Legal Provisions and Process for Conversion to LLP – Firm | Private | Unlisted Public Company

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  • Last Updated on 24 September, 2024

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Conversion to LLP

Conversion to LLP refers to the process by which an existing firm, private company, or unlisted public company is transformed into a Limited Liability Partnership (LLP) under the provisions of the LLP Act, 2008. This conversion allows businesses to retain the benefits of a partnership structure while enjoying the limited liability protection similar to that of a company. To convert, entities must meet eligibility criteria, such as ensuring all partners or shareholders become partners of the LLP and that there is no subsisting security interest on assets. The process involves filing necessary documents with the Registrar of Companies, after which the LLP assumes all assets, liabilities, and obligations of the previous entity.

Table of Contents

  1. Legal Provisions Regarding Conversion to LLP
  2. Provisions of the Act
  3. Eligibility for Conversion
  4. Documents to be Filed for Conversion
  5. Certification by Registrar
  6. Effects of Registration
  7. Notice of Conversion in Correspondence
  8. Penalty

The concept of LLP provides the benefits of limited liability with perpetual succession. To enable the existing firms, private companies and unlisted public companies avail the benefits of LLP structure, they are allowed to convert to an LLP in accordance with the provisions of the LLP Act.

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1. Legal Provisions Regarding Conversion to LLP

Notes:

  1. Unlisted Public Company: Unlisted company means a company which does not have any of its securities listed on any stock exchange. They are registered as a public company and have minimum share capital, as may be prescribed, and seven as minimum number of members. There is no limit on maximum number of members. Its shares are not available for trading to general public.
  2. The Rules do not prescribe any minimum paid up capital. Therefore, there is no requirement of minimum paid up capital at present.

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2. Provisions of the Act

Conversion from Firm to Limited Liability Partnership Conversion from Private Company to LLP Conversion from Unlisted Public Company to LLP
A partnership firm may be converted into a LLP in accordance with the provisions of section 55 and the Second Schedule of the LLP Act, 2008. The provisions of conversion of partnership firm to LLP are discussed below: A private company may be converted into a LLP in accordance with the provisions of section 56 and the Third Schedule of the LLP Act, 2008. The provisions of conversion of private company to LLP are discussed below. An unlisted public Company may be converted into a LLP in accordance with the provisions of section 57 and the Fourth Schedule of the LLP Act, 2008. The provisions of conversion of unlisted public company to LLP are discussed below.

3. Eligibility for Conversion

Conversion from Firm to Limited Liability Partnership

 Conversion from Private Company to LLP Conversion from Unlisted Public Company to LLP
A firm (registered or unregistered) may apply to convert into a LLP only if all of its partners and no one else becomes partners of the LLP.

If any other partner is to be inducted or any partner is to be dropped that can be done after that LLP comes into being and in accordance with the LLP agreement.

 A company may convert into a LLP if:

(a) There is no security interest in its assets subsisting or in force at the time of application (all the assets of the private company must be free from encumbrance of any kind) and

(b) All the shareholders of the company and no one else becomes the partner of the LLP.

 A company may convert into a LLP if

(a) There is no security interest in its assets subsisting or in force at the time of application.

(b) All the shareholders of the company and no one else becomes the partners of the LLP. (If any shareholder is unwilling or not able to join the conversion process. Then other shareholders of the  company are is to acquire his shareholding by as per the company’s AOA before the company lodges the application for conversion).

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4. Documents to be Filed for Conversion

Conversion from Firm to Limited Liability Partnership

 Conversion from Private Company to LLP Conversion from Unlisted Public Company to LLP
A firm may apply to convert into a limited liability partnership by filing with the Registrar:

1. A statement by all of its partners in Form 17 along with requisite fee containing the following particulars:

(i) the name and registration number (if applicable) of the firm and

(ii) the date on which the firm was registered under the Indian Partnership Act, 1932 or under any other Law if applicable.

Following documents have to be attached with Form 17

(a) Statement of consent of all partners,

(b) Statement of Assets and Liabilities of the firm duly certified as true and correct by a practicing Chartered Accountant,

(c) Copy of acknowledgement of latest income-tax return,

(d) Approval from any body/authority if required,

(e) List of all the creditors along with their consent to the conversion.

The statement is to be signed by a designated partner who shall state that

(a) All requirements of the LLP Act and the rules made have complied with in respect of conversion of the firm into LLP.

