Conversion of Company

Proprietorship to Pvt Ltd

Conversion of Proprietorship Firm to Private Ltd Company

A sole proprietorship cannot get all benefits of operation as it grows. So, there will be a need to convert the proprietorship into a private limited company. The conversion can bring in its wake all the benefits of a company like higher capital, limited liability, and so on. Conversion of a proprietorship into a private limited company provides many benefits, but it also brings along the diffusion of power and loss of independence. Therefore the decision must be taken after careful consideration of all the factors involved and see if it genuinely brings about privileges intended.

About This Plan

Get your private limited company registered in the fastest possible manner.

Timeline

It usually takes 7 to 10 working days.

Services Covered

DSC (2 nos)
Filing of SPICe+ Form
Issue of Incorporation Certificate along with PAN and TAN
Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
Assistance in Opening Bank Accoun

Who Should Buy

Businesses looking to expand or scale operations on higher level
Startups looking to raise capital and issue ESOPs
Businesses looking to convert their existing firm structure into private limited company
Businesses aiming to work globally or with reputed clients

How It’s Done

DSC Application
Name approval form filing
Preparation of Incorporation Documents
Getting those docs signed by the respective stakeholders
Filing of e-Forms with ROC
Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.

Documents Required

Name, Contact Number and Email Id of all the Stakeholders.
Directors Identification Number, if already.
Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.
Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.
Latest Month Personal Bank statement of all the Stakeholders.
Specimen Signatures of all Stakeholders.
Few Proposed Business Names along with Objects.
Latest Electricity Bill/Landline Bill of Registered Office.
NOC from owner of registered office, If Owned. (Download Template)
Rent Agreement from Landlord, If Rented/Leased. (Download Template)
Brief description of main business activities of the proposed Company.
Shareholding pattern (50:50 or 60:40) between the Stakeholders.
Authorised & Paid Up Share Capital of the Company.

Proprietorship vs Private Limited Company

A private limited company offers a lot of advantages over the sole proprietorship form of business. We have listed a few of them below:

A sole proprietor would be incurred with unlimited liabilities for any losses incurred, which means that he/she will be required to pay personally for any losses incurred by the firm. The regulation of a private limited company makes a distinction between the owner and the entity, thereby making his/her liabilities limited.
Sole proprietors will be taxed on their personal income tax rate, which isn’t the case with a private limited entity. Know more about income tax rate for companies.
Sole proprietorship firms are not vested with adequate fund-raising options, in contrast to a private limited entity.
The demise of a sole proprietor would lead to the closure of the firm, whereas a private limited Company facilitates the legal heirs to rightfully take over the affairs of the business.

Sl. No.	Point of Difference	Proprietorship Firm	Private Limited
1	Registration	No Formal Registration	A Private Ltd Company is registered under Companies Act,2013
2	Legal Entity Status	Does not hold any Separate Legal Entity.	Hold separate Legal entity under the Companies Act, 2013
3	Transferability of Shares	Non Transferable	Shares can be transferred
4	Liability	Unlimited	Limited to extend of shares
5	Members	Minimum – 1 MemberMaximum – 1 Member	Minimum – 2 MemberMaximum – 200 Member
6	Taxation	Owners Income Tax	Profits are taxed at 30% plus surcharges and cess as applicable
7	Compliance	Not Required	Annual Return, Annual Accounts required to be filed with the Registrar of Companies every year.

Points of Difference between Proprietorship & Private Limited Conditions for Conversion from Proprietorship to Private Limited

A takeover agreement or sale agreement needs to be entered into between the sole proprietor and company.
The Memorandum of Association (MOA) needs to carry the object “The take over of a sole proprietorship”.
All the assets and liabilities of the sole proprietorship must be transferred to the company.
The shareholding of the proprietor should not be less than 50% of the voting power, and the same must continue to be held for a period of 5 years.
The proprietor does not receive any additional benefits either directly or indirectly, except to the extent of shares held.

Initiating the Process of Conversion from Proprietorship to Private Limited

A sole proprietorship can be converted if the above-mentioned conditions are met. Talking about the conversion process, the following measures must be initiated by an entrepreneur to get the proprietorship firm converted into a private company:

Obtaining the Digital Signature Certificate (DSC) and Director Identification Number (DIN) for the sole proprietor and new director.
Acquiring permission for naming the company, the application for which must be made in Form-1. Click here to check company name availability .
Apply to MCA for Incorporation of company.
Completing the slump sale formalities
Modifying details of the bank account in accordance with the conversion.
Submitting the relevant documents and forms (covered separately).

Procedure for Conversion of Proprietorship to Private Limited

The following are the steps involved in the conversion of a proprietorship to a company when the above mentioned requirements are met:

The proprietor must complete the slump sale formalities.
The Director Identification Number (DIN) and the Digital signature certificate (DSC) must be obtained for all the directors.
The proprietor must apply for the availability of name in Form – 1.
Prepare the MOA and Articles of Association (AOA) of the company specifying the objects and the rules of the company.
Apply for the incorporation of the company to the Ministry of Corporate Affairs (MCA).
Submit all the relevant documents.
Receive the Certificate of Incorporation.
Apply for a new PAN and TAN.
Modify the bank details as per the conversion.

Prerequisites For Forming a Private Limited Company

To form a private limited company from a sole proprietorship, the procedure is to first form the private limited company and then take over the sole proprietorship through a Memorandum Of Association (MoA) and transfer all benefits and liabilities to the limited company. So, the following requirements must be taken care of before applying for a certificate of incorporation.

