Conversion of Private Limited Company into LLP

With the advantages of LLP, corporate are opting to restructure their business by converting them into LLP. Lets recall the advantages of LLP;

  • Easy to Form
  • Unlimited Partners
  • No minimum Contribution i.e. Capital required
  • Limited Liability
  • Perpetual Succession
  • Flexible to Manage
  • Easy Transferable Ownership
  • Separate Property
  • Raising Money is easy
  • Capacity to sue
  • No Mandatory Audit Requirement in certain cases
  • Partners are not agent of other Partners

Existing private company or existing unlisted public company can be easily converted into LLP. The basic requirements to get converted is that the company should be compliant in terms of all the upto date returns should be filed and completed and there should be no pending litigation against the company. Please note that in case of conversion of Private Limited Company into LLP, all the shareholders of the Company shall become the partners in the LLP.

Checks to be performed before even proceeding ahead for conversion;

  • There should be NO SECURITY INTEREST subsisting or in force at the time of application in the assets of the Company.
  • All the Income-tax returns is required to be filed under the Income-tax Act, 1961 for the company getting converted.
  • It is important to check whether any prosecution initiated against or show cause notice received by the company for alleged offences under the Companies Act, 1956 or Companies Act 2013
  • It is important to check whether any proceeding by or against the company is pending in any Court or Tribunal or any other Authority.
  • It is important to check whether any conviction, ruling, order, judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting.
  • It is important to check whether any clearance, approval or permission for conversion of the company into limited liability partnership is required from anybody/ authority. etc

PROCESS OF CONVERSION OF COMPANY INTO LLP

A Private Company may convert into LLP in accordance with the procedure as below.

  1. OBTAIN DIN & DSC for the existing Shareholders

If the Existing Shareholder has already obtained DIN earlier, then, there is no need to apply again. Otherwise, it is required to be obtained first and foremos

  1. BOARD MEETING:

Now, call a Board meetings and pass Resolution for Conversion of Company into LLP. Also company is required to authorize the Authorised Signatory or Director to apply name and file the forms.

  1. APPLICATION FOR NAME AVAILABILITY:

File the name application with CRC (An Initiative by MCA)

  1. Obtain name Approval Certificate from CRC.
  1. FILING OF INCORPORATION DOCUMENTS:

Now, file the necessary documents alongwith the Proof of Address of Registered office of LLP, Subscription sheet signed by the promoters, detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner

  1. FILLING OF APPLICATION FOR CONVERSION:

Now, file the necessary documents alongwith Statement of shareholders and following documents;

  • Incorporation Documents & Subscribers Statements.
  • Statement of Assets and Liabilities of the company duly certified as true and correct by the auditors not older than 30 days from filing the application
  • 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.
  1. DRAFTING OF LIMITED LIABILITY PARTNERSHIP AGREEMENT:

It is essential to draft a LLP agreement having important clauses which are as below;

  • 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
  1. CERTIFICATE OF INCORPORATION AS LLP FORM ROC.

After all formalities and filings been complied with by the applicants. Certificate of conversion is issued.