Article explains Regulatory Framework for Conversion of Private Limited Company into LLP, Eligibility criteria under LLP Act for conversion of Private Company into LLP, Pre-Conditions for Conversion of Private Limited Company into LLP, Companies which cannot be converted into LLP, Intimation about Conversion, Notice of conversion in correspondence, Effects of Registration, Procedure for Conversion Of Private Limited Company Into LLP and Frequently Asked Questions on Conversion of Private Limited Company Into LLP.

‘Company’ means a private company as defined under Section 2(68) of the Companies Act, 2013.

Meaning of Conversion:

‘Convert’, in relation to a private company converting into a LLP, means a transfer of:

-Property,

-Assets,

-Interests,

-Rights,

-Privileges,

-Liabilities,

-Obligations and

-The undertaking

of the private company to the LLP in accordance with Schedule 3 of LLP Act, 2008.

Regulatory Framework for Conversion of Private Limited Company into LLP:

1. Section 56 of LLP Act, 2008: A private company may be converted into LLP in accordance of Chapter X and Third Schedule of LLP Act, 2008.

2. Rule 39 of LLP Rules, 2009:

  • An application shall be made in form 18 for conversion of Private Company into LLP;
  • The Registrar shall, on conversion of Private Company into LLP issue a certificate of registration;
  • The LLP so converted shall inform the concerned Registrar of Companies about conversion in Form 14.

3. Third Schedule of LLP Act, 2008.

Why to Convert Private Company into LLP or benefits which enjoyed by LLPs and not by Companies?

1. Lower Legal Compliance as compared to companies;

2. Audit is not mandatory for LLP;

3. No restriction on Related Party Transactions;

4. There is no restriction on distribution of profits and provisions of Dividend Distribution Tax (DDT) are not applicable on LLPs.

5. There is no restriction on receiving of loan from outsiders;

6. The provisions of Minimum Alternate Tax (MAT) not applicable on LLPs.

Eligibility criteria under LLP Act for conversion of Private Company into LLP:

A company may apply to convert into LLP in accordance with Schedule III if and only if-

  • There is no security interest in its assets subsisting or in force at the time of application; and
  • the partners of the LLP to which it converts comprise all the shareholders of the company and no one else.

Pre-Conditions for Conversion of Private Limited Company into LLP:

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

2. The all the shareholders of the company shall be partners of LLP;

3. Consent from all shareholders of the company must be given for conversion;

4. Consent from all creditors of the company must be given for conversion;

5. All due returns of ROC, Income Tax and other statutory authorities must have been be filed;

6. NOC from regulatory authority, if necessary have been obtained for conversion;

7. The company shall furnish a Statement of Assets and Liabilities certified by Auditor not older than 30 days on the date of filing conversion application.

Companies which cannot be converted into LLP?

1. Companies engaged in the businesses of banking, finance and insurance;

2. Companies having secured loan/ security interest on assets;

3. Companies having FDI where performance linked conditions are applicable;

4. Companies having External Commercial Borrowings;

5. Companies having FDI under approval route.

Intimation about Conversion:

The LLP shall, within 15 days of the date of conversion, inform the concerned Registrar of Companies about the conversion.

Notice of conversion in correspondence:

1. Every official correspondence of the LLP for the period of 12 months bears the following:

  • a statement that it was converted from a company into a LLP w.e.f…… (Date of conversion)………. and
  • the name and registration number of the company from which it was converted.

2. Any LLP which contravenes the above provisions shall be punishable with fine:

Minimum: Rs 10,000/-

Maximum: 1,00,000/-

If the default is continued, further fine:

Minimum Rs 50/- Per Day

Maximum Rs 500/- Per Day.

Effects of Registration:

1. All tangible 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 LLP without further assurance, act or deed.

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

3. If any property is registered with any authority, the LLP shall as soon as possible, after the date of conversion, intimate the authority about the conversion.

4. 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 LLP.

