In India, formation of Business in form of a Company, specifically private company, is most favoured form with respect to other alternatives as available for business like Proprietorship, Society, Firm, LLP etc. Although when considered from the prospective of legal entity and perpetual succession as a feature of form of business after Company, formation of LLP is considered to be apt.
2. Basics and Reasons for
Conversion
In India, formation of Business in form of a Company, specifically private company, is most favoured form with
respect to other alternatives as available for business like Proprietorship, Society, Firm, LLP etc. Although when
considered from the prospective of legal entity and perpetual succession as a feature of form of business after
Company, formation of LLP is considered to be apt.
Reason being LLP provides the status of a body corporate with less compliance and limited management
obstacles. In the current scenario, some businessman already running their business through companies thinks it
fit to convert its Company into LLP due to below given reasons:
╸ Regulatory authorities are becoming stricter by introducing new corporate governance for Companies
╸ Increasing penalties and imprisonment for non-compliance of provisions
╸ To retain control over business by few people
╸ Easy management
╸ More emphasis and focus on growth of business
╸ Cost Saving for legal compliances
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3. What is Limited Liability
Partnership
A partnership which got registered itself under The LLP Act, 2008 whereby partners intends to carry an objective
clearly mentioned through an agreement known as LLP Agreement. Below given are some features of LLP as
provided under LLP Act, 2008.
╸ Status of body corporate: LLP is a body corporate which enjoys status of separate legal entity and perpetual
succession.
╸ Designated Partners and Partners: LLP shall have at least two designated partