Why to prefer Conversion of Company into LLP? What are the steps and basic requirements?

Conversion of Private Limited Company into LLP

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

·         LLPs are Less Taxed

·         Raising Money is easy

·         Capacity to sue

·         No Mandatory Audit Requirement

·         Partners are not agent of other Partners

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.

Basic Requirements FOR CONVERSION OF COMPANY INTO LLP

ü  In case of conversion of Private Limited Company into LLP, all the shareholders of the Company shall be the partners in the LLP.

ü  Also there will be NO SECURITY INTEREST subsisting or in force at the time of application in the assets of the Company.

ü  Every Designated Partner is required to obtain a DIN and Digital Signature to file the forms online.

ü  Up to date Income-tax returns is required to be filed under the Income-tax Act, 1961.

ü  Need to check whether any prosecution initiated against or show cause notice received by the company for alleged offences under the Companies Act, 1956.

ü  Need to check whether any proceeding by or against the company is pending in any Court or Tribunal or any other Authority.

ü  Need to check whether any conviction, ruling, order, judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting.

ü  Need 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 prescribed in the Third Schedule. Process as given 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.

2. BOARD MEETING:

ü  Call meeting of board of Director.

ü  Pass Resolution for Conversion of Company into LLP.

ü  Pass Resolution to authorize any director to Apply for Name of LLP.

3. APPLICATION FOR NAME AVAIBILITY:

File e-form 1 with ROC.

Attachments: Board Resolution Board resolution passed by the Company approving the conversion into LLP shall be attached with the aforesaid form

4. Obtain name Approval Certificate from ROC.

5. FILING OF INCORPORATION DOCUMENTS:

File E-Form- 2 with ROC along with following ATTACHMENTS:

ü  Proof of Address of Registered office of LLP.

ü  Subscription sheet signed by the promoters.

ü  Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner

7. FILLING OF APPLICATION FOR CONVERSION:

File E-FORM- 18 with ROC along with following ATTACHMENTS:

ü  Statement of shareholders.

ü  Incorporation Documents & Subscribers Statements in Form 2 filed electronically.

ü  Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.

ü  List of all the Secured creditors along with their consent to the conversion.

ü  Approval of the governing council (In case of professional private limited companies)

ü  NOC from Income Tax authorities and Copy of acknowledgement of latest income tax return.

ü  Approval from any other body/authority as may be required.

ü  Particulars of pending proceedings from any court/Tribunal etc.

6. DRAFTING OF LIMITED LIABILITY PARTNERSHIP AGREEMENT:

Contents of Agreement are:

ü  Name of LLP

ü  Name of Partners & Designated Partners

ü  Form of contribution

ü  Profit Sharing ratio

ü  Rights & Duties of Partners

ü  Proposed Business

ü  Rules for governing the LLP

ü  It is not necessary to have the LLP Agreement signed at the time of incorporation, as the details of the same needs to field in eform 3 within 30 days of incorporation but in order to avoid any dispute between the partners as to the terms & conditions of the agreement after the conversion into LLP.

7. FILING OF E-FORM-3:

This form provides information in respect to the LLP Agreement entered into between the partners.

ATTACHMENT: LLP Agreement

8. CERTIFICATE OF INCORPORATION AS LLP FORM ROC.

After all formalities and filings been complied with by the applicants and approved by the Ministry, REGISTRAR OF LLP TO ISSUE A CERTIFICATE OF REGISTRATION in form no. 19 as to conversion of the LLP. The Certificate of Registration issued shall be the conclusive evidence of conversion of the LLP.

9. FILLING OF E-FORM-14: (INTIMATION TO ROC)

After Receiving Incorporation Certificate Limited liability partnership to file within 15 (fifteen) days of the date of registration, information to the concerned Registrar of Companies with which it was registered under the provisions of the Companies Act, 2013 (1 of 2013) about the conversion and of the particulars of the limited liability partnership in eForm 14 within 15 days of conversion into LLP.

ATTACHMENTS OF E-FORM 14

·         Copy of Certificate of Incorporation of LLP formed.

·         Copy of incorporation document submitted in Form 2

STEPS OF CONVERSION:

S. NO.	PARTICULAR	REQUIREMENT
1.	Apply for Din No.	e-form DIR-3
2.	Call BM- to change name – ending with word LLP
3.	File Form for Name approval with work LLP	E-form 1
4.	ROC issue name approval certificate
5.	Incorporation documents with registrar	File e-form -2
6.	Application of Conversion	e-form – 18
7.	LLP Agreement- within 30 days of approval of above forms	e-form- 3
8.	If incorporation certificate is issued by department; then
9.	Intimation of Conversion to Registrar	e-form-14

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