnover Limit The Total sales, turnover or gross receipts in business of the company do not exceed Sixty Lacs (60 Lacs) Rupees in any of the three preceding previous years
        ii.              All the shareholders of company became partner of the LLP All the shareholders of the company become partners of the LLP in the same proportion as their shareholding in the company.
      iii.              Capital Contribution and Profit Sharing Ration on Conversion. The Capital Contribution and Profit Sharing ration of the shareholders of company should be in the same proportion as their shareholding in the company as on the date of Conversion.
      iv.              No other consideration to partners. No consideration other than share in profit and capital contribution in the LLP arises to partners.
       v.              Profit Sharing Ration after conversion The erstwhile shareholders of the company continue to be entitled to receive at least 50 per cent in aggregate of the profits of the LLP for a period of 5 years from the date of conversion
      vi.              Assets and Liabilities All assets and liabilities of the company become the assets and liabilities of the llp.
    vii.              Accumulated Profit (Reserve) No amount is paid, either directly or indirectly, to any partner out of the accumulated profit of the company for a period of 3 years from the date of conversion
  • If all the above conditions (i) to (vi) are complied with, the conversion shall not attract capital gains tax either for the company or the Successor LLP or for the shareholders of the Company, who became partner in the successor LLP and get share of profits and capital in the LLP in lieu of their shares in the company.
  • If any of the above conditions (i) to (vi) is not complied with, then as per provisions of Section 47 A (4) such transfer of Capital Assets & Intangible assets deemed to be liable to Capital gains of the successor LLP or the Shareholders of the predecessor company in the previous year in which such non-compliance took place.

BREACH OF CONDITIONS OF SECTION 47(xiiib)

Example:

If the profit sharing ratio of the partners is changed within 5 years, bringing their ratio less than 50% in aggregate of the profits of the LLP of the accumulated profits (reserves) paid directly or indirectly to any partner within a period of 3 years from the date of conversion.

Subsequent breach of conditions would render the LLP ineligible for the benefit and the benefits would be withdrawn.

Section of Breach Section of Benefit Consequences
Section- 47A(4) Capital Gain u/s 47(xiiib) Profits arising from the transfer of assets not earlier charged to tax would be deemed to be the profits in the hands of succeeding LLP in the year of breach.
Section- 47A(4) Capital Gain u/s 47(xiiib) Profits arising from the transfer of shares not earlier charged to tax would be deemed to be the profits in the hands of the shareholder of the predecessor company in the year of breach.
Section- 72A(6A) Accumulated loss and unabsorbed depreciation u/s 72A(6A0 The benefit of set-off availed by the LLP would be deemed to be the profits in the hands of the LLP in the year of breach.

Are unabsorbed depreciation and accumulated loss of company can be carries forward and set off by successor LLP?

First let’s discuss the terms:

  • Unabsorbed Depreciation: means so much of the allowance for depreciation of the predecessor private company or unlisted public company before conversion into limited liability partnership, which remains to be allowed and which would have been allowed to the predecessor company, under the provisions of this Act, if the conversion has not take place.

Section 32(2) of the Income Tax Act, provides for carry forward of unabsorbed depreciation. Unabsorbed depreciation is that part of current year depreciation which could not be allowed due to the absence or inadequacy of income. Such depreciation can be carried forward and treated as part of depreciation above under section- 47(xiiib).

  • Accumulated Loss: means so much of the loss of private company or unlisted Public company before conversion in to LLP, under the head “Profit and gains of business or profession” which predecessor company, would have been entitled to carry forward and set off under the provisions of section-72 if the reorganization of business or conversion or amalgamation or demerger had not taken place.

Under Section 72 of the Income Tax Act, the assess has the right to carry forward the loss in cases where such loss cannot be set-off due to the absence of inadequacy of income. The loss so carried forward can be adjusted against the profits of subsequent years.

The Finance Act-2010 has amended Section-72A of the Act by insert of new sub-section (6A). The new sub-section (6A) provides that the accumulated business losses and unabsorbed depreciation of the predecessor company shall be allowed to be carried forward and set-off by the successor LLP if all the conditions {(i) to (vi) above} in (clause xiiib of section 47 are satisfied).

