How to convert a limited-liability partnership (LLP) into a Pvt. Ltd. company Registration?
Many businesses started in India as Limited Liability Partnerships (LLPs) may now wish to convert to a private limited company to effect greater growth in business or equity capital.
An LLP can be converted to a private Ltd. As per the provisions contained in Section 366 of the Companies Act, 2013 and the Companies (Authorized to Register) Rules, 2014. However, converting LLP into a private limited company requires different requirements, for example, LLP must have at least 7 partners, approval from all partners is required, advertising to be done in the newspaper at local and national, a No Objection Certificate (NOC) from the ROC is required where such an LLP is registered and then all incorporation procedures have to be completed which include:
- Name approval
Name approval has to be obtained from ROC (Registrar of Companies) by submitting the application in e-format. To apply for this, you need to choose various items which are mentioned as INC-1. The name will be valid for 60 days.
- Securing DSC and DIN:
If all the 7 members, who are future directors of the company after conversion, do not have a Digital Signature Certificate (DSC) and Director Identification Number (DIN) for all future directors of the company. To obtain a DIN, an application form must be filed on the MCA portal. The DIN application is processed and approved by the Central Government through the Office of the Regional Director, Ministry of Corporate Affairs. The form should be accompanied by self-attested address proof and identity proof along with the recent passport size colour photograph of the applicant. All required documents must be verified by a practicing cost accountant or a practicing chartered accountant or a practicing company secretary.
Filing Form No. URC – 1
After approval of the name from the Registrar of Companies, the applicant has to prepare and file Form No URC-1 in addition to the following documents.
- List of members with various details. Names, addresses, shares, etc. held by them.
- List of first directors of Private company registration with various details. Name, address, DIN, passport number, etc. with an expiration date.
- An affidavit from every person first proposed as directors, that he is not barred to be a director under section 164 and all necessary documents filed with the registrar for the registration of the firm should contain information which is complete and correct and To be the best is the right of his faith and knowledge.
- A list including the names and addresses of the partners of the LLP and a copy of the LLP agreement and a certificate of LLP company registration in India is duly verified by the two nominated partners of the LLP should be attached.
- A statement indicating the following specifications
- The firm’s nominal share capital and the number of shares in which it is set aside
- The number of shares taken and the amount paid for each share
- Words other than the name of the firm Limited or Private Limited is required.
- Written consent or no objection certificate from all creditors.
- Copy of newspaper advertisement, statement of accounts of the company not earlier than 6 days from the date of application and should be duly certified by the auditor.
Memorandum of Association and Articles of Association
Memorandum of Association (MOA) and Articles of Association (AOA) are to be formed and then approval of name and Form no. URC-1 – From Registrar. The conversion process offers some tax benefits, however, to meet any additional requirements, for example, it is necessary to maintain the same shareholding by partners, as in the previous LLP, when the conversion occurs, prior to conversion. For five years, partners of such LLPs, who are now shareholders in the newly formed company, cannot hold a stake of less than 50 percent in total. Another option is available for LLP which is to set up a separate private limited company and then with the help of a written agreement the entire business is transferred to the private company, in such case the above-mentioned restrictions like minimum 7 There is no need to cater to partners, newspaper publications, etc. However, in this case, capital gains tax is levied. In addition, the stamp duty implication also applies to such transfers.
If the LLP will be transferred to private limited, will the annual compliance be filled with LLP or private limited?
The answer is so simple that if LLP is transferred to a private limited then annual compliance will be recorded in the name of the transferred company from the date of transfer. LLP is also required to file LLP annual compliance till the date of transfer of the company.