Conversion of Limited Liability Partnership in to a Private/Public Limited Company under the Companies Act,2013

#LLPconversion #Companiesact2013

Governing Section of the Companies Act, 2013: Section 366 Specified the procedure of the act which is to be complied with.

Pre-requisites for conversion of LLP in to Company whether Private Limited or Public Limited Co:

1.????? Converted Company to have a Minimum number of Members

·??????? Minimum of two members required for the conversion of the LLP in to Pvt Ltd Co.

·??????? Minimum of Seven members required for the conversion of the LLP in to Public Ltd Co.

2.????? Converted Company to have a minimum number of Directors

·??????? The Company so converted shall have a minimum of 3 directors in case of conversion into a public company.

·??????? The Company so Converted shall have a Minimum of 2 directors in case of conversion into a private company.

[Caution: It is to be noted that whether you are incorporating a Private Company or a Public Company one director needs to be resident in India.]

3.????? Registered Office

·??????? Converted Company shall have a registered office of the company with in 30 days from the date of Incorporation of the Company.

4.????? Surplus on account of revaluation not to be credited to personal accounts of partners

·??????? As per the Rule 5 of Companies (Authorised to Register) Rules, 2014 a Limited Liability Partnership has to ensure that if the assets of the LLP (during the immediately preceding three years) are revalued for the purpose of vesting of its assets with the company to be incorporated under this Act, the surplus arising out of such revaluation shall not be deemed to have been credited to the capital account or current account of partners.

5.????? Digital Signature certificate of Every Director/subscriber required.

6.????? Permanent Paid Capital requirement

·??????? As per the Section 366(iii) of the Companies Act, 2013, Limited Liability Partnership can be converted into a company limited by shares only if the converted company possesses a permanent paid-up or nominal share capital with a fixed amount, which is divided into shares or held as transferable stock. The company should be formed on the principle that its members are exclusively the holders of those shares or stock, and no one else.

Procedure for conversion of LLP in to Company

Conversion of LLP into a company involves various steps including obtaining written consent from the partners, applying for name reservation, publishing the newspaper advertisement, and filing of various incorporation forms as per Rule 3 of Companies (Authorised to Register) Rules, 2014. The below-mentioned process is to be followed for the conversion of the LLP into a Company:

1.????? Obtaining the approval of the partners for conversion

The first and foremost step is to take the assent of the majority of the partners at a general meeting summoned to convert the LLP into a company. Furthermore, authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents, etc. for conversion of the LLP as a Company.

2.????? Reservation of name through SPICE+ Part A

In the new web-based form SPICe+, there are two options for applicants. In the first scenario, the applicant can choose to directly proceed with the incorporation process by providing a company name without the need to separately reserve it. This streamlined approach facilitates quicker incorporation. Alternatively, applicants have the flexibility to begin by reserving a company name. In this case, they can specify two preferred names in order of preference in form SPICe+ A along with the required fees. The reserved name will remain valid for 20 days, with the possibility of extending this period as needed. In the case of conversion, the applicant shall file the SPICe+ Part A form to secure the name of the proposed Company and not to proceed with the incorporation form filing simultaneously.

3.????? Publication of the newspaper advertisement

Once the name is approved the LLP shall publish an advertisement about the conversion of the LLP into the company and seeking objections, if any within 21 clear days from the date of publication of the notice. The said advertisement shall be in Form No. URC-2. URC-2 is required to be published in two newspapers one in English and the other in any vernacular language, circulating in the district where the registered office of the LLP is situated. It is to be noted that name approval is valid for 20 days only and 21 days' time period is specified for seeking objections on conversion, if any. Therefore, one has to apply for the extension of name approval in any case. Further, a copy of the advertisement is also to be served to the ROC under whose jurisdiction the LLP is registered.

4.????? Documents to be prepared and uploaded

Before filing the incorporation form, one has to arrange the documents required for filing the necessary conversion forms under Section 374 read with rule 4 and 5 of Companies (Authorized to Register) Rules,2014.

The following documents are to be arranged before filing the conversion forms with ROC:

(a) Preparation of statement of accounts The LLP shall prepare a statement of accounts of the firm. The statement shall not be 15 days older than making the conversion application. Further, the statement is required to be certified by the Auditor along with the audited financial statements of the previous year. It is to be noted that the LLP has to ensure that if the assets of the LLP (during the immediately preceding three years) are revalued for the purpose of vesting of its assets with the company to be incorporated under this Act, the surplus arising out of such revaluation shall not be deemed to have been credited to the capital account or current account of partners.

(b) No Objection certificate from the secured creditors No Objection Certificate from secured creditor along with charge holders, if any.

(c) Preparation of the list of partners Prepare a list showing the names, addresses, and occupations of all persons named therein as partners with details of shares held by them respectively.