Thus Unabsord Depreciation and Accumulated Losses of company can be carried forward and set off by successor LLP.

Is MAT (Minimum Alternate Tax) benefit is available to successor LLP?

The Finance Act, 2010 has inserted a new sub- section (7) in section 115JAA to provide that MAT credit of the predecessor company shall not be available to the successor LLP. Thus, it may make sense for the company to first avail the MAT credit before converting to LLP.

LLP don’t have concept of MAT. LLP have concept of AMT (Alternate Minimum Tax). Therefore, the succeeding LLP will not be allowed the credit of MAT paid by the preceding company.

Cost of Conversion of Company into LLP:

Cost on conversion of company into LLP which will be incurred by company will be as under:

  • Unabsorbed Depreciation and Accumulated Loss not carried over {if, all the conditions {(i) to (vi) above} in clause xiiib of section 47 are not satisfied.}
  • Capital Gain on transfer of capital asset or intangible asset to LLP or any transfer of share or shares held in the company by a shareholder on conversion of a private company or unlisted company into an LLP. {If, all the conditions {(i) to (vi) above} in clause xiiib of section 47 are not satisfied.}
  • Loss of Credit of MAT. {LLP don’t have concept of MAT. LLP have concept of AMT (Alternate Minimum Tax). Therefore, the succeeding LLP will not be allowed the credit of MAT paid by the preceding company.}
  • Stamp Duty on Transfer of Immovable Assets, If any.
  • Cost on transfer of Brand Name, Patent and Trade Mark on conversion, if any.
  • Cost of forming of LLP for the purpose of conversion.
CHECKS FOR CONVERSION OF COMPANY INTO LLP
The partners of the limited liability partnership to which it converts comprise all the shareholders of the company and no one else. 
Ø  Also there will be NO SECURITY INTEREST subsisting or in force at the time of application in the assets of the Company. (As per Third Schedule).
Every Designated Partner is required to obtain a DIN from the Central Government.
All the E-FORMS which are required for the purpose of incorporating the LLP are filed electronically through the medium of Internet; it is not possible to sign them manually. Therefore, for the purpose of signing these forms, the Designated Partner of the proposed LLP needs to obtain a Digital Signature Certificate (DSC) from government recognized DSA’S.
Whether up to date Income-tax return is filed under the Income-tax Act, 1961.
Whether any prosecution initiated against or show cause notice received by the company for alleged offences under the Companies Act, 1956. (As per Third Schedule.){Any conviction, ruling, order or judgment of any court, tribunal or other authority in favour of or against the company may be enforced by or against the Limited Liability Partnership.}
Whether any proceeding by or against the company is pending in any Court or Tribunal or any other Authority.
Whether any conviction, ruling, order, judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting.
Whether any clearance, approval or permission for conversion of the company into limited liability partnership is required from anybody/ authority.
Whether company have Creditors if, yes then NOC from Unsecured creditors.

PROCESS OF CONVERSION OF COMPANY INTO LLP

A. OBTAIN DIN:

Earlier there was Concept of DPIN, which has been abolished therefore. Now obtain DIN for those designated partners who don’t posses DIN already.

B. BOARD MEETING:

  • Call meeting of board of Director.
  • Pass Resolution for Conversion of Company into LLP.
  • Pass Resolution to authorize any director to Apply for Name of LLP.

APPLICATION FOR NAME AVAILABILITY:

File e-form LLP-1 with ROC.

Attachments: Board Resolution Board resolution passed by the Company approving the conversion into LLP shall be attached with the aforesaid form

C. Obtain name Approval Certificate from ROC.

D. DRAFTING OF LIMITED LIABILITY PARTNERSHIP AGREEMENT:

Contents of Agreement are:

  • Name of LLP
  • Name of Partners & Designated Partners
  • Form of contribution
  • Profit Sharing ratio
  • Rights & Duties of Partners
  • Proposed Business
  • Rules for governing the LLP

It is not necessary to have the LLP Agreement signed at the time of incorporation, as the details of the same needs to field in e-form 3 within 30 days of incorporation but in order to avoid any dispute between the partners as to the terms & conditions of the agreement after the conversion into LLP.

