Conversion of LLP into Company

The Emergence of the Concept of Conversion:

Ministry of Corporate Affairs vides notification passed on 31st May 2016 allowed the LLPs to convert its business structure into Company governed by the provisions of Section 366 under Companies Act, 2013.

Why LLP gets converted into Company?

In the financial year 2014 -15, LLP registration increase by 55%.LLP provides the flexibility of organizing the internal management on the basis of mutually formed agreement like in Partnership firms. On the other side in terms of Corporates, liability Limited Liability Partnership is itself liable for debts borrowed in running the business, rather than the individual members of the LLP. Also, LLP Partners are not liable for the negligence of other partners.

Since its origination, LLP concept got more recognition in Small and medium enterprises who looks for less compliance burden and various tax exemptions. Gradually owing to emerging international competition this structure got recognition in large enterprises as well. But as the LLP grows, the requirement of equity capital arises. Hence, many entrepreneurs prefer the need of LLP conversion into a company for the sake of growth and expansion of business by raising Company’s capital through equity funds.

PROCEDURE

• Pre-Requisites for conversion:

  1. There should be at least 7 existing members in LLP;
  2. The secured creditors have to give their consent for conversion;
  3. Publication of notice for conversion in English &Hindi Newspaper;
  4. Approval of conversion by a majority of partners in a General Meeting.
  5. Din & Digital signatures of the proposed Directors.

• Approval of Name:

The name should be approved from ROC by using ‘RUN service’

• Filing of conversion documents:

Filing of Form URC-1 along with the following documents:

3. 1. List of members along with relevant details;
   2. List of proposed directors along with relevant details;
   3. An affidavit from the proposed directors;
   4. NOC from secured creditors, if any;
   5. Consent of majority of members for conversion;
   6. An affidavit from all the partners;
   7. Statement of Accounts duly certified by Auditor (Not older than 6 days);
   8. Declaration by the Directors verifying particulars of partners;
   9. Certificate from a practicing Company Secretary.

• Filing of Company Incorporation Documents:

After obtaining the name approval and approval of URC-1, the incorporation documents need to be prepared and filed with the Registrar

4. 1. Filing of SPICE Form 32 along with SPICE MOA and SPICE AOA;
   2. Power of Attorney to be executed by proposed Directors.

• Providing additional clarifications/ information’s, by the person authorized to through Power of Attorney if required, by RoC.

• Incorporation certificate is issued by RoC after the clarifications are provided.

• Intimation to the concerned Registrar of (LLP) along with necessary documents or papers for its dissolution as LLP.