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Conversion of a Private Limited Company into a Limited Liability Partnership

Conversion of a Private Limited Company into a Limited Liability Partnership (LLP)

Under the Companies Act, 2013 and the Limited Liability Partnership Act, 2008, a Private Limited Company can be converted into a Limited Liability Partnership (LLP), provided the company meets certain conditions and follows the prescribed procedure. The conversion allows the company to take advantage of the flexibility and tax benefits of an LLP structure while retaining the limited liability of its members.

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    Pre-Requisites for Conversion of Private Limited Company into LLP:

    1. Unanimous Member Approval: All members of the company must consent to the conversion decision.
    2. Conversion of Members to Partners: Upon conversion, all members of the company will become partners in the LLP, and no one outside the existing membership can join.
    3. Income Tax Return: The latest filed Income Tax Return (ITR) of the company must be submitted to the Registrar of Companies (ROC).
    4. Creditor Consent: In addition to the members, all creditors of the company must also provide their consent for the conversion.
    5. No Pending Prosecution: There should be no ongoing prosecution against the company under the Companies Act.
    6. No Unresolved Charges: The company should not have any unsatisfied (open) charges or pending liabilities.
    7. Annual Filings: At least one balance sheet and one annual return should have been filed by the company after incorporation.
    8. Share Capital Requirement: The company must have share capital.
    9. Exclusion of Section 8 Companies: The company must not be a Section 8 company (non-profit organization).

    Procedure for Conversion of Company into LLP:

    Step 1: Board of Directors Meeting

    1. Unanimous Member Approval: All members of the company must consent to the conversion decision.
    2. Conversion of Members to Partners: Upon conversion, all members of the company will become partners in the LLP, and no one outside the existing membership can join.
    3. Income Tax Return: The latest filed Income Tax Return (ITR) of the company must be submitted to the Registrar of Companies (ROC).
    4. Creditor Consent: In addition to the members, all creditors of the company must also provide their consent for the conversion.
    5. No Pending Prosecution: There should be no ongoing prosecution against the company under the Companies Act.
    6. No Unresolved Charges: The company should not have any unsatisfied (open) charges or pending liabilities.
    7. Annual Filings: At least one balance sheet and one annual return should have been filed by the company after incorporation.
    8. Share Capital Requirement: The company must have share capital.
    9. Exclusion of Section 8 Companies: The company must not be a Section 8 company (non-profit organization).

    Step 2: Application for Name Reservation

    • File for Name Reservation: The company must apply for the reservation of its LLP name using Form RUN-LLP.
    • Obtain Name Approval: After submission, the company must receive a Name Approval Certificate from the ROC.

    Step 3: Filing of Incorporation Form

    • Submit Form FiLLiP: The company must file e-Form FiLLiP for incorporation of the LLP with the ROC.
    • Required Attachments:
      • Proof of the LLP’s registered office address (e.g., utility bill, NOC, and ownership proof).
      • Subscription sheet signed by partners.
      • Consent from partners to act as designated partners.
      • Identity and residential proof of designated partners and partners.
      • Details of any other LLPs or companies where the partners are serving as directors or designated partners.

    Step 4: Filing Application for Conversion

    • File E-Form 18: The company must file e-Form 18 for the conversion to LLP with the ROC.
    • Attachments Required:
      • Shareholder consent statement (mandatory).
      • Audited statement of accounts for the company, certified by an independent auditor.
      • List of all secured creditors, with their consent.
      • Acknowledgement of the latest Income Tax Return (mandatory).

    Step 5: Certificate of Incorporation as LLP

    • ROC Approval: After verifying that all requirements are met, the ROC will issue the Certificate of Incorporation confirming the conversion of the company into an LLP.

    Step 6: Drafting the LLP Agreement

    • File E-Form 3: After conversion, the LLP must file e-Form 3 with the ROC to formalize the LLP agreement between the partners.
    • Timeline: This form must be filed within 30 days from the date of the company’s conversion into an LLP.
    • Required Attachment: A copy of the signed LLP Agreement.

    Conclusion:

    Converting a Private Limited Company into a Limited Liability Partnership (LLP) requires careful adherence to the prescribed process under the LLP Act and Companies Act. Following the steps above ensures that the conversion is compliant with all regulatory requirements and results in a smooth transition from a company structure to an LLP with benefits such as reduced compliance and enhanced operational flexibility.

    Feel free to contact us for assistance with the conversion process or any related queries. We are here to guide you through every step of the conversion efficiently.