E. FILLING OF INCORPORATION DOCUMENTS:File E-Form- 2 with ROC along with following ATTACHMENTS:

  • Proof of Address of Registered office of LLP.
  • Subscription sheet signed by the promoters.
  • (Notice of Consent & Appointment of Designated Partners with their personal details)
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner

F. FILLING OF APPLICATION FOR CONVERSION:

File E-FORM- 18 with ROC along with following ATTACHMENTS:

  • Statement of shareholders.
  • Incorporation Documents & Subscribers Statements in Form 2 filed electronically.
  • Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.
  • List of all the Secured creditors along with their consent to the conversion.
  • Approval of the governing council (In case of professional private limited companies)
  • NOC from Income Tax authorities and Copy of acknowledgement of latest income tax return.
  • Approval from any other body/authority as may be required.
  • Particulars of pending proceedings from any court/Tribunal etc.

G. After all formalities and filings been complied with by the applicants and approved by the Ministry, REGISTRAR OF LLP TO ISSUE A CERTIFICATE OF REGISTRATION in form no. 19 as to conversion of the LLP. The Certificate of Registration issued shall be the conclusive evidence of conversion of the LLP.

H. FILLING OF E-FORM-3:

This form provides information in respect to the LLP Agreement entered into between the partners.

ATTACHMENT: LLP Agreement

I. CERTIFICATE OF INCORPORATION AS LLP FORM ROC.

J. FILLING OF E-FORM-14: (INTIMATION TO ROC)

After Receiving Incorporation Certificate Limited liability partnership to file within 15 (fifteen) days of the date of registration, information to the concerned Registrar of Companies with which it was registered under the provisions of the Companies Act, 2013 (1 of 2013) about the conversion and of the particulars of the limited liability partnership in within 15 days of conversion into LLP.

ATTACHMENTS OF E-FORM 14

  • Copy of Certificate of Incorporation of LLP formed.
  • Copy of incorporation document submitted in Form 2

Above we talked about procedure for conversion of Private Company into LLP according to Companies Act and LLP Act.

Event Based Compliance by LLP:

Compliance Section e-form Time Limit
Filing of Consent of Designated Partners 7(3) Form 4 Within 30 days of incorporation or subsequent appointments
Filing of Change in Partners 25(2) Form 3 and   Form 4 Within 30 days of Change
LLP Agreement & Changes therein 23(2) Form 3 Within 30 days of incorporation or Changes in LLP Agreement
Shifting of Registered Office 13(3) Form 15 Within 30 days of Compliance
Change of Name 19 Form 5 Within 30 days of Compliance.

Regular Compliance by LLP:

Compliance e-form Time Limit
Filing of Statements of Accounts & Solvency Form-8 Within 30 days from the end of 6 months from the closure of Financial Year
Filing of Annual Return Form-11 Within 60 Days of closure of Financial Year

TABLE OF STEPS OF CONVERSION:

S. NO. PARTICULAR REQUIREMENT
A. Call BM- to change name – ending with word LLP
B. File Form for Name approval with work LLP E-form LLP-1
C. ROC issue name approval certificate
D. Incorporation documents with registrar File e-form -2
E. Application of Conversion e-form – 18
F. LLP Agreement- within 30 days of approval of above forms e-form- 3 
G. If incorporation certificate is issued by department; then
H. Intimation of Conversion to Registrar e-form-14 

RELEVANT SECTIONS OF LLP ACT-2008

Conversion of Company into LLP Govern by Following Sections of LLP Act-2008:

Section-56: A private company may convert into a Limited Liability partnership is accordance with the provisions of this Chapter and the Third Schedule.

Section-57: An unlisted Public Company may convert into a Limited Liability Partnership in accordance with the provisions of this Chapter and the Fourth Schedule.