(b) All partners of the firm are partners of LLP.

(c)    All approvals/clearance for conversion have been obtained.

(d)  Consent of all creditors of the firm have been obtained.

(e)   All information in this Form and its attachment are correct and complete.

The statement shall be certified by a either a practicing:

(i) Company Secretary or

(ii) Chartered Accountant or

(iii) Cost Accountant

that all requirements of the Act have been complied with in respect of conversion of firm into LLP.

2. Incorporation document and statement referred to in Section 11.

 A private company may apply to convert into a LLP by filing with the Registrar:

1. A statement by all of its members in Form 18 along with requisite fee containing the following particulars:

(i) The name and registration number of the company and

(ii) The date on which the company was incorporated Following documents have to be attached with the form.

(a) Statement of consent of all shareholders.

(b) Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.

(c) List of all the unsecured creditors along with their consent.

(d) Approval from any other body/authority.

The Statement is to be signed by a designated partner who shall state that:

(a) All requirements of the LLP Act and the rules made have been complied with in respect of conversion of the company into LLP.

(b) All the partners of the LLP comprise all the shareholders of the company and no one else.

(c)All approvals/clearance for conversion have been obtained.

(d) Consent of all the unsecured creditors for conversion of the company has been obtained.

(e) All the documents due for filing including latest balance sheet and annual return have been filed under the provisions of the Companies Act, 2013.

(f) All information in this form and its attachment are correct and complete.

The statement shall be certified by either a practising:

(i) Company Secretary

(ii) Chartered Accountant

(iii) Cost Accountant

that all requirements of the Act have been complied with in respect of conversion.

2. Incorporation document and statement referred to in Section 11.

 An unlisted public company may apply to convert into a LLP by filing with the Registrar.

1. A statement by all of its members in Form 18 along with requisite fee containing the following particulars:

(i) The name and registration number of the company and

(ii) The date on which the company was incorporated. Following documents have to be attached with the form.

(a) Statement of consent of all shareholders.

(b) Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.

(c) List of all the unsecured creditors along with their consent

(d) Approval from any other body/authority.

The Statement is to be signed by a designated partner who shall state that:

(a) All requirements of the LLP Act and the rules made have been complied with in respect of conversion of the company into LLP.

(b) All the partners of the LLP comprise all the shareholders of the company and no one else.

(c) All approvals/clearance for conversion have been obtained.

(d) Consent of all the unsecured creditors for conversion of the company has been obtained.

(e) All the documents due for filing including latest balance and annual return have been filed under the provisions of the Companies Act, 2013.

(f) All information in this form and its attachment are correct and complete

that all requirements of the Act have been complied with in respect of conversion.

2. Incorporation document and statement referred to in Section 11.

5. Certification by Registrar

Conversion from Firm to Limited Liability Partnership

 Conversion from Private Company to LLP Conversion from Unlisted Public Company to LLP
(a) Registration: On receiving the documents, if ROC is satisfied he shall register the documents and issue a certificate of registration stating that the limited liability partnership has come into existence and from the date specified in the certificate. LLP shall within 15 days of the registration inform the Registrar of Firms with which it was registered under the Indian Partnership Act (or any other law) about the conversion of firm into LLP.

(b) Refusal to Register: If Registrar is not satisfied with information furnished by the firm. The Registrar may ask for clarification from the firm, if he is still not satisfied he can reject the application for conversion. The appeal may be made by the firm before the Tribunal in case of refusal of registration by the Registrar.

 (a) Registration: On receiving the documents, if ROC is satisfied he shall register the documents and issue a certificate of registration stating that the limited liability partnership has come into existence on and from the date specified in the certificate. LLP shall within 15 days of the registration inform the Registrar of Companies with which the company was registered about the conversion and of the particulars of the LLP.

(b) Refusal to Register: If Registrar is not satisfied with information furnished by the company, the Registrar may ask for classification from the company, if he is still not satisfied he can reject the application for conversion. The appeal may be made by the company before the Tribunal in case of refusal of registration by the Registrar.

 (a) Registration: On receiving the documents, if ROC is satisfied he shall register the documents and issue a certificate of registration stating that the limited liability partnership has come into existence and from the date specified in the certificate. LLP shall within 15 days of the registration inform the Registrar of companies with which the company was registered about the conversion and of the particulars of the LLP.