Directors: For the formation of a private limited company minimum of two directors are required. One of them can be the proprietor himself, and the other can be any relative or friend.
Director Identification Number: The directors need to have an Identification Number as a prerequisite to incorporation.
Shareholders: The company needs to have a minimum of two shareholders, and they can be the same as the directors. The owner of the sole proprietorship needs to be one of the directors of the limited company.
Capital: The company needs to have a minimum authorised capital of 1 Lakh rupees.

So to summarize, it is as shown below:

Benefits of Conversion from Proprietorship to Private Limited

Capital expansion: A sole proprietorship is limited to the capital of the owner, whereas the private limited company has fundraising options and can raise higher capital for expansion.
Limited liability: A sole proprietor is wholly responsible for the losses, and his/her personal assets will also get attached to repay creditors in case of losses. However, in case of a private limited company, such liabilities are limited by shares or warranty.
Continuity: A sole proprietorship is dependent on a single person, so its existence is limited to that of the proprietor’s ability to operate. Whereas, the private limited company is a separate legal entity and not bound by the existence of a single owner.

Certificate of Incorporation for Converted Private Limited Company

After the completion of all the procedures specified above, the MCA validates the prescribed compliance requirements. If the administering body finds it satisfactory, the entity will be provided with a Certificate of Incorporation, which effectively gives birth to a new private limited company.

To convert a proprietorship into a private limited company, get in touch with a Witcorp Advisor at connect@Witcorp.com

OPC to Pvt Ltd

Conversion of OPC to Private/Public Limited Company

The conversion of an OPC- One Person Company into Private Limited Company as per Section 18 of the Companies Act, 2013 and the provisions of Companies (Incorporation) Rules of 2014 should be discharged by a newly formed Private Limited Company. These rules will not affect the existing debts, liabilities, obligations or contracts of the OPC. There are two ways of converting an OPC into a private limited company either voluntarily or mandatorily. Under both these type of conversions, the requirements are necessary alterations in the MOA and AOA of the OPC (As per the provisions provided in section 18 of the Companies Act, 2013, along with section 122 of the Act). The section says to obtain no objection in written form, from the concerned members and creditors; passing a resolution in support of conversion; and it should also satisfy the requirements of the minimum paid-up capital, along with the minimum number of members and directors. For incorporating a private limited company the minimum paid capital recommended is Rs. 1,00,000 and two members and two directors at a minimum. To apply for conversion of OPC to private limited company, you need to fill the form INC-6, to the Ministry of Corporate Affairs, Govt. of India.

About This Plan

Get your OPC converted to Public/Private limited in the fastest possible manner.

Timeline

It usually takes 20 to 25 working days.

Services Covered

DSC
Filing of SPICe+ Form
Issue of Incorporation Certificate along with PAN and TAN
Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
Assistance in Opening Bank Account

Who Should Buy

DSC
Filing of SPICe+ Form
Issue of Incorporation Certificate along with PAN and TAN
Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
Assistance in Opening Bank Account

Who Should Buy

Businesses looking to expand or scale operations on higher level
Startups looking to raise capital and issue ESOPs
Businesses looking to convert their private limited company to public ltd company
Businesses aiming to work globally or with reputed clients

How It’s Done

DSC Application
Name approval form filing
Preparation of Documents
Getting those docs signed by the respective stakeholders
Filing of e-Forms with ROC
Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.

Documents Required

Name, Contact Number and Email Id of all the Stakeholders.
Directors Identification Number, if already.
Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.
Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.
Latest Month Personal Bank statement of all the Stakeholders.
Specimen Signatures of all Stakeholders.
Few Proposed Business Names along with Objects.
Latest Electricity Bill/Landline Bill of Registered Office.
NOC from owner of registered office, If Owned.
Rent Agreement from Landlord, If Rented/Leased.
Brief description of main business activities of the proposed Company.
Shareholding pattern (50:50 or 60:40) between the Stakeholders.
Authorised & Paid Up Share Capital of the Company.

Similarities between OPC & Private Limited

Separate legal entity: Both of them have separate legal entity. That means OPC or Private Ltd Co. is treated as a different individual in the eyes of law.
Benefits on taxes: To the both types of business structures tax benefits are given. The tax benefits would be 25% from the profits.

BOARD MEETING

NOTICE

Issue Notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and SS-I for convening a meeting of the Board of Directors.

AGENDA

– To discuss with directors that Company want to convert the OPC into Private Limited Company.– Pass Board resolution for increase in Number of Directors (Minimum 2 Directors)– Pass a Board resolution to get in principal approval of Directors for increase shareholder of the Company (Minimum 2 Shareholders)– Pass Resolution to get shareholders’ approval for Alteration in MOA & AOA of Company.

SHAREHOLDER’S MEETING

There is required to pass Shareholder resolution. Note:- But as per Section 122(1) there is no need to hold EGM by OPC, it shall be sufficient if, in case of OPC, the resolution is communicated by the member of the company and entered into the minutes books required to be maintained u/s 188 and signed and dated by member and such date shall be deemed to be the date of the meeting for all the purpose under this Act

ROC Form Filling

E-Form INC-6

As per Section 18 of the Companies Act, 2013 OPC within 30 days of passing Special. Resolution file form with ROC

ATTACHMENTS:

– Certified true copy of board resolution where person giving notice has been authorized– Altered copy of MOA & AOA.– Copy of the duly attested latest financial statements– Certified true copy of Special resolution where person giving notice has been authorized– Any other information can be provided as an optional attachment(s)

Limited Liability: In case of OPC the Sole owner and in case of Pvt. Ltd. Co. the shareholders have limited liability to the extent of their shares.
Registration Process: Both the companies are required to be registered with the Ministry of Corporate Affairs.