5. 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 LLP.

6. 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 the LLP were a party to such an agreement instead of the company.

7. 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 LLP and shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto instead of the company.

8. Every contract of employment shall continue in force on or after the date of registration as if the LLP were the employer there under instead of the company.

9. 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 LLP were appointed.

Procedure for Conversion Of Private Limited Company Into LLP

STEP 1

Issue Notice of Board Meeting at least 7 days before the date of Board Meeting

[Section 173(3)].

STEP 2

Hold Board Meeting and get the following proposal approved by the Board:

  • Pass Board Resolution for conversion of company into LLP;
  • Pass Board Resolution for authorizing any director or Company Secretary for filing of forms etc. for conversion of company into LLP.

STEP 3: Apply for DSC (Digital Signature Certificate):

Getting DSC of any one director for digital authentication of Conversion. Fillip Form and Form 18 shall be digitally signed by any director.

STEP 4: Apply for Name Reservation:

File form RUN LLP for reservation of name of the proposed LLP. Addition of the word LLP or Limited Liability Partnership at the end is allowed in the existing name of the company to be converted.

STEP 5: Filing of Form Fillip:

After approval of name of proposed LLP, file Form Fillip for conversion of company into LLP. Following information shall be given in form Fillip:

1. Name of LLP;

2. Full address of Registered Office;

3. Main Objects of the LLP;

4. Name of the office of Registrar in which the proposed LLP is to be registered/converted;

5. Based on business activities, main division of industrial activity of the LLP as per NIC-2004;

6. Total Number of Designated Partners and/or Partners;

7. Details of designated partners and/or partners such as their Name, Father`s name, Date of Birth, Mobile & Telephone No, E-mail address, present and permanent address, educational qualification, place of birth, duration of stay at present address, PAN card Number, Passport/Aadhar/DL/Passport Number;

8. Monetary Value of contribution (in Rs.) by each Partner/Designated Partner;

9. Interest of Partners/Designated Partners in other Entities;

10. Total monetary value of contribution in the LLP;

11. Statement by a CS/Advocate / CA/ CMA in practice that all the requirements of the LLP Act, 2008 and the rules made there under have been complied with, in respect of incorporation/conversion.

Attachments of Fillip Form:

  • Subscribers Sheet;
  • Consent of designated partners to act as designated partner;
  • Interest of designated partner and/or partners in other entities;
  • ID proof of all designated partners and/or partners (viz. Aadhar Card/Voter ID/Passport/Driving Licenses, any one)
  • Address Proof of all designated partners and/or partners (Viz Bank Statements/Electricity Bill/Telephone Bill/Mobile Bill, any one);
  • Pan Card of all designated partners and/or Partners;
  • Utility Bill of the premises where registered office of the LLP is proposed to be situated;
  • NOC from the owner of the premises where registered office of the LLP is proposed to be situated;
  • Certified Copy of MOA/AOA;
  • Certified True Copy of Board Resolution passed for conversion of Private Company into LLP.

STEP 6: Filing of Form: 18:

Application for conversion shall be filed along with the following attachments:

1. Statement of assets & liabilities of the company duly certified by a Chartered Accountants in Practice;

2. List of Creditors along with their consent for conversion;

3. Consent of all shareholders for conversion;

4. Approval from any other body/authority as may be required;

5. Statement of Partners;

6. Copy of Acknowledge of Latest Income Tax Return;

7. Copy of MOA/AOA;

8. Latest Audited Financial Statements of the company;

9. Certificate from Chartered Accountant that the company is not engaged in NBFC activities and the company if converted into LLP, shall not be engaged in NBFC activities’

10. Declaration from directors of the company that all the requirements related to conversion of private company into LLP have been complied with.

STEP 7: Approval/Sent for Re-submission/Refusal by the Registrar:

The Registrar, on satisfying that a company has complied with the provision of the Third Schedule, the LLP Act, 2008, The Companies Act,2013 and rules made there under, He shall register the documents submitted and issue a Certificate of Incorporation pursuant to conversion of company into LLP.