THE THIRD SCHEDULE

(See section 56)

CONVERSION FROM PRIVATE COMPANY INTO LIMITED LIABILITY PARTNERSHIP:

1. Interpretation:-

In this Schedule, unless the context otherwise requires, —

a. “company” means a private company as defined in clause (iii) of sub-section (1) of section 3 of the Companies Act, 1956(1 of 1956);

b.    “convert”, in relation to a private company converting into a limited liability partnership, means a:

  • Transfer of the property, assets, interests, rights, privileges, liabilities, obligations and
  • the undertaking of the private company to the limited liability partnership in accordance with this Schedule.

2. Eligibility for conversion of private companies into limited liability partnership:-

1. A company may convert into a limited liability partnership by complying with the requirements as to the conversion set out in this Schedule.

2. A company may applyto convert into a limited liability partnership in accordance with this Schedule if and only if–

a. There is no security interest in its assets subsisting or in force at the time of application; and

b. The partners of the limited liability partnership to which it converts comprise all the shareholders of the company and no one else.

3. Upon such conversion, the company, its shareholders, the limited liability partnership into which the company has converted and the partners of that limited liability partnership shall be bound by the provisions of this Schedule that are applicable to them.

3. Statements to be filed:-

A company may apply to convert into a limited liability partnership by filing with the

a. Registrar–

A statement by all its shareholders in such form and manner to be accompanied by such fees as the Central Government may prescribe, containing the following particulars, namely:–

i. The name and registration number of the company;

ii. The date on which the company was incorporated; and

b. Incorporation document and statement referred to in section 11.

4. Registration of conversion:-

On receiving the documents referred to in paragraph 3, the Registrar shall, subject to the provisions of this Act and the rules made there under, register the documents and issue a certificate of registration in such form as the Registrar may determine stating that the limited liability partnership is, on and from the date specified in the certificate, registered under this Act:

Provided that the limited liability partnership shall, within fifteen days of the date of registration, inform the concerned Registrar of Companies with which it was registered under the provisions of the Companies Act, 1956(1 of 1956) about the conversion and of the particulars of the limited liability partnership in such form and manner as the Central Government may prescribe.

5. Registrar may refuse to register

1. Nothing in this Schedule shall be construed as to require the Registrar to register any limited liability partnership if he is not satisfied with the particulars or other information furnished under the provisions of this Act:

Provided that an appeal may be made before the Tribunal in case of refusal of registration by the Registrar.

[Provided further that until the Tribunal is constituted under the Companies Act, 1956, the appeal under this sub-paragraph may be made before the Company Law Board]

2. The Registrar may, in any particular case, require the documents referred to in paragraph 3 to be verified in such manner, as he considers fit.

6. Effect of registration

On and from the date of registration specified in the certificate of registration issued under paragraph 4–

a. there shall be a limited liability partnership by the name specified in the certificate of registration registered under this Act;

b. all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed; and

c. the company shall be deemed to be dissolved and removed from the records of the Registrar of Companies.

7. Registration in relation to property

If any property to which clause (b) of paragraph 6 applies is registered with any authority, the limited liability partnership shall, as soon as practicable, after the date of registration, take all necessary steps as required by the relevant authority to notify the authority of the conversion and of the particulars of the limited liability partnership in such form and manner as the authority may determine.

8. Pending proceedings

All proceedings by or against the company which are pending before any Court, Tribunal or other authority on the date of registration may be continued, completed and enforced by or against the limited liability partnership.

9. Continuance of conviction , ruling, order or judgment

Any conviction, ruling, order or judgment of any Court, Tribunal or other authority in favour of or against the company may be enforced by or against the limited liability partnership.

10. Existing agreements

Every agreement to which the company was a party immediately before the date of registration, whether or not of such nature that the rights and liabilities there under could be assigned, shall have effect as from that date as if–

a. the limited liability partnership were a party to such an agreement instead of       the company; and

b. for any reference to the company, there were substituted in respect of anything to be done on or after the date of registration a reference to the limited liability partnership.

