Article explains Meaning of Useful terms Related to Conversion of Unlisted Public Company Into LLP, Regulatory Framework for Conversion of Unlisted Public Company into LLP, Eligibility for Conversion of Unlisted Public Company Into LLP, Advantages of Conversion of Unlisted Public Company into LLP, Pre-Conditions for Conversion of Unlisted Public Company into LLP, Intimation about Conversion of Unlisted Public Company Into LLP, Notice of Conversion of Unlisted Public Company Into LLP in correspondence, Effects of Registration/Conversion of Unlisted Public Company Into LLP, Procedure for Conversion of Unlisted Public Company Into LLP and FAQs on Conversion of Unlisted Public Company Into LLP.

Terms Related to Conversion of Unlisted Public Company Into LLP

i. Meaning of Company:

“Company” means an unlisted public company.

ii. Meaning of Conversion:

“Convert”, in relation to a company converting into LLP, means a transfer of the:

    • Property;
    • Assets;
    • Interests;
    • Rights;
    • Privileges;
    • Liabilities;
    • Obligations and
    • The undertaking of the company to the LLP.

iii. Meaning of Listed Company:

“Listed company” means a listed company as defined in the SEBI (ICDR) Regulations, 2009.

iv. Meaning of Unlisted Public Company:

“Unlisted Public Company” means a company which is not a listed company.

Regulatory Framework for Conversion of Unlisted Public Company into LLP:

1. Section 57 of LLP Act, 2008: An unlisted public company may be converted into LLP in accordance with the provisions of Chapter X and Fourth Schedule of LLP Act, 2008.

2. Rule 40 of LLP Rules, 2009:

    • An application shall be made in Form 18 for conversion of Unlisted Public Company into LLP;
    • The Registrar   shall, on   conversion   of   any   unlisted   public company  into  LLP shall  issue  a certificate of registration.
    • The LLP shall   inform   the   concerned   Registrar   of Companies about  conversion  in Form 14.

3. Fourth Schedule of LLP Act, 2008.

Eligibility for Conversion of Unlisted Public Company Into LLP

An Unlisted Public Company may apply to convert into LLP if and only if-

  • There is no security interest in its assets subsisting or in force at the time of application; and
  • All the shareholders of the company shall become partners of LLP.

Advantages of Conversion of Unlisted Public Company into LLP:

1. Lower Legal Compliance;

2. Audit is not mandatory for LLPs;

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.

Pre-Conditions for Conversion of Unlisted Public Company into LLP:

1. There is no Charge open at the time of filing application for conversion;

2. 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.

Intimation about Conversion of Unlisted Public Company Into LLP:

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

Notice of Conversion of Unlisted Public Company Into LLP 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 continues further fine:

Minimum Rs 50/- Per Day

Maximum Rs 500/- Per Day.

Effects of Registration/Conversion of Unlisted Public Company Into LLP :

1. There shall be an LLP by the name specified in the certificate of registration registered under this Act;

2. 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.

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

4. If any property which 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 LLP in such form and manner as the authority may determine.

5. All proceedings by or against the company which are pending in any Court or Tribunal or before an authority on the date of registration may be continued, completed and enforced by or against the LLP.

6. 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.

7. Every agreement to which the company was a party immediately before the date of registration, whether or not of such nature that rights and liabilities thereunder 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.

8. 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 die LLP were named therein or were a party thereto instead of the company.

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

Procedure for Conversion of Unlisted Public 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 the 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 one director authorized for the purpose.

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 License, 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 premises where registered office of the LLP is proposed to be situated;
    • Certified Copy of MOA/AOA;

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. Certified True Copy of Board Resolution;

9. Latest Audited Financial Statements of the company;

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

11. Declaration from the directors of the company that all the requirements regarding conversion of company into LLP have been complied with.

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

The Registrar, on satisfying that company has complied with the provision of the Fourth Schedule, the LLP Act, The Companies Act 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.

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 4 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 with Registrar 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.

FAQs on Conversion of Unlisted Public Company Into LLP

Q.1 What is the eligibility criteria for conversion of Unlisted Public Company into LLP?

Answer:  A company may apply to convert into LLP only if-

  • All the assets of the company should be 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 Unlisted Public Company into LLP?

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

  • Section 57 of the LLP Act, 2008;
  • Rule 40 of LLP Rules, 2009 and
  • Schedule 4 of LLP Act, 2008.

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

Answer: 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?

Answer: 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?

Answer: 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?

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

(a) a statement that it was converted from a Unlisted Public 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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