Two Types of Conversion

For converting an OPC into Private Limited Company, the provisions laid down in the Section-18 of the Indian Companies Act of 2013, and the Companies (Incorporation) Rules of 2014, in particular the Rule 7(4) of the Companies (Incorporation) Rules, 2014, needs to be followed for both the conditions; voluntarily and under compulsion.

Voluntary Conversion

Voluntary conversion into a private limited company is not permitted unless two years is expired from the date of incorporation of the OPC. Though, if the paid-up share capital exceeds rupees 50 lakhs or if its average turnovers exceed INR 2 crores then within two months, the OPC could convert into a private limited company.

OPC has to communicate voluntary conversion to a registrar of companies in form INC 5 within sixty days.

For converting to a private limited company, OPC is required to have 2 directors and 2 members.

Procedure for Voluntary Conversion: Mandatory/Compulsory Conversion

This is a condition where you need to convert an OPC to private limited company compulsorily. It is because an OPC has paid up share capital that exceeds Rs. 50 lakhs and the yearly turnover of immediately previous three consecutive financial years is more than 2 Crores rupees, then it is obligatory for anyone to convert. Such company has to compulsorily convert to a private or public limited company within a period of 6 months from the date when the paid-up share capital exceeded 50 lakhs rupees or the last date of the related period in which the average annual turnover surpasses 2 Crore rupees.

The conversion is made by just passing a special resolution in the general meeting. It is checked for a No objection certificate in written from the creditors, and the other members before the resolution are passed.

Procedure for Mandatory Conversion:

STEPS	PROCEDURE
BOARD MEETING	NOTICE Issue Notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and SS-I for convening a meeting of the Board of Directors. AGENDA – To discuss with directors that Company has crossed the Limits as given above and there is need to mandatory conversion of OPC into Company.– Pass Board resolution for increase in No. of Directors. (Minimum 2 Directors)– Pass a board resolution to get in principal approval of Directors for increase shareholder of the Company. (Minimum 2 Shareholders).– Pass Resolution to get shareholders’ approval for Alteration in MOA & AOA of Company
SHAREHOLDER’S MEETING	There is required to pass Shareholder resolution (SR).But as per Section 122(1) there is no need to hold EGM by OPC, it shall be sufficient if, in case of OPC, the resolution is communicated by the member of the company and entered into the minutes books required to be maintained u/s 188 and signed and dated by member and such date shall be deemed tobe the date of the meeting for all the purpose under this Act
ROC Form Filling	E-Form INC-5 (Notice to ROC) As per Rule 6(4) The Companies (Incorporation) Rules, 2014: OPC within 60 days from the period when Condition as mentioned above attract give notice to ROC informing that it has ceased to be OPC and that it is now required to convert itself into a private company or public company ATTACHMENTS: – Certified true copy of board resolution where person giving notice has been authorized– Copy of the duly attested latest financial statements– Certificate from a Chartered Accountant in practice for calculation of average annual turnover during the relevant period – This certificate is mandatory to attach if the threshold limit is exceeded on account of average annual turnover.– Any other information can be provided as an optional attachment(s) E-Form INC-6 (Application for conversion) As per Section 18 of the Companies Act, 2013 OPC within 30 days of passing Special Resolution file form with ROC ATTACHMENTS: – Certified true copy of board resolution where person giving notice has been authorized– Altered copy of MOA & AOA.– Copy of the duly attested latest financial statements– Certified true copy of Special resolution where person giving notice has been authorized– Any other information can be provided as an optional attachment(s)

a. Intimating to ROC

The concerned ROC should first be communicated through the prescribed method that the OPC is now required for converting itself into a private limited company.

b. Passing the Board Resolutions

The shareholders of the OPC should hold a General Meeting for passing the resolution for raising the paid-up capital (if needed), no. of shareholders, and appointment of directors for meeting the requirements of the Private Limited Company. For converting an OPC to a Private Limited Company, there should be at least 2 shareholders and 2 directors.

Furthermore, a board resolution should be passed by the shareholders for approving the alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) of the OPC.

c. Application for conversion of OPC to Public/Private Limited Company

Once the above steps are completed, the company needs to file an application to the registrar along with a copy of the resolution within fifteen days of passing the resolution. The registrar then confirms on the application details filled to be correct and fees are being paid against the registration. Then the registrar makes a decision by finally studying the application and other documents thoroughly and issues the certificate of conversion. Nowadays E-Forms are also available with the Registrar of Companies. There will a penalty is this type of conversion if any officer contravenes the provisions of these rules, and will be punished with a fine amounting to Rs.10 thousand and a further fine of one thousand rupees for every day after the first such contravention being continued.

The introduction of One Person Company into legal system came into existence to encourage the entrepreneurs to enter into the corporate world. It will not only enable the individual capabilities to contribute economic growth but will also generate employment opportunity.

Legal Framework for Conversion of OPC into Public/Private Company

Section 18 of the Companies Act, 2013, Companies (Incorporation) Rules of 2014 and Companies (Incorporation) Second Amendment Rules, 2021discuss about the conversion of one person company into private limited company. These rules don’t affect the existing liabilities of the OPC. Section 17 of the Companies Act along with Rule 7(4) of Companies (Incorporation) Rules, 2014 also discusses about the same.
The government in April 2021 has amended the Companies (Incorporation) Rules, 2014 with Companies (Incorporation) Second Amendment Rules, 2021.
E-form INC-6 has to be filed under section 18 of the Companies Act and Rule 7(4) of the Companies (Incorporation) Rules, 2014.
Section 18 states that a company can convert itself into any other company by alteration of memorandum and articles. If the company converts according to this section, the applicant has to submit the application to the Registrar. The Registrar will issue the certificate of incorporation after verifying the application and documents. This registration will not affect the liabilities of the company.
Earlier Rule 7 of the 2014 Rules prescribed that no OPC can convert voluntarily into any kind of company unless 2 years have expired from the incorporation of OPC or the threshold limit has increased to Rs. 50 Lakhs or turnover exceeded Rs. 2 crores. But now, the 2 years restriction has been removed. OPCs can freely convert into any company at any time without any limitations on the turnover or paid-up capital.
Under the conversion, the alteration of MOA and AOA is according to Section 18 and 122 of the Companies Act. If someone wants to apply for conversion of One person company to private limited company, they need to submit form INC-6. It is mandatory for the company to obtain no objection from the members and creditors of the company. OPCs can convert to private companies after increasing the minimum number and members and directors.