11. Exiting contracts, etc.

All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the date of registration relating to the company or to which the company is a party shall continue in force on and after that date as if they relate to the limited liability partnership and shall be enforceable by or against the limited liability partnership as if the limited liability partnership were named therein or were a party thereto instead of the company.

12. Continuance of employment

Every contract of employment to which paragraph 10 or paragraph 11 applies shall continue in force on or after the date of registration as if the limited liability partnership were the employer there under instead of the company.

13. Existing appointment, authority or power

a. Every appointment of the company in any role or capacity which is in force immediately before the date of registration shall take effect and operate from that date as if the limited liability partnership were appointed.

b. Any authority or power conferred on the company which is in force immediately before the date of registration shall take effect and operate from that date as if it were conferred on the limited liability partnership.

14. Application of paragraphs 6 to 13:-

The provisions of paragraphs 6 to 13 (both inclusive) shall apply to any approval, permit or license issued to the company under any other Act which is in force immediately before the date of registration of the limited liability partnership, subject to the provisions of such other Act under which such approval, permit or license has been issued.

15. Notice of conversion in correspondence:-

1. The limited liability partnership shall ensure that for a period of twelve months commencing not later than fourteen days after the date of registration, every official correspondence of the limited liability partnership bears the following, namely:–

a. a statement that it was, as from the date of registration, converted from a company into a limited liability partnership; and

b. the name and registration number of the company from which it was converted.

2. Any limited liability partnership which contravenes the provisions of sub-paragraph (1) shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees and with a further fine which shall not be less than fifty rupees but which may extend to five hundred rupees for every day after the first day after which the default continues.

Conclusion:

As per above discussions the LLP is more advantageous form of organization over a company from Compliances, tax and operational flexibility stand point. Therefore LLP may be more suitable for small entrepreneur and professionals particularly. The conversion from the existing corporate structure can be made to a LLP while retaining the advantages of Limited Liability and less compliances.

 (Author is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com for any Suggestions, Comments and Queries)

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

Read Other Articles Written by CS Divesh Goyal

(Article was First Published on 18.08.2014 and was republished on 04.06.2015)

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48 responses to “Process-Conversion of Private Ltd. Company Into LLP”

  1. Manohar says:

    I want to convert our PVt LTD Co. RSN Engineers PVT Ltd to LLP

  2. Neha Jain says:

    If a company converted into LLP but left with filing of DIR-11 then how it can be filed after conversion.??

  3. Thorat Madhukar Gangaram says:

    My quation is after conversion in to pvt to LLP . We are open the new a/c in bank or only change the name ?

  4. damodar says:

    J. FILLING OF E-FORM-14: (INTIMATION TO ROC)
    Form for intimating to Registrar of Firms about conversion of the firm into limited liability partnership (LLP).
    To be filled in physical form and submitted to Registrar of Firms.

    not to ROC

  5. Aakash Aggarwal says:

    After conversion of Pvt Co. to LLP can the partner reduce there capital contribution

  6. Ashish Kumar Mittal says:

    If total of balance sheet (either side) of my private ltd co.is more than Rs.5 crs even then can i convert to LLP.

  7. AKANKSHA says:

    In case of conversion of pvt co to llp.if there is any minor shareholder what will be his position in llp.If any designated partner is not making monetary contribution. What will be field in form 2 in proposed value of monetary contribution.

  8. Deepak Arora says:

    I would like to ask for the filing of form 8 for the LLP being converted from Pvt Ltd Company.

    Whether the revenue in form 8 to be reported for the whole year or from the date from which it is converted from Company to LLP.

    And if from the date of conversion of LLP, then how balance sheet will be prepared. Will this not be the case of incomplete disclosure.

    Pls guide

  9. ANUJ SARAF says:

    Can you pl reply in conversion precess if one share holder holding 1 Share does not agree to sign papers then what is the way out.

  10. Sejal Sanghani says:

    This article is really very helpful. Please let me know one more thing ” If any company transfers any property to LLP then whether there is any liability to pay stamp duty incurs?’