However if the registrar has a reasonable ground to believe that the documents filed are not proper or he requires some additional documents then he can ask the applicant for providing the same by sending the forms for re-submission.

If the Registrar has a reasonable ground to believe that the application for conversion filed is improper or the company fails to comply with the provisions of the LLP Act, 2008, Companies Act, 2013, the Schedule 3 of LLP Act, 2008 and LLP Rules, 2009 regarding conversion, He can reject the application mentioning reason of rejection.

An appeal may be made before the Tribunal in case of refusal of registration by the Registrar.

STEP 8: Intimation to the Registrar of Companies:

The LLP shall within 15 (Fifteen) days from the date of conversion intimate about such conversion to the Registrar of Companies.

STEP 9: Drafting and Execution of LLP Agreement:

LLP Agreement shall be drafted, the contents of LLP Agreements shall be following:

1. Name of LLP;

2. Full address of Registered office of the LLP;

3. Main Business activities of LLP

4. Profit/Loss Sharing Ratio;

5. Amount and Form of Contribution by each partner;

6. Rights and Duties of partners;

7. Rules Governing LLP;

8. Jurisdiction of court in case of dispute arises;

9. Date and place of execution of agreement.

LLP agreement shall be duly executed/signed by all the designated partners and/or partners of the LLP and witnessed by at least two witnesses;

Stamp Duty shall be paid on the LLP Agreement, such stamp duty may differ state to state.

STEP 10: Filing of form LLP-3 (LLP Agreement):

Form LLP 3 shall be filed within 30 days from the date of conversion of company into LLP. There shall be only one attachment in form LLP-3 viz. LLP Agreement.

STEP 11: Apply for allotment of Pan Card Number of LLP:

Application for allotment of Pan Card number shall be made by LLP.

Frequently Asked Questions on Conversion of Private Limited Company Into LLP

Q. 1 What is the eligibility criteria for conversion of Private Limited Company into LLP?

Ans. A company may apply to convert into LLP only if-

  • All the assets of the company are charge free at the time of filing of application for conversion; and
  • All the shareholders of the company must become partners of LLP.

Q.2 What is the Regulatory Framework for Conversion of Private Company into LLP?

Ans. For conversion of Company into LLP, provisions of following Section, Rule and Schedule shall be complied with:

  • Section 56 of the LLP Act, 2008;
  • Rule 39 of LLP Rules, 2009 and
  • Schedule 3 of LLP Act, 2008.

Q.3 Is the consent of all creditors mandatory for conversion?

Ans. Yes, Consent of all the creditors is mandatory for conversion of Company into LLP.

Q.4 Is the consent of all shareholders of company is mandatory for conversion?

Ans. Yes, Consent for conversion of all shareholders is mandatory.

Q.5 Is it necessary to intimate the Registrar of Companies about the conversion of company into LLP?

Ans.Yes, the LLP shall within 15 (Fifteen) days from the date of conversion intimate about such conversion to the registrar of companies in Form-14.

Q.6 Is the LLP liable to give a statement in all its correspondences about its conversion?

Ans. Every official correspondence of the LLP bears the following for the period of 12 months:

(a) a statement that it was converted from a private company into a LLP w.e.f……… (Date of Conversion); and

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

Author Bio

Qualification: CS
Company: JANGID R & ASSOCIATES
Location: JAIPUR, Rajasthan, India
Member Since: 24 Feb 2021 | Total Posts: 11
CS RADHE SHYAM JANGID is a Practicing Company Secretary and Sole Proprietor of M/s Jangid R & Associates (a Jaipur Rajasthan based firm of Company Secretaries). He is offering his expertise and experience in the field of Corporate Laws, IPR, Taxation, DGFT, Labour Laws, NCLT and Legal Due Dilig View Full Profile

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