Changes after Companies (Incorporation) Second Amendment Rules, 2021

Before April 2021 Amendment there was a rule that OPCs can voluntarily convert after 2 years of incorporation into a private limited company. But it has been omitted in 2021 amendment. Now OPCs can convert into a private company anytime. They have to communicate about the conversion of one person company into private limited company in Form INC-6.
Before the Companies (Incorporation) Second Amendment Rules came into existence, the OPCs mandatorily converted to private limited if the paid-up share capital crosses Rs. 50 Lakhs and the annual turnover for three consecutive years was beyond Rs. 2 crores. This conversion was done by passing a special resolution in a general meeting. Before the conversion, the creditors and the other members submit a no-objection certificate.
The government has amended this provision, now there are no limitations on the growth of OPCs in India with respect to paid-up capital and turnover.

Approval of Conversion

The board resolution is to be passed for the purpose of approval of the proposal for the conversion of an OPC into Private Limited Company or Public Limited Company.

The following approvals with subjected to the members’ approval:

Alteration of Articles of Association
Alteration of Memorandum of Association.
Conversion of a company into a Public or Private Limited Company.

The board resolutions passed to be intimated to the sole member by providing a notice of the resolutions that are passed at the board meeting. The resolution member providing the authority to the director to director to sign and submit e-form INC-5 and INC-6 digitally is required to be filed for the conversion of the company.

After the approval from the directors regarding the conversion of the company is obtained, the copy of the resolution is to be sent to shareholder/ member along with Notice of passing of such resolution. The member is required to submit the resolution for the conversion to the company.

Upon the approval of the shareholder for the conversion of the company, the board is required to proceed with the process of filing the application with the registrar of companies and comply with various other formalities.

Note: The Company must not be a defaulter in terms of appropriate submission of the financial statement or any documents due for filing with the Registrar.

Conclusion

The sole purpose of introducing OPCs in India was to boost entrepreneurship. It enables people to contribute to the economic growth of India. One Person Companies can convert to a private limited company after qualifying the criteria laid down by the Companies Act. The 2021 amendments have removed the stringent conditions associated with conversions of OPCs to cater to the growth of OPCs in India.

Partnership to LLP

Conversion of Partnership Firm into LLP (Limited Liability Partnership)

The shift from traditional partnerships to Limited Liability Partnerships (LLPs) has increased in recent years. The reason behind this is that LLPs offer more flexibility, unlimited partners and the like. But the real driving force behind the shift is due to the fact that LLPs offer a major advantage in terms of limited liability. The strain on the personal assets of the partner is put to rest when it comes to LLPs since they are hybrid of both a partnership and a private limited company. Small and medium-sized businesses find this type of organisation structure to suit their needs very well.

The advantages of the Limited Liability Partnership (LLP) form of business outweigh those of the traditional partnership. Limited liability, perpetual succession and unlimited partners are the key incentives for a partnership firm to convert itself into an LLP.

About This Plan

Get your Partnership Firm converted to Limited Liability Partnership in the fastest possible manner.

Timeline

It usually takes 20 to 25 working days.

Services Covered

DSC
Filing of MCA Form
Issue of Incorporation Certificate along with PAN and TAN
Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
Assistance in Opening Bank Account

Who Should Buy

Businesses looking to expand or scale operations on higher level
Startups looking to raise capital and issue ESOPs
Businesses looking to convert their private limited company to public ltd company
Businesses aiming to work globally or with reputed clients

How It’s Done

DSC Application
Name approval form filing
Preparation of Documents
Getting those docs signed by the respective stakeholders
Filing of e-Forms with ROC
Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.

Documents Required

Name of the Proposed LLP
Information related to the Partnership Deed of the partnership firm
Digital Signature Certificate of the Respective Partners
Authorised Capital of the LLP
Any information related to the contribution by the partners
Registered office information of the partnership limited entity
Identification Documents of the Partnership- Voter ID and other related information
Utility Bill of the Partnership Firm- Electricity Bill/ Water Bill or any other Bill
Evidence or Proof of the Registered Office of the Partnership (Lease deed/Ownership Documents) of the property
Permanent Account Number (PAN) of all the Partners of the Partnership
Audited Information related to the Partnership
Statements such as Bank Details of the Partnership
Main objects of the Partnership Business
NOC of the owner of the premises in case the premises is leased

Post Incorporation Documents

Copy of the Certificate of Incorporation of the LLP
Documents which are submitted for Fill IP

Convert Partnership Firm to LLP – Documents Required, Procedure

Partnership firms are at a disadvantage when compared to the newly introduced Limited Liability Partnership (LLP) as they do not provide limited liability protection for the partners, separate legal entity status, ability to take on unlimited number of partners and ease of ownership transfer. The introduction of LLP’s through the Limited Liability Partnership Act, 2008 has made LLPs the premier choice for small and medium sized businesses. Inciting tremendous interest among Partners of a existing Partnership firms to convert their firms into LLP. In this article we look at the process for conversion of partnership into LLP.

Why LLP over Partnership Firm ?