  11. Atul Jaiswal says:

    While Conversion of Private Company into LLP Statement of Assets and Liabilities Statement duly annexed but such statement is how much older?

  12. dsa says:

    IF PRIVATE COMPANY REGISTERED JUST 3 MONTH BACK CAN CAN BE CONVERTED INTO LLP

  13. dhananjaya says:

    sir plz guide me how to maintain the branch accounts with H.O. accounts

  14. VBR says:

    Dear All, Pvt Ltd Converted in to LLP on 30.07.2015 and completed on 10.08.2015, MCA is allowed to file AOC-4 and also LLP NOT allowed to file any returns states that not established before 31.03.2015

  15. Kamal Somani says:

    Dear Sir,

    You have written a very comprehensive article on conversion. It is good article and beneficial to people those who are having small company, they can get converted in LLP.
    We want to get converted our Pvt Ltd in to LLP in Maharashtra state . Our Company is holding agriculture land , how to get transferred that land in to LLP? Will there be stamp duty payable for transferring that land on the name of LLP? Under which section of Stamp duty act we can claim exemption?
    Thanks & regards
    Kamal Somani

  16. Pawan Agarwal says:

    A Pvt. Ltd., Company having turoover of more than 60 lakhs can be converted into a LLP without paying Capital Gains Tax ?????

  17. Naina Mistry says:

    Dear Sir..

    This page was helpful.. But I have question as under :

    We have converted our Pvt. Ltd. Company to LLP. As per MCA website status shows as company dissolved and converted to LLP as on 19/Aug/2015. But we are yet to do formalities for LLP like opening bank account, obtaining PAN, TAN, Service Tax No. etc. Under the circumstances for how long we can continue operating under PVT. LTD. company. Is there any time line to cut off transactions in Company from date of conversion ?? Is there any guideline till what period after conversion we can continue business transaction in the company which is technically already shows as dissolved ??

  18. Jayshree Rathi says:

    Sir,

    What will be the format and content of the affidavit to be filed during conversion stating that the assets and liabilities of the company will be transferred to the LLP within 30 days of conversion.

  19. Mahak Bajaj says:

    Dear Sir,

    If a company is engaged in the business of trading of shares/stocks?? how will the share held by that company in its stock will transferred??

  20. smita s purandare says:

    I want to know that what is the accounting entries in LLP after conversion from Private limited company in respect of share capital and reserve & surplus containing only profit and loss balance ?

  21. Shruti Baid says:

    Sir,

    I am not getting e-form 14 which is required to file for intimation of conversion…please resolve

  22. sonali says:

    Sir,
    1. How to calculate Stamp duty on conversion from private limited to LLP?
    2.Transfer of shares from A TO B Both are NRI- Procedure, Valuation & Cost?
    3. What Is require to be done for fixed assets, Financial Assets & other Liabilities?

    Thanks

  23. R Saraf says:

    Sir,

    You have written a very comprehensive article on conversion.

    Incase where the private ltd company has changed its name and then converted into LLP, what will be the procedures to be followed regarding the following:

    1. If property is held in earlier name of Pvt ltd co, does one now require to apply to City Survey dept & Municipal Corporation to make correction in the name as per ROC’s certificate in the name of the LLP OR leave everything as it is in old name?

    2. As per procedure of change in name of Pvt Ltd co, it is required to mention the earstwhile name below the current name for a certain period of time. In the present case it has been further converted to LLP, and as per requirements, the LLP is required to mention that it was converted on — date and the earlier name & regn No was —-. In the present case do we also require to mention that the original name of the co was XYZ.

    I would be thankful if you could please clarify.

  24. p k jain says:

    we have converted our company in to LLP on 21st May 2014, now we want to know how and when the company should file its balance sheet to ROC and IT return

    P K Jain

  25. Dinesh Pal says:

    What are the steps to be taken with ref to Income Tax, Vat & Service Tax once LLP has been formed.

  26. Kusum says:

    I think you can convert your company into LLP having turnover of RS. 5 crore but consider the provision of Audit requirement in case of contributions exceeding Rs. 25 lacs or turnover exceeding Rs. 40 lacs.

