How to transfer immovable asset in Name of LLP from name of company without stamp duty in the state Govt. records.

Stamp Duty payable or not at the time of Transfer of Assets at the time of Conversion into LLP

There is a dilemma for whether Stamp Duty is payable or not at  the time of Transfer of Assets at the time of Conversion of Private Limited Company into LLP.

What LLP Act says;

a. As per Schedule III, point no. 6, effect of Registration, on and from the date of Registration, all tangible (movable or immovable) 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 limited liability partnership without further assurance, act or deed; and the company shall be deemed to be dissolved and removed from the records of the Registrar of Companies

What Ministry says:

MCA has a view point that Since Stamp Duty is the subject reserved for the States, the LLP Act does not contain any provision for treatment of stamp duty issues. The stamp duty payable will depend upon the relevant Stamp Act prescribed by the State Government/Union Territory.

What Professionals says;

No Stamp Duty is levied on Assets which will be converted into LLP. As, All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid. 

"So, you cannot escape from paying the Stamp Duty on transfer of Assets by way of Conversion into LLP."

Professionals, please share your opinion on this with case studies and Provisions.

Companies to repay Deposits on or before 31st March, 2015

As per Section 74 of Companies Act, 2013, any deposit accepted before commencement of Companies Act, 2013 needs to be repaid/ refunded on or before 31st March, 2015

Penalty if non Compliance of Section 74, Min 1 Crore and Maximum 10 Crores.

Now, the question is whether Loans taken from Directors, or their relatives or shareholders are actually termed as Deposits or not as per Deposit Rules 2014. Practically, it is not possible for companies to repay the amounts taken in lakhs to repay the amount in just 1 year's time. The loan taken by the Companies especially by Private Limited Companies have been invested further in the Assets of the Company and to repay that amount is difficult for the entrepreneurs. Their business operations may suffer losses and disturbances.

It's time for Professionals to guide their clients/ business people to take right steps further;
1. Not to file Form DPT 4 and not to repay the amount.
2. Through certain CAse laws, the professionals have clarified that the amount taken is Loan and not deposits, so if these are not deposits then what to repay and why to repay
3. Wait for MCA for issuing further clarification on this
4. And, if you have filed Form DPT 4, then, the amount is regarded as Deposits and it should be repaid before 31st March, 2015
5. File Application before Tribunal/ CLB before 31 March 2015 for getting further time for repaying the deposit amount

Best Solution is repay the amount by the end of 31st March 2015 or file application with CLB, if you are unable to pay it by 31st March 2015

No need to file form MGT 14 for some Board Resolution

MGT-14 relief to certain extent circular dated 19.03.2015, No need to file form MGT 14 for some Board Resolution

MCA has notified the much awaited Amendment to the Companies (Meeting of Board & its Powers) Rules, 2014 by relaxing the requirement of passing resolution at the Board Meeting and filing of Form MGT – 14 thereafter. Accordingly items mentioned in Rule 8 relating to taking note of appointment(s) or removal(s) of one level below the Key Management Personnel, taking note of the disclosure of director’s interest and shareholding, buying, selling investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves of the investee company, inviting or accepting or renewing public deposits and related matters, reviewing or change the terms and conditions of public deposit, and for approving quarterly, half yearly and annual financial statements or financial results as the case may be are now omitted.

As per circular dated 19.03.2015, now no need to file form MGT 14 for the following:

(3) to take note of appointment(s) or removal(s) of one level below the Key Management Personnel;

(5) to take note of the disclosure of director’s interest and shareholding;

(6) to buy, sell investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves ofthe investee company;

(7) to invite or accept or renew public deposits and related matters;

(8) to review or change the terms and conditions of public deposit;

(9) to approve quarterly, half yearly and annual financial statements or financial results as the case may be.

Our Analysis:

• Above mentioned Board items may now be transacted by way of circular resolution instead of Board meeting, which was not possible earlier. 
• Requirement of intimation to Registrar under E-form MGT 14 need not be given on passing above resolutions 
• Approval of annual financial statements shall be transacted at Board meeting only pursuant to Section 179(3)(g) of Companies Act, 2013. Nevertheless, filing requirement of MGT 14 for approving quarterly and half yearly financials has been dispensed with. 

Shifting Registered Office within same state but outside local limits

Appointment of First Auditors in a Private Limited Company under Companies Act, 2013

Appointment of First Auditors

As per section 139(6) the first auditor of the company shall be appointed by the Board within 30 days of Incorporation. In case of Board’s failure, an EGM shall be called within 90 days to appoint the first auditor. The law is silent regarding from when this time limit of 90 days be reckoned, it is better to take a stricter view and interpret that the 90 days limit starts from Incorporation rather than expiry of 30 days(i.e. failure of Board) from it. Tenure: – Till conclusion of 1st annual general meeting. Remuneration: – As per proviso to section 142(1) remuneration of the first auditor can be decided by the Board. 

Documents required:
a. Consent Letter
b. Intimation
c. Board Resolution

Which form to be filed?
Form ADT 1 with the Registrar of Companies

When to be filed?