Apart from the key differences, there are a few features that make the LLP a more desirable option over a standard partnership firm:-

Freedom of Management/Flexibility: The partners are given a reasonable level of flexibility in conducting the operations and running the day to day affairs of the LLP. The LLP Agreement is not mostly influenced by the Limited Liability Partnership Act, 2008, which means to say that the Act is comparatively flexible on how the agreement can be drawn up.
Perpetual Succession: Unlike in the traditional partnership, the death of the partner does not affect the existence of the LLP. The separate legal entity feature of the LLP allows it to carry on business.
Investment Attraction: Foreign investors and venture capital funds look at LLPs as an investment opportunity as it has a corporate structure and is more organized as opposed to traditional partnerships.
Multidisciplinary LLPs: Professionals of various disciplines can work together in an LLP, which is an exclusive feature and an advantage in itself.
More Investment: Conversion of partnership to LLP would improve the amount of investment in the LLP. Through the process of conversion, the reputation of the entity would increase making more amounts of investors invest in the LLP.
Limited Liability: Conversion of partnership to LLP would automatically grant the status of limited liability to the partners. Limited liability would afford some form of independence to the partners of the firm. Limited liability separates the liability of the partners from the firm.
Foreign Direct Investment: The government of India has relaxed the regulations related to the FDI in an LLP. There is leniency for FDI in an LLP when compared to a partnership.

Conditions For Converting a Partnership Firm to LLP

The conversion of a partnership firm to LLP shall be done as per Section 55 of the Limited Liability Partnership Act 2008 read with Schedule II of the Act.
All the partners of the firm shall be the partners of the LLP, which means there shall be no new partners or the existing partners cannot cease to be partners while making the application
It is mandatory for all Partners to hold a valid Digital Signature Certificate (DSC) and at least two partners must have a DPIN before making such an application.
The partnership firm to be converted must be registered under the Partnership Act, 1932.
All the partners’ consent must be obtained.
The LLP must have the same partners as that of the partnership firm. Any partner that wishes to be removed from the LLP may be removed after the conversion is complete.
Director Identification Number (DIN)/Designated Partner Identification Number (DPIN) must be obtained for all Designated Partners.

Procedure for Conversion of a Firm From Partnership to LLP

Step I – Name Approval and DSC

Name Approval

Register and subsequently log on the MCA portal.
Under the MCA Services tab, the “RUN – LLP” option is to be selected.
RUN stands for Reserve Unique Name.
In the dropdown list, the option “Conversion of Firm into LLP” is to be selected.
Subsequently, there are two Proposed Names for the LLP to be given.
Further, any supporting documents may be uploaded in the PDF format, after which the “Submit” button is to be clicked on.
The page is redirected to a payment gateway where the fees amounting to Rs. 200 is to be paid for the form.
The reserved name then holds a validity period of 90 days.

Digital Signature Certificates

In order to proceed past the Name Incorporation stage, it is mandatory that the Designated Partners of the LLP possess their very own Digital Signature Certificates.
Every e-form requires the DSCs of the Designated Partners to be affixed to the relevant forms in order to ensure a successful submission.

Step II – Filing of the Forms with the RoC

Form 17 (Application and Statement for conversion of a firm into LLP)

The application form has to be filled in with information such as:

Service Request Number (SRN) of the RUN – LLP form.
Name of the Proposed LLP.
Name, address, registration and partnership agreement details of the firm.
Details regarding the number of partners, capital contribution to be provided.
Secured creditors details.

The following attachments are to be provided:

Statement of Consent of Partners of the firm.
Statement of assets and liabilities of the firm certified by a Chartered Accountant in practice.
Copy of the latest Income Tax Return acknowledgement.
List of all the secured creditors along with their consent.
Any other supporting information (optional).

Form FiLLiP (Form for incorporation of LLP)

The application form is to be filled in with:

Details of the RUN – LLP which will be auto-filed.
Registered office address and email id of the LLP.
Office of the Registrar.
Nature of business activities.
Details of the partners, designated partners, their DINs, DPINs and PANs.
Amount of contribution by the partners in the LLP.

Both the forms are to be e-signed by the proposed designated partners and certified by a Cost Accountant, a Company Secretary, or a Chartered Accountant or any of whom must be in whole-time practice. The fee to be paid will vary in relation to the amount of capital contribution.

Step III – Issue of Registration Certificate

The Certificate of Registration of the LLP shall be granted by the Registrar on approval of the application.

Step IV – LLP Agreement

The LLP Agreement has to be submitted in Form LLP – 3 within 30 days of incorporation of the LLP. It shall contain the following particulars:

Name of the LLP
Name of the designated partners and other partners
Form of capital contribution and profit sharing ratios
Rules governing the LLP
Rights and duties of the partners

Step V – Intimation to the Registrar of Firms

The Registrar of Firms has to be given intimation regarding the conversion into LLP and the related details of the LLP within 15 days from the date of the incorporation in Form – 14. The form has to be accompanied by:

– Copy of the LLP Incorporation Certificate.
– Copy of the incorporation documents submitted in Form FiLLiP. Once all these steps are complied with, it can be said that the conversion from a partnership to LLP is complete in all respects. Nevertheless, it is to be noted that the old licenses and permits do not transfer over to the LLP. They have to be freshly applied for post-conversion.

Registration

The Registrar, on receiving the relevant documents, may accept or refuse to register the LLP. If all documents are found correct in accordance with the provisions of the act, the Registrar shall issue a certificate of registration. The LLP will in less than 15 days of registration inform the Registrar of firms with which it is registered in Form 14. In the event of a refusal of registration by the Registrar, an appeal can be made with the tribunal.

