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Guide to Conversion of LLP to Private Limited Company

Author : Comply Globally | Published On : 28 Nov 2024

Unlock Your Business Potential with Complyglobally: Expert Services 

 

At Complyglobally, we understand that navigating the complexities of business structure conversion can be daunting. Our expert services are designed to simplify the process, ensuring that you can focus on what matters most when growing your business. With a team of experienced professionals, we provide tailored solutions to facilitate the conversion of LLP to a private limited company, guiding you through each step with clarity and precision. Whether you need assistance with documentation, compliance, or strategic advice, Complyglobally is here to help you unlock your business potential.

 

Legal Framework for Conversion of LLP to Private Limited Company 

 

The conversion of LLP to private limited company is governed by the provisions of the Companies Act, 2013, and the Limited Liability Partnership Act, 2008. According to these laws, an LLP can be converted into a private limited company if it meets certain criteria and follows the prescribed procedures. The legal framework ensures that the rights of all stakeholders, including partners, creditors, and employees, are protected during the conversion process. 

 

The conversion process is designed to be straightforward, allowing businesses to transition smoothly while adhering to regulatory requirements. It is essential to understand the legal implications of this conversion, as it affects the rights and responsibilities of the partners and the company.

 

Eligibility Criteria for Conversion of LLP to Private Limited Company 

 

Before initiating the conversion of LLP to private limited company, it is crucial to determine whether your LLP meets the eligibility criteria set forth by the Companies Act. The key eligibility requirements include: 

  • Minimum Partners: The LLP must have at least two partners, and the Private Limited Company must have a minimum of two shareholders. 

  • No Pending Litigation: The LLP should not be involved in any ongoing litigation or legal proceedings that could hinder the conversion process. 

  • Consent of Partners: All partners of the LLP must agree to the conversion. This consent should be documented to avoid any disputes later. 

  • Compliance with Financial Obligations: The LLP must be in good standing with its financial obligations, including tax payments, and compliance with regulatory requirements. 

  • No Outstanding Debts: The LLP should not have any outstanding debts or liabilities that could complicate the conversion process. 

Meeting these criteria is essential to ensuring a smooth transition from an LLP to a Private Limited Company.

 

Steps Involved in the Conversion of LLP to Private Limited Company 

 

The process of converting an LLP to a Private Limited Company involves several key steps. Here’s a detailed breakdown of the steps involved:

 

1. Approval of Name 

 

The first step in the conversion process is to obtain approval for the name of the new Private Limited Company. The name must comply with the naming guidelines set by the Ministry of Corporate Affairs (MCA). It should be unique and not like any existing company names. You can apply for name approval through the RUN (Reserve Unique Name) service on the MCA portal.

 

2. Securing DSC and DIN 

 

Before proceeding with the conversion, it is necessary to secure a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) for the proposed directors of the new Private Limited Company. 

  • Digital Signature Certificate (DSC): This is required for signing electronic documents and forms submitted to the MCA. It can be obtained from authorized certifying agencies. 
  • Director Identification Number (DIN): This is a unique identification number assigned to individuals intending to become directors of a company. It can be applied for online through the MCA portal.

 

3. Filing Form No. URC-1 

 

Once the name is approved and the DSC and DIN are secured, the next step is to file Form No. URC-1 with the Registrar of Companies (ROC). This form is specifically designed for the conversion of LLPs to Private Limited Companies. 

In Form URC-1, you will need to provide details such as: 

  • Name of the LLP 

  • Registration number of the LLP 

  • Details of partners and proposed directors 

  • Address of the registered office of the new company 

  • Declaration of compliance with the eligibility criteria 

 

4. Memorandum of Association & Articles of Association 

 

As part of the conversion process, you will need to draft the Memorandum of Association (MoA) and Articles of Association (AoA) for the new Private Limited Company. 

  • Memorandum of Association (MoA): This document outlines the company's objectives, scope of activities, and the relationship between the company and its shareholders. It is a crucial document that defines the company's purpose and the extent of its activities. 

  • Articles of Association (AoA): This document contains the rules and regulations governing the internal management of the company. It outlines the rights and responsibilities of the shareholders and directors, as well as the procedures for conducting meetings and making decisions. 

Both the MoA and AoA must be filed with the ROC along with Form URC-1. 

 

5. Documents Required for the Conversion of LLP to Private Limited Company

 

To successfully complete the conversion process, several documents must be prepared and submitted. These include: 

  • Copy of the LLP Agreement: This document outlines the terms and conditions agreed upon by the partners of the LLP. 

  • Consent of Partners: A written consent from all partners agreeing to the conversion. 

  • Identity and Address Proof: Identity and address proof of all partners and proposed directors, such as Aadhar cards, passports, or utility bills. 

  • No Objection Certificate (NOC): If the LLP has any secured creditors, a NOC from them is required to ensure that they have no objections to the conversion. 

  • Financial Statements: The latest financial statements of the LLP, including balance sheets and profit and loss accounts. 

These documents must be compiled and submitted along with the application for conversion. 

 

Post-Conversion Compliance Requirements

 

After the successful conversion of the LLP to a Private Limited Company, there are several compliance requirements that must be adhered to: 

  • Issuance of Share Certificates: Upon conversion, the new Private Limited Company must issue share certificates to the shareholders based on their contributions. 

  • Updating Records: The company must update its records with the Registrar of Companies, including the new MoA and AoA. 

  • Tax Registration: The new company must obtain a new PAN and GST registration, if applicable, as the tax identification will change with the conversion. 

  • Annual Compliance: The Private Limited Company must comply with annual filing requirements, including the submission of annual returns and financial statements to the ROC. 

  • Board Meetings and General Meetings: The company must conduct regular board meetings and annual general meetings as per the provisions of the Companies Act. 

  • Maintaining Statutory Registers: The company is required to maintain various statutory registers, including the register of members, register of directors, and register of charges. 

 

Quick Summary

 

The conversion of LLP to private limited company is a strategic move that can enhance your business's growth potential and operational capabilities. By understanding the legal framework, eligibility criteria, and necessary steps involved in the conversion process, you can navigate this transition smoothly. 

At Complyglobally, we are committed to providing expert services to assist you in every aspect of the conversion process, ensuring compliance with all legal requirements, and helping you unlock your business potential. Whether you are considering this conversion for the first time or need guidance on specific steps, our team is here to support you.