Within 30 days of registration or within 90 days of Extra Ordinary General Meeting

I would suggest to file for Auditors Appointment even if the law is silent regarding from when this time limit of 90 days be reckoned, it is better to take a stricter view and interpret that the 90 days limit starts from Incorporation rather than expiry of 30 days(i.e. failure of Board) from it. 

Ways to Establish Your Business Credibility

8 Ways to Establish Your Business Credibility

1. Be Sensitive
2. Be Honest
3. Be Objective
4. Be Sincere
5. Be Knowledgeable
6. Ask for endorsements
7. Promote Achievements
8. Find your confidence

Why it makes sense to go for LLP

With the emergence of time when people were forged bythe unethical structure of partnership firms and were not diligent enough to afford the compliances of that of a company, the Ministry of Corporate Affairs brought the concept of Limited Liability Partnership Firms into picture i.e. an entity which offers management flexibility coupled with less compliances to do.

As per the LLP Act 2008 an “LLP is defined as that business entity where having two Designated Partners is minimum requirement and such partners had their liability limited to their contribution towards the LLP”.

A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of organization and offers a hybrid structure. So, those want the benefits of both the structure, then LLP is the best option for them.

LLP as a business Structure proved itself to be a midway for those who were operating partnership firms but wanted to work in the organized sector under a legally compliant structure with world recognitionrestricted liability.

The greatest advantage which LLP offers is the flexibility to do business. Instead of being bound by legal provisions, LLP’s are free to create their own rules of management, which was not possible in case of companies. As result of which, a lot of companies have started to convert themselves into LLP. 

In case of LLP, the LLP Agreement is of fundamental importance. The Agreement defines the rules of the games, terms and conditions of the relationship vis-à-vis the LLP and the partners and the partners inter-se. The entire LLP functions on the basis of the LLP agreement.

LLP is managed by the Partner themselves. Generally partners who manage the business are called managing partners. There is also a concept of designated partners in the LLP. In terms of law designated partners are responsible for compliance of LLP Act, Income Tax etc. Generally it is believed that designated partners are also the managing partners but it can’t be true in all cases. Different partners may be  called as designated and managing partners.

LLP is generally suitable for:

1.      Small to medium scale businesses

2.      Worldwide LLP are more used in service industry

3.      Businesses where different partners have different role to play

4.      Businesses where investors can play a role as a silent partner while the owners are in the driver’s seat.

5.      Start-ups

Key reasons to go for  LLP

·         Low registration cost.

·         Separate Legal Entity

·         Limited Liability of partners

·         Easy to establish

·         No requirement of minimum Capital Contribution

·         Unlimited number of Partners

·         Personal Assets of the partners are not exposed except in case of fraud

·         Unlike company , no Tax is levied on Profit distributed to Partners

·         LLP is flexible and governed by rules framed by partners

·         Less Compliances as compared to Company

Minimum Requirements to register LLP

·         2 (Two) Partners

·         Out of partners, 2 (Two) should be appointed as  Designated Partners

·         Registered Office in India

·         Atleast 1 (One) Partner should be Resident in India

·         Can be formed only for Profit making

Steps to form LLP:

·         Deciding Partners

·         Obtaining Digital Signatures of Designated Partners

·         Applying for DIN of Designated Partners

·         Checking Name Availability of the LLP

·         Applying for Name Approval

·         Preparing & Filing Incorporation documents

·         Obtaining Certificate of Incorporation

·         Preparing & Filing LLP Agreement

LLP vs Other Forms of Business Entities

This table compares LLP on some key attributes with Company & Partnership

Basis of Difference	LLP	Company	Partnership Firm
Registration Cost	Minimum Govt Registration fees Rs. 750	Minimum Govt Registration fees Rs. 5000	Minimum Government fees Rs. 1000
Min. Capital/Contribution	Any amount can be induced to start the LLP	Min Paid up share capital Rs.100, 000 for Private Limited Companies and Rs.500, 000 for Public Limited Companies.	Any amount can be induced to start the Partnership Firm.
Min Number of Members/Partners	Min. 2 Designated Partner	Min 2 Member/Directors in a Private Limited Company and Min 7 Members and 3 Directors in a Public Limited Company.	Min. 2 Partners are to form Partnership firm
Liability	Liability of the Partners is restricted towards their Contribution so made.	Liability of members can be either limited or unlimited subjected to the nature of the company so registered.	The liability of the Partners of such entity is unlimited as one is bound by the act of another.
Compliances	The Compliances in an LLP is not stringent as that in a company	The Compliance Management in case of a company is stringent and shall have to be complied.	The liability to fulfill all the compliances upon the Partnership Firm is optional
Participation by Foreigners	A Foreign national can be a partner in the LLP subject to additional compliances	A Foreign national can be a Member/Director in a Company	A Foreign national cannot be a partner in the Partnership Firm

Who can become Partner in LLP?

·         Companies/ Body Corporate registered in or outside India

·         LLP registered in or outside India

·         Individuals resident in or outside India