Effect of Registration

An LLP shall come into existence by the name stated in the certificate of registration.
All the assets, liabilities, rights and privileges which vested in the firm shall vest in the LLP.
The firm shall stand dissolved, and if it was registered under the Indian Partnership Act 1932, it shall be removed from the records maintained.
All proceedings which were pending against the firm may be enforced against the LLP.
Any order or judgement either in favour or against the firm may be enforced against the LLP.
All existing contracts and agreements in which the firm was a party shall continue to be in force with the LLP as the party.
Every existing appointment of the firm or authority conferred on the firm shall be as if it were conferred on the LLP.

Partners Liability Before Conversion

Every partner will be jointly and severally liable for all the liabilities and obligations of the firm which were incurred before such conversion. If any partner discharges the obligation, then he shall be indemnified by the LLP.

Conversion Notice

The LLP shall provide for a period of 12 months, which begins from a date not later than 14 days after registration: – A statement that it was converted from a firm to a LLP as from the date of registration mentioned and – Name and registration number (if any) of the firm from which it was converted in every official correspondence of the LLP. In case the LLP contravenes the above provision it shall be punishable with a minimum fine of Rs 10,000 and a maximum fine of Rs 1,00,000. In case of continuing default, the minimum fine shall be Rs 50 per day, and the maximum shall be Rs 500 per day.

LLP Form No 17

This form is an application and statement for the conversion of a firm into an LLP. The form is divided into 2 parts: Part A: Application and Part B: Statement.

Information to be Furnished in Part A: Application

SRN of the Reserve Unique Number (RUN) form if it is already filed. If not the proposed name of the LLP.
Name and address of the firm.
Details of registration of the firm either under the Indian Partnership Act 1932 or under any other law.
Date of agreement which provides the details around the formation of the firm.
The total number of partners in the firm.
The total number of partners in the LLP, which shall be auto-populated from the details provided as per the previous proint.
Total capital contribution of the firm.
Details of the consent of all partners.
Details of all partners of the LLP being shareholders of the company and no one else.
Details of the income tax return filed under the Income Tax Act 1961.
Details of any pending proceedings in any court/tribunal/any other authority.
Whether any previous application for conversion has been refused by the Registrar. If yes, SRN and reasons for refusal need to be provided.
Details of any continuance of any conviction/order/judgement of any court/tribunal/other authority in favour or against the firm.
Whether there are any secured creditors. If yes, whether the consent of all secured creditors has been obtained for the conversion.
Whether any clearance or approval is required for the conversion into LLP. If yes whether the approval has been obtained.

Part B: Statement

Contents of the declaration

Consent by the partner for conversion from firm to LLP.
The partner shall state that he or she shall be liable both jointly as well as severally for all liabilities incurred before the conversion
He or she shall state: – That all the requirements as per the LLP Act 2008 and the rules have been complied with. – That all the partners of the firm are the partners of the LLP and no one else. – That all the required approvals have been obtained. – That the consent of all secured creditors has been obtained. – That all the information provided in the form is to the best of his knowledge and belief.

Attachments

Statement of Assets and Liabilities of a firm duly certified as true and correct by a Chartered Accountant in practice.
Statement of the consent of partners of the company.
List of all the secured creditors along with their consent to the conversion.
Copy of acknowledgement of the most recent income tax return.
Approval from any authority/body.
Optional attachment(s)-if any.

The e-form shall be digitally signed by a designated partner with details of DIN/DPIN of the designated partner and PAN number in case none of the designated partners have a DIN. The certification shall be done by a Chartered Accountant/Company Secretary/Cost accountant in full time practice. Selection of associate or fellow needs to be done, and membership number/certificate of practice number shall be provided. Intimation to the Registrar shall be provided in Form 14.

The following information shall be provided:

Name of the firm.

Principal address of the firm.

Details of the registration of the firm either under the Partnership Act 1932 or any other statute.

Particulars of the LLP into which the firm has been converted shall also be provided.

The copy of the certificate of incorporation of the LLP shall be attached, and the partner shall digitally sign the form.

Frequently Asked Questions:

What is one of the main requirements for conversion of partnership to LLP?

One of the main requirements for conversion of partnership to LLP is the requisite consent of all the individual partners of the firm. Apart from this all the compliances related to the conversion process must be fulfilled by the partners of the partnership company.

What is the strength of the partnership at the time of conversion?

At the time of conversion, the number of partners must be the same. There must not be any form of increase or decrease in the amount of partners.

How many names can be reserved for the LLP?

For the process of conversion of partnership into LLP, the name has to be reserved in advance by the partners of the firm. This procedure or process of name reservation can be conducted online. A maximum of six names would be allowed to be reserved for the partnership. Such names have to be in the order of preference for the partnership firm. The registrar may also ask the LLP to apply for a new name at the time of conversion of partnership into LLP.

What are the rules related to naming which is required to be followed by an LLP?

The following rules related to naming the partnership must be followed by the partners:

The name must not be against any rules of intellectual property in India.
The name of the LLP must be unique and distinctive in character.
It must not mislead any individual including the public.
The name of the LLP must not go against any public law or constitutional law of India.

What is the meaning of capital contribution in an LLP?

For conversion of partnership into LLP, the amount of capital contribution must be disclosed by the respective partners.

Does a director require having a DIN to run an LLP?

Usually, an LLP would have partners. Any director who is appointed to carry out the responsibilities of an LLP would have to have a director identification number (DIN). Such requirements have to be complied by the independent directors of an LLP.

How do I become a partner of an LLP?

The following pre-requisites must be followed for becoming a partner of an LLP:

The partner have to be more than 18 years of age
The partner must not have any form of disqualifications
The partner must not be criminally liable
The partner must not be insolvent.

What is the main regulatory authority for registering an LLP in India?

The main regulatory authority for registering an LLP in India is the Ministry of Corporate Affairs (MCA). However, the main regulatory authority for registering a partnership firm is the Registrar of Firms.

Is it possible for the LLP to change the number of partners of the firm?

Yes an LLP can only change the number of partners or add any new partners once the firm is converted.

pvt ltd to Public ltd

Conversion of Private Limited to Public Limited Company

Private limited companies are a dime a dozen, but every private limited company, at some point, wishes to turn public so as to increase scalability. The question generally put across is, “Why go public?” The answer lies in certain distinct differences that arise between private limited companies and public limited companies.

Public companies offer the option of Initial Public Offering (IPO). Here, by going public, the company is offering its shares to the general public.
The option of IPO thereby removes the restriction on the transferability of shares, which is a feature of private limited companies.
There is no cap with regards to the maximum number of members in a public limited company, thereby allowing them to raise and gain easy access to funding. Therefore, growth and flexibility are ideally the reasons for the switch from private to public.

A Public Company has seven or more members and can invite public to subscribe to its shares. A subsidiary company of a Public company is deemed to be a Public company.

A Private company is an organization which limits its number of members to 200 and cannot invite public to subscribe to its shares. The Companies Act, 2013 provides for converting a Public Company to a Private Company by altering the MOA and AOA of the company.

The main advantage of Public Company is that it can raise reserves at a large scale without approaching banking system and reducing debt whereas Private Companies which are privately owned, all the reserves are raised by existing members, shareholders and promoters. If a Private company goes public then the risk is also shared among the shareholders. Public companies once recorded, get indirect promotions and support through stock exchange websites where their stocks are recorded.

Conversion of Private Limited Company to Public Limited Company is done through Witcorp for the peace of mind and fast processing.

About This Plan

Get your private limited company converted to public limited in the fastest possible manner.

Timeline

It usually takes 20 to 25 working days.

Services Covered

DSC (2 nos)
Filing of SPICe+ Form
Issue of Incorporation Certificate along with PAN and TAN
Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
Assistance in Opening Bank Account

Who Should Buy

Businesses looking to expand or scale operations on higher level
Startups looking to raise capital and issue ESOPs
Businesses looking to convert their private limited company to public ltd company
Businesses aiming to work globally or with reputed clients

How It’s Done

DSC Application
Name approval form filing
Preparation of Incorporation Documents
Getting those docs signed by the respective stakeholders
Filing of e-Forms with ROC
Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.

How It’s Done

Name, Contact Number and Email Id of all the Stakeholders.
Directors Identification Number, if already.
Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.
Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.
Latest Month Personal Bank statement of all the Stakeholders.
Specimen Signatures of all Stakeholders.
Few Proposed Business Names along with Objects.
Latest Electricity Bill/Landline Bill of Registered Office.
NOC from owner of registered office, If Owned.
Rent Agreement from Landlord, If Rented/Leased.
Brief description of main business activities of the proposed Company.
Shareholding pattern (50:50 or 60:40) between the Stakeholders.
Authorised & Paid Up Share Capital of the Company.

What is a Private Limited Company and a Public Limited Company?

Let us have a brief understanding of what is private and public limited company.

A company that is privately held for small businesses. The liability of the members of a private limited company is restricted to the number of shares respectively held by them. The shares of a private limited company can’t be traded.

A company whose shares are traded on a stock exchange and can be purchased and traded by anyone. It is also called a publicly held company. As the name suggests, a public limited company is a company that offers company shares to the general public. The Company’s Act 2013 also defines a public limited company as one that has limited liability and offers company shares to the public. Anyone can acquire the stocks of such a company either through stock-market trading or via IPOs ( Initial Public Offerings).

Benefits of a Public Limited Company

Quick Share Transfer

Shareholders of a public limited company can transfer their shares with great ease. All they need to do is file the share transfer form and hand over the share certificate to the buyer. The process of transferring a share to another business structure is very tedious.

Raise Capital

The advantage of the public limited structure is that you can leverage it to raise capital from the general public through shares. This would, however, require listing on a stock exchange. All public limited companies can issue fixed deposits, debentures, convertible debentures to the general public.

Greater Credibility

Public limited companies need to disclose their audited statement of accounts, inform the regulatory bodies of any structural change, and hold annual general body meetings for all shareholders. These compliance procedures bring a great deal of credibility to the organization.

Increase in Reputation

Conversion of private limited to public limited company would increase the reputation of the company. A public limited company is allowed to list its shares in the public stock exchange. Automatically this process of listing the shares in the public stock exchange would increase the reputation of the company.

Acceptance of Deposits

Any public company is allowed to accept deposits under section 76 of the Companies Act, 2013.

Procedure for Conversion into a Public Limited Company

Procedure for Conversion into a Public Limited Company (pursuant to applicable provisions of the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014):

Board Meeting:

The Directors are to be issued a notice regarding the agenda of the Board Meeting. This notice has to be issued to their respective registered addresses at least 7 days prior to the date on which the Board Meeting is to be held. The following matters have to be included in the agenda of the Board Meeting for discussion: – Approval of the shareholders regarding –

Adoption of a new/amended Memorandum of Association (MOA).
Adoption of a new/amended Articles of Association (AOA).
Conversion of the private limited company into a public limited company.

– Approval for conducting an EGM and the subsequent authorization of a person to be in charge of circulation of the notice regarding the EGM.
– The date, time and place for the EGM has to be fixed as well.
– Passing of a Board Resolution for the increase in the number of directors, as a public limited company would mandate a minimum of 3 directors as per the provisions under Section 149(1)(a) of the Companies Act 2013.

Issuance of a notice regarding EGM and holding the EGM:

Once the Board Meeting has taken place, the Director/Company Secretary so appointed to circulate the notice regarding the EGM may issue to the notice to all of the following:

– Directors
– Shareholders
– Auditors

The notice of the EGM has to be given not less than 21 days prior to the date on which the EGM is to be held. However, a shorter notice period can be given if and only if the consent is given by not less than 95% of the members who are entitled to vote at the meeting. The consent has to be obtained either through:-

– Writing
– Electronic mode At the EGM, the resolutions will be passed subject to the approval of the shareholders.

Filing of the form with RoC:

Once the resolutions are passed in the EGM, the formalities with regard to form filing with the Registrar of Companies has to be completed within the stipulated time frame.

a)E-Form MGT – 14: This form has to be filed with the RoC within 30 days of passing the respective resolutions along with the prescribed fees. The form is be filed on the MCA portal, with the following attachments:

Notice of the EGM along with the Explanatory Statement as per Section 102 of the Act.
Certified copies of the resolutions which are passed in the EGM. – Copy of the new MOA.
Copy of the new AOA.

b)E-Form INC – 27: This form is specifically for the application for conversion of a private limited company into a public limited company. This form has to be filed with the RoC within 15 days after passing of the resolutions in the EGM. The following documents are to be enclosed along with the form:

Minutes of the meeting.
Copy of the new AOA.
Copy of the new MOA.
Copy of the resolution(s) passed at the EGM.
List of the members of the company along with the essential details

Benefits of Conversion of Private Limited to Public Limited

In India, the benefits of conversion of Private Limited to Public Limited are as follows:

A Public Company can issue shares to the public to raise investments;
A Public Company can list its shares on a recognized stock exchange. It means that more people will get information about its functions, thereby increasing brand recognition.
A Public limited company can transfer its shares in comparison to a private limited company. It means that a shareholder is not bound to be with the company forever and can easily sell shares for a profit.
A Public Company can accept deposits from the public under section 76 of the Companies Act, 2013.

Minimum Requirements for Conversion of Private Company to Public Company

Digital Signature Certificate (DSC) – A digital signature certificate has to be created for at least one director.
Seven members as Shareholders- Seven members have to be appointed as shareholders of the company to be a public limited company.
Director Identification Number for all the Directors- All the directors need a director identification number (DIN).
Shareholder and Director- An individual can be appointed as a shareholder and a director.
Three Directors- Apart from this to operate, the public company has to have minimum of three directors.

Regulatory Framework for Conversion of Private Company to Public Company

The primary regulatory authority for conversion of private limited to public limited company is the Registrar of Companies and the Ministry of Corporate Affairs.

Apart from the above regulatory bodies, the Companies Act, 2013 and respective rules would apply for conversion of private limited to public limited company.

Section 2(68) defines the meaning of private companies under the Companies Act, 2013. These companies are not allowed to transfer their shares as per the articles of association of the company. Section 2(71) provides the meaning of public limited companies under the companies act, 2013. These companies are allowed to transfer their shares and also list shares as per the requirements of the stock exchange.
Section 3 of the Companies Act- Such section would relate to the objects of the company. The objects clause is present in the Memorandum of Association (MOA). The company has to change the objects clause for converting into a public limited company.
Section 18 of the Companies Act- This section provides that the company can go for the process of conversion of private limited to public limited company. Alteration of the MOA and AOA has to be carried out as per the requirements of the companies act, 2013.
Section 149 of the Companies Act- Such section relates to the appointment of directors of the company. A public limited company has more directors that a private limited company.
Section 13 along with Rule 29 of the Companies (Incorporation) Amendment Rules, 2020- When going for conversion of private limited to public limited company, the MOA has to be altered.
Section 14 along with Rule 33 of the Companies (Incorporation) Amendment Rules, 2020- This provision and section relates to alteration of the AOA of the Company.

Post-Compliance requirements for Conversion of Private Limited to Public Limited Company

The following post-compliance requirements have to be carried out by the company in order to comply with the requirements of the Companies Act, 2013:

Frequently Asked Questions:

→ What are one of the most important compliance requirements for conversion of private limited to public limited company?

One of the most important compliance requirements after converting a private limited company to a public limited company is to change the name of the company.

→ What is the minimum number of directors and shareholders which a public limited company has?

A public limited company has a minimum of seven shareholders and three directors.

→ Summarise the process of conversion of private limited to public limited company?

First the board meeting has to be held. For this a notice must be provided to all the directors. Once the board meeting is held, the agendas and various resolutions must be discussed. Apart from this the amendments of the MOA and AOA should take place. The schedule to holding the EGM must be considered in the board meeting. In the EGM a special resolution must be passed by the majority regarding the conversion of private limited to public limited. After this is considered the same must be filed with the ROC along with MGT-14 and INC-27. If the ROC considers that all requirements have been fulfilled, then the certificate of incorporation would be provided for the new company.

→ How long is the process to convert a private limited company to a public limited company?

Usually the process to convert a private limited company to a public limited company would take a period of 30 days.

→ What is the difference between clear days and working days?

Clear days would include just the days which it takes for a particular transaction or process to occur. For example, if the filing is done on Thursday evening, then for the purpose of calculating the amount of clear days the time from Friday is only taken. However, for business days the time from Thursday would be taken for calculation.

→ Who controls and has authority over the public limited company?

The main individuals having authority over the public limited company are the directors and shareholders of the public limited company.

→ Do I have to pay any additional fees during the time of conversion of private limited to public limited company?

No, any additional fee should not be provided for the process of conversion of private limited to public limited company. A fee should not be paid even when the registrar issues the certificate of incorporation for the public limited company.

Witcorp India Advisors LLP