  27. Nitin Ganatra says:

    I want to convert my Pvt Ltd to LLP in which section exemption of stamp duty for immovable Property

  28. Monika jain says:

    Since Stamp Duty is the subject reserved for the States, the LLP Act does not contain any provision for treatment of stamp duty issues. The stamp duty payable will depend upon the relevant Stamp Act prescribed by the State Government/Union Territory.

  29. Vijay says:

    If turnover of private investment company is 10 lacs and capital of Rs 65 lacs can it converted into LLP?

  30. Geetanjali Malhotra says:

    Dear Sir,

    I want to know that is there any evidence regarding your 4rth Point:

    4. NO STAMP DUTY: All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.

    Please provide the reference of Section or Law.

    Thanks & Regards
    Geetanjali Malhotra

  31. CS Richa Sharma says:

    Dear members i was just going through this post many of the query is not been replied if your query is still unresolved mail it on mailme.csricha@gmail.com

  32. Lakshmi kant Jha says:

    I want to convert my Pvt Ltd to LLP. How will this effect on VAT on modvable excise material Stocks. If new VAT & Excise registration is to be obtained in LLP than VAT will be applicable. Please clarify. – See more at:

  33. UJWAL JAIN says:

    Dear Sir,

    Recently i went to Income Tax Department for NOC for conversion of Pvt Ltd Co to LLP. The Assessing Officer is of the view that he is governed by the income tax act and not by llp act and has refused to grant the NOC certificate. Please help in this matter

  34. chhavi says:

    Meaning of No Security Interest in its asset??

  35. chhavi says:

    what do u mean by No security Interest in its assets???Plz clarify this term

  36. cs nancy jain says:

    dear all,

    where it is written that statement of assets and liabilities should not be older than 1 month

  37. prince says:

    Company Having charge with bank can be converted into LLP?

  38. prince says:

    Company having charges even that the company can be converted into LLP?

  39. Deepika Singh says:

    Respected all,

    i have filled form 2 & 18 for LLP conversion before conversion i have filled all returns (23AC & 23ACA, 20B, MGT-14, ADT-1)but at the time of conversion the following query has been raised “alert shows that The company is defaulter in filing of its due balance sheets and annual returns. certified copy of B/R for conversion required. the statement of assets & liabilities (not older than 1 month) duly certified by C.A should be attached” further clarify that what does statement of assets & liabilities means as per ROC record because i have already attached Balance sheet and Profit & Loss Account with the form.

  40. Ritesh says:

    Sir, if pvt ltd co is partner in various firm than would it be automatically transfered in llp.

  41. Daljit Singh Kochar says:

    I want to convert my Pvt Ltd to LLP. How will this effect on VAT on movable assets like Stocks and Machinery. If new VAT registration is to be obtained in LLP than VAT will be applicable. Please clarify.

  42. Pradeep says:

    Statement of assets and liability should be of which date ????????

  43. Pradeep says:

    Statement of assets and liability duly certified by CA should be of which date ???????

  44. Kamal Garg says:

    How to convert a 100 % subsidiary to LLP? Who can be the partners in proposed LLP since 100 % of the shareholding is held by the holding company though 100 shares are held by a as nominee. Does the nominee becomes partner?

  45. CHARUL GUPTA says:

    Dear Sir,

    Pl. let me know whether we have received the Certificate of Incorporation for conversion of the LLP from PVT LTD. company so what we have to be file the Annual Return for 2014 in ROC.

  46. CHARUL GUPTA says:

    Dear Sir,

    Pl. provide me LLP agreement for conversion of Private Limited Company into LLP.

    Thanx and Regards

    Charul Gupta

  47. CA Mahendra Soni says:

    How to transfer immovable asset in Name of LLP from name of company without stamp duty in the state Govt. records.

  48. Sandeep Gala says:

    1.If turnover of my private ltd co.is Rs.5 crs even then can i convert to LLP ?
    2.What do we mean by NO SECURITY INTEREST?

    Thanks

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