Q: How can XYZ Private Limited
(OPC) be converted into LLP?
A:No, OPC cannot be directly converted into LLP as
the company should have atleast 2 members who shall on conversion become
partners/ DP of LLP.
*However, if we act smart, another way to Convert OPC into LLP is by conversion of
OPC into Private Company (Step I) and then Private company into LLP(Step II).
What Companies Act 2013,
says;
As
per Section 18 of Companies Act 2013,
(1)A company of any
class registered under this Act may convert itself as a company of other class
under this Act by alteration of memorandum and articles of the company in
accordance with the provisions of this Chapter.
(2) Where the conversion is required to be done under this
section, the Registrar shall on an application made by the company, after
satisfying himself that the provisions of this Chapter applicable for
registration of companies have been complied with, close the former
registration of the company and after registering the documents referred to in
sub-section (1), issue a certificate of incorporation in the same manner as its
first registration.
(3) The registration of a company under this section shall
not affect any debts, liabilities, obligations or contracts incurred or entered
into, by or on behalf of the company before conversion and such debts,
liabilities, obligations and contracts may be enforced in the manner as if such
registration had not been done.
Rule 6 : One Person Company to convert itself into a public
company or a private company in certain cases.-
(1) Where the paid up share capital of an One Person
Company exceeds fifty lakh rupees and its average annual turnover during the
relevant period exceeds two crore rupees, it shall cease to be entitled to
continue as a One Person Company.
(2) Such One Person
Company shall be required to convert itself, within six months of the date on
which its paid up share capital is increased beyond fifty lakh rupees or the
last day of the relevant period during which its average annual turnover
exceeds two crore rupees as the case may be, into either a private company with
minimum of two members and two directors or a public company with at least of
seven members and three directors in accordance with the provisions of section
18 of the Act.
(3) The One Person Company shall alter its memorandum and
articles by passing a resolution in accordance with sub-section (3) of section
122 of the Act to give effect to the conversion and to make necessary changes
incidental thereto.
(4) The One Person Company shall within period of sixty
days from the date of applicability of sub-rule (1), give a notice to the
Registrar in Form No.INC.5 informing that it has ceased to be a One Person
Company and that it is now required to convert itself into a private company or
a public company by virtue of its paid up share capital or average annual
turnover, having exceeded the threshold limit laid down in sub-rule (1).
Explanation.-For the purposes of this rule,- “relevant
period” means the period of immediately preceding three consecutive financial
years;
(5) If One Person Company or any officer of the One Person
Company contravenes the provisions of these rules, One Person Company or any
officer of the One Person Company shall be punishable with fine which may
extend to ten thousand rupees and with a further fine which may extend to one
thousand rupees for every day after the first during which such contravention
continues.
(6) A One Person
company can get itself converted into a Private or Public company after
increasing the minimum number of members and directors to two or minimum of
seven members and two or three directors as the case may be, and by maintaining
the minimum paid-up capital as per requirements of the Act for such class of company
and by making due compliance of section 18 of the Act for conversion.
Condition Precedent
·
No OPC can convert voluntarily into a private company
unless two years is expired from the date of incorporation;
●
An OPC can convert into a
private company within two years of its incorporation only if threshold limit
(paid up share capital) is increased beyond fifty lakh rupees or its average
annual turnover during the relevant period exceeds two crore rupees.
Our View:
A
One Person Company (OPC) can convert itself into a private company by complying
the procedure laid out under the Companies Act, 2013. By converting an OPC to a
private company, the ownership of the company is getting transferred from the
sole member to minimum two shareholders. The number of directors also to be
increased to minimum two. The Registrar shall on an application made by the
company, after satisfying himself that the relevant provisions of for
registration of companies have been complied with, register the documents for conversion
and close the former registration of the company and issue a fresh certificate
of incorporation.
Procedure for conversion
●
Company shall obtain No
objection in writing from creditors.
●
Pass a resolution for
conversion of OPC to private company
●
An affidavit by the
director(s) of the company confirming that all creditors of the company have
given their consent for conversion,
●
file copy of the special
resolution with the Registrar of Companies within thirty days
●
The company shall file an
application in Form No.INC.6 for its conversion into private limited
Documents required
●
Altered Memorandum of
Association
●
Altered Articles of
Association
●
Copy of latest audited
balance sheet and Loss Account
●
Copy of board resolution
authorising giving notices to creditors
●
List of creditors; and
●
Copy of No Objection letter
from secured creditors.
Effect of conversion
●
On approval of the
application, the registrar will issue fresh certificate of incorporation.
●
The ownership will be
transferred from sole member to multiple members.
●
The new company have no
restriction on the capital or turnover.
●
The conversion shall not
affect any debts, liabilities, obligations or contracts incurred or entered
into, by or on behalf of the company before conversion and it may be enforced
in the manner as if such registration had not been done.
Step II : Conversion of Private
company into LLP;
What LLP Act , 2008 says,
Any existing private company or existing
unlisted public company can be converted into LLP by complying with the Provisions
of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed
with the registrar along with Form 2 for such conversion.
CHECKPOINTS FOR CONVERSION OF COMPANY INTO
LLP
- In case of conversion
of Private Limited Company into LLP, all the
shareholders of the Company to be partners in the LLP. No one else can
be partner in LLP
- Also there will be NO
SECURITY INTEREST subsisting or in force at the time of
application in the assets of the Company.
- Every Designated Partner is
required to obtain a DIN from the Central Government.
- All the E-FORMS which are
required for the purpose of incorporating the LLP are filed electronically
through the medium of Internet, it is not possible to sign them manually.
Therefore, for the purpose of signing these forms, the Designated Partner
of the proposed LLP needs to obtain a Digital Signature
Certificate (DSC) from government recognized DSA’S.
- Whether up to date Income-tax
return is filed under the Income-tax Act, 1961.
- Whether any prosecution
initiated against or show cause notice received by the company for alleged
offences under the Companies Act, 2013.
- Whether any proceeding by or
against the company is pending in any Court or Tribunal or any other
Authority.
- Whether any conviction, ruling,
order, judgment of any Court, Tribunal or other authority in favour of or
against the company is subsisting.
- Whether any clearance, approval
or permission for conversion of the company into limited liability
partnership is required from anybody/ authority. etc
For more details, contact CS Neha Seth at csnehaseth.cp@gmail.com or call us at 9871903449
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