(d) Preparation of the list of the proposed directors Prepare a list showing the particulars of persons proposed as the first directors of the company, along with the Director Identification Number (DIN), passport number, if any, with an expiry date, and residential addresses. Further, a document reflecting their interests in other firms or body corporates along with their consent to act as directors of the company shall also be prepared.

(e) Preparation of the declaration from the proposed directors that they are not disqualified to act as directors Prepare a declaration from the proposed directors that they are not disqualified to act as directors.

(f) Preparation of statement of proceedings by/against the LLP Prepare a statement of proceedings, if any, by or against the LLP, which is pending in any court or any other Authority.

(g) Deed of LLP along with changes, if any Deed of LLP, by-laws or other instruments constituting or regulating the LLP. Further, in case the deed was revised at any time in the past, copies of the principal and all subsequent deeds including the latest deed.

(h) Copy of the resolution declaring the amount of guarantee, if the LLP is getting conversion into a company limited by guarantee In case a LLP intends to convert itself into a company limited by a guarantee, a copy of the resolution declaring the amount of guarantee.

(i) Copy of incorporation certificate Incorporation Certificate from the registrar of firms.

(j) Copy of the newspaper advertisement Copy of the notice, as published and the copy of the notice served on ROC under whose jurisdiction LLP is registered along with proof of service.

(k) Copy of the latest Income Tax Return A copy of the latest income tax return of the Limited Liability Partnership is to be submitted.

5.??? Web forms to be filled at MCA

(a) Spice + Part B (Form INC-32)

?Following the name reservation through SPICE+ Part A, the subsequent crucial section of the form revolves around capturing essential information related to the company's structure, its registered office address, as well as details concerning directors and subscribers. Additionally, this form covers the payment of stamp duty, particulars of the registered office, PAN/TAN information, and concludes with a declaration provided by the certifying professional who shall be a practicing CA, CS, CMA or Advocate.

(b) Form URC-1

Following the form Spice+ Part B, the next step involves completing the form URC-1, this form is basically an application by a company for registration under section 366. Before filing this form, one has to ensure that the name reservation is done. Further, the secured creditors have given their consent for conversion. Also ensure that before filing this e-Form, a notice in the newspaper about conversion seeking objections must be published. A copy of such notice is to be filed along with this form. The entity should address such objections, if any suitably.

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(c) Filling of AGILE PRO-S

Following the form URC-1, the next step involves completing the Spice AGILE-PRO-S form. This form facilitates the application for the registration of essential components, including the Goods and Services Tax Identification Number (GSTIN), Employees' State Insurance Corporation (ESIC) registration, Shop & Establishment registration, and Employees Provident Fund Organization (EPFO) registration, all of which are seamlessly integrated with the company incorporation process. Furthermore, AGILE-PRO-S also captures pertinent details related to the company's authorized signatory and directors for opening of company's bank account and registrations.

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(d) Filling of E-AOA (Form INC-34)

Upon the completion of form AGILE PRO S, the subsequent step involves completing INC-34, known as e-AOA. This form includes the Articles of Association, and it is essential to select the relevant Table according to Schedule I of the Companies Act, 2013, based on the specific type of company being incorporated. The Articles of Association (AOA) is a legal document that outlines the rules, regulations, and internal management structure of a company. It is one of the key documents required during the incorporation of a company, and it defines how the company will operate internally.

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(e) Filling of E-MOA (Form INC-33)

Following the form INC-34, which is the electronic Articles of Association (e-AoA), the subsequent step involves the completion of INC-33, the electronic Memorandum of Association (e-MoA). E-MOA basically captures the business activities which is proposed to be conducted by the company. This form encompasses the Memorandum of Association, subscriber details, and share capital details. The e-MoA serves as the company's charter and can be conveniently submitted through the SPICe+ platform.

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(f) Declaration in form INC-9

Following the completion of all the requisite forms, an auto-generated document, namely INC-9, is populated. The INC-9 comprehensively contains all the details of the directors and subscribers.

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It is to be noted that all these forms are interlinked and are to be filed simultaneously.

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(g) Affixing of digital signatures and uploading

Once an applicant is done with the filling of all the forms. Subsequently, the applicant is instructed to download all the forms, and affix digital signatures for directors, subscribers, and the professionals involved. Once these digital signatures are affixed, the final step involves uploading all the forms and making the necessary fee payments. The forms are to be uploaded in the specified series Spice+>E[1]MOA>E-AOA>URC-1>AGILE-PRO-S>INC-9.

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(h) Granting of certificate of incorporation

On being satisfied that everything is in place Central Registry Centre (CRC) shall issue the certificate of incorporation in INC-11. Further, DIN (if applied), PAN and TAN shall be allotted.