(b) Refusal to Register: If Registrar is not satisfied with information furnished by the company, the Registrar may ask for clarification from the company if he is till not satisfied he can reject the application for conversion. The appeal may be made by the company before the Tribunal in case of refusal of registration by the Registrar.

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6. Effects of Registration

Conversion from Firm to Limited Liability Partnership

 Conversion from Private Company to LLP Conversion from Unlisted Public Company to LLP
On and from the date of registration specified in the certificate of registration issued there shall be:

  1. Existence of LLP: There shall be an LLP by the name specified in the certificate of registration.
  2.  Transfer of assets and liabilities: All tangible (movable and immovable) as well as intangible property vested in the firm, all assets, interests, rights, privileges, liabilities, obligations relating to the firm and the whole of the undertaking of the firm shall be transferred to and shall vest in the LLP automatically.
  3. Dissolution of firm: The firm shall be deemed to be dissolved and if registered it shall be removed from the records maintained under that Act.
  4. Registration in relation to property: If any property is registered with any authority, the LLP shall as soon as possible, after the date of registration, notify the relevant authority of the conversion and of the particulars of the LLP.
  5. Pending proceedings: All proceedings by or against the firm which are pending in any Court or Tribunal before any authority on the date of registration may be continued, completed and enforced by or against the LLP.
  6. Continuance of conviction, ruling, order or judgement: Any conviction, ruling, order or judgement of any Court, Tribunal or other authority in favour of or against the firm may be enforced by or against the LLP.
  7. Existing agreements: Every agreement to which the firm was a party immediately before the date of registration, shall have eěect as from that date as if; the LLP were a party to such an agreement instead of the firm
  8. Existing contracts: All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the date of registration relating to the firm or to which the firm is a party, shall continue in force on and after that date as if they relate to the LLP and shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto instead of the firm.
  9. Continuance of employment: Every contract of employment shall continue to be in force on or after the date of registration as if the LLP were the employer instead of the firm.
  10. Existing appointment, authority or power:
    (a) Every appointment of the firm in any role or capacity which is in force immediately before the date of registration shall take effect and operate from that date as if the LLP were appointed.
    (b) Any authority or power conferred on the firm which is in force immediately before the date of registration shall take eěect and operate from that date as if it were conferred on the LLP.
  11. Approval, permit or license: If any approval, permit or license has been issued to the firm under any other Act before the date of registration then such approval, permit or license shall continue even after conversion of firm to LLP. As per the law under which the approval permit or license was issued.
  12. Partner liable for liabilities and obligations of firm before conversion: Partners of the firm converted to LLP continue to be personally liable (jointly and severally with the LLP) for the firm’s liabilities and obligations pertaining to the pre-conversion period. (This shows that a person cannot escape from his liabilities by reason of a mere change of his legal status and if partner is liable to an unlimited extent he shall remain so after conversion). If a partner of the firm personally discharges the firm’s liability, he is entitled to be indemnified by the LLP subject to any agreement with the LLP.
 On and from the date of registration specified in the certificate of registration issued there shall be:

  1. Existence of LLP: There shall be an LLP by the name specified in the certificate of registration.
  2. Transfer of assets and liabilities: All tangible (movable and immovable) as well as intangible property or vested in the company, all assets, interests, rights,             privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the LLP automatically.
  3. Dissolution of company: The company shall be deemed to be dissolved and removed from the records of the Registrar of Companies.
  4. Registration in relation to property: If any property is registered with any authority, the LLP shall as soon as possible, after the date of registration, notify the relevant authority of the conversion and of the particulars of the LLP.
  5. Pending proceedings: All proceedings by or against the company which are pending in any Court or Tribunal or before any authority, on the date of registration may be continued, completed and enforced by or against the LLP.
  6. Continuance of conviction, ruling, order or judgement: Any conviction, ruling, order or judgement of any Court, Tribunal or other authority in favour of or against the company may be enforced by or against the LLP.
  7. Existing agreements: Every agreement to which the company was a party immediately before the date of registration, shall have right as if; the LLP were a party to such an agreement instead of the company
  8. Existing contracts: All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the date of registration relating to the company or to which the company is a party, shall continue in force on and after that date as is they relate to the LLP and shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto instead of the company.
  9. Continuance of employment: Every contract of employment shall continue to be in force on or after the date of registration as if the LLP were the employer instead of the company.
  10. Existing appointment, authority or power:
    (a) Every appointment of the company in any role or capacity which is in force immediately before the date of registration shall take effect and operate from that date as if the LLP were appointed.
    (b) Any authority or power conferred on the company which is in force immediately before the date of registration shall take eěect and operate from that date as if it were conferred on the LLP.
  11. Approval, permit or license: If any approval, permit or license has been issued to the company under any other Act before the date of registration then such approval, permit or license shall continue even after conversion of company to LLP. SAs per the law under which the approval, permit or license was issued.

