Several businesses which started in India as Limited Liability Partnership (LLP), may now wish to convert into a private limited company for more growth in business or for infusing equity capital. An LLP can be converted into a Pvt. Ltd. company as per the provisions contained in Companies Act, 2013.
Ref:
Section 366 to Section 374 of Companies Act
Chapter XXI PART-1 Companies Authorised to register under Companies Act.
Advantage of LLP over Pvt Ltd:
Benefit in terms of lower Income tax rate of 22%, rather than 30%
Better compliance and recognition
Pre requisite for LLP to be converted into Company:
Check whether LLP has filed its statutory returns till date, and filed all LLP agreements including supplementary agreements with Registrar of Companies (“RoC”).
All filed forms should be in the approved status.
If not, complete all filings prior to starting of conversion procedure.
Same name of LLP can be continued if available, and the words 'Private Limited' shall be added with such name.
The amount of contribution shall be equal to amount of capital and there cannot be change in such amount.
All the partners shall become the shareholders of the Company.
Certificate from Professional (CA/CS) regarding compliance of statement of accounts.
Hold meeting of Partners and pass the resolution for assent of all Partners for conversion of LLP into Private Limited Company and authorise one or more Partner(s) to do all such acts and deeds necessary in this regard.
Apply for name on MCA Portal under SPICE+.
Once the name gets approval it shall be valid for 20 days from the date of name approval in case of a new company and sixty days in case of change of name of existing company.
Essential requirement for conversion of LLP to private limited company:
There must be at least two members for registration as private limited company
LLP must be registered, if it is nor registered file application for its registration.
Approval from all partners is required.
No objection certificate (NOC) is required from ROC where such LLP is registered.
Procedure:
E-form URC-1:File URC-1 within 30 days from name approval with ROC.
Publish advertisement in Form URC-2 in an english newspaper and a local newspaper (seeking objection if any within 21 days from publication) circulating in district where LLP is situated.
Tax Implication:
If the following conditions are fulfilled then there will not be any capital gain tax:-
All the assets and liabilities of the firm or of the association of persons or body of individuals relating to the business immediately before the succession become the assets and liabilities of the company;
All the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession;
The partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and
The aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of the succession;
The demutualization or corporatization of a recognized stock exchange in India is carried out in accordance with a scheme for demutualization or corporatization which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
Other details required:
Particulars of members/partners along with the details of shares held by them.
Declaration of two or more directors verifying the particulars of all members/ partners.
Affidavit from all the members/partners for dissolution of the entity.
Copy of certificate of registration of the entity.
Copy of the instrument constituting or regulating the entity.
Copy of Newspaper advertisement.
Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Stamp Act, to the extent applicable.
Consent of majority of members is mandatory to be attached in case company is limited by shares or Unlimited company.
Consent of at least three-fourth of members agreeing for registration under this part is mandatory to be attached in case company is limited by guarantee.
No objection certificate from the concerned Registrar of Firms or Registrar of Companies (LLP) is mandatory to be attached in case type of entity is Firms/ LLP.
No objection certificate/Consent given by secured creditors is mandatory to be attached in case of any secured debt outstanding as on the date of application.
Copy of the resolution declaring the amount of guarantee is mandatory in case company is limited by guarantee.
o. Statement of accounts of the company, prepared not later than 6 days preceding the date of application duly certified by auditor, if applicable.
Any other information can be provided as an optional attachment(s).
Other forms to be filled:
Spice MOA & AOA
DIR-12
INC-22
Agile Pro
INC-9
Other docs required:
Identity and address proof
Copy of LLP agreement
Registered office proof
Written statement and no objection from creditors
List of documents to be submitted by the Director and the Shareholders
o. Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
o. Scanned copy of Voter’s ID/Passport/Driver’s License
o. Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
o. Scanned passport-sized photograph Specimen signature (blank document with signature [directors only])
Note: Any one of the directors must self-attest the first three documents. In case of foreign nationals and NRIs, all the documents must be notarised (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).
For the Registered Office:
Scanned copy of Latest Telephone or Electricity or Gas Bill or Water bill.
Scanned copy of Notarized Rental Agreement in English Scanned copy of No-objection Certificate from property owner.
Scanned copy of Sale Deed/Property Deed in English (in case of owned property)
Note: Your registered office need not be a commercial space; it can be your residence, too.
Time Required:
With present situations the time required maybe min of 40 days.
Conclusion:
There are various ways of converting a LLP to a company, i.e. slump sale, admitting the company as a partner, dissolution thereof and on dissolution, business being taken over by the company etc., In view of the choices available. Conversion should be made in a manner appropriate to a particular situation. Thus, aforesaid is the detailed procedure and documents involved in conversion of LLP into a Private Limited Company. The attachments will play a important role in conversion approval and all attachments are to be in order for getting the approval.
Quote of the day:
“Put your foot upon the neck of the fear of criticism by reaching a decision not to worry about what other people think, do, or say.”
- Napoleon Hill, Think and Grow Rich: The Landmark Bestseller Now Revised and Updated for the 21st Century
Regards
CA Umang Jain
+ 91 96323-32850
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