 

 On and from the date  of registration specified in the certificate of registration issued there shall be:

  1. Existence of LLP: There shall be a LLP by the name specified in the certificate of registration.
  2. Transfer of assets and liabilities: All tangible (movable and immovable) as well as intangible property vested in the company, all assets, interests, rights,             privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the LLP automatically.
  3. Dissolution of company: The company shall be deemed to be dissolved and removed from the records of the ROC.
  4. Registration in relation to property: If any property is registered with any authority, the LLP shall as soon as possible, after the date of registration, notify the relevant authority of the conversion and of the particulars of the LLP.
  5. Pending proceedings: All proceedings by or against the company which are pending in any Court or Tribunal or before any authority on the date of registration may be continued, completed and enforced by or against the LLP
  6. Continuance of conviction, ruling, order or judgement: Any conviction, ruling, order or judgement of any Court, Tribunal or other authority in favour of or against the company may be enforced by or against the LLP.
  7. Existing agreements: Every agreement to which the company was a party immediately before the date of registration, shall have as if; the LLP were a party to such an agreement instead of the company
  8. Existing contracts: All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the date of registration relating to the company or to which the company is a party, relate to the LLP and shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto instead of the company.
  9. Continuance of employment: Every contract of employment shall continue to be in force on or after the date of registration as if the LLP were the employer instead of the company.
  10. Existing appointment, authority or power:
    (a)  Every appointment of the company in any role or capacity which is in force immediately before the date of registration shall take effect and operate from that date as if the LLP were appointed.
    (b) Any authority or power conferred on the company which is in force immediately before the date of registration shall take eěect and operate from that date as if it were conferred on the LLP.
  11. Approval, permit or license: If any approval, permit or license has been issued to the company under any other Act before the date of registration then such approval, permit or license shall continue even after conversion of company to LLP. As per the law under which the approval permit or license was issued

7. Notice of Conversion in Correspondence

Conversion from Firm to Limited Liability Partnership

 Conversion from Private Company to LLP Conversion from Unlisted Public Company to LLP
To keep all concerned parties informed of this transition, the LLP shall ensure that for a period of 12 months commencing not later than 14 days after the date of registration, every official correspondence of the LLP bears the following:

(a) a statement that it was as from the date of registration, converted from a firm into a LLP and

(b) the name and registration number (if any) of the firm from which it was converted.

 The LLP shall ensure that for a period of 12 months commencing not later than 14 days after the date of registration, every official correspondence of the LLP bears the following:

(a) a statement that it was as from the date of registration, converted from a company into a LLP and

(b) the name and registration number of the company from which it was converted.

 The LLP shall ensure that for a period of 12 months commencing not later than 14 days after the date of registration, every official correspondence of the LLP bears the following:

(a) a statement that it was as from the date of registration, converted from a company into a LLP and

(b) the name and registration number of the company from which it was converted.

8. Penalty

Conversion from Firm to Limited Liability Partnership

 Conversion from Private Company to LLP Conversion from Unlisted Public Company to LLP
If any LLP contravenes with above provision of notice of conversion it shall be punishable with:

(a) fine which shall not be  less than ₹ 10,000 but which  may  extend to ₹ 1,00,000 and

(b) with further fine which shall not be less than ₹ 50 but which may extend to ₹ 500 for every day after the first day after which the default continues.

 Any LLP which contravenes the above provision of notice of conversion shall be punishable with:

(a) fine which shall not be  less than ₹ 10,000 but which  may  extend to ₹ 1,00,000 and

(b) with further fine which shall not be less than ₹ 50 but which may extend to ₹ 500 for every day after the first day after which the default continues.

 Any LLP which contravenes the above provision of notice of conversion of shall be punishable with:

(a) fine which shall not be  less than ₹ 10,000 but which  may  extend to ₹ 1,00,000 and

(b) with further fine which shall not be less than ₹ 50 but which may extend to ₹ 500 for every day after the first day after which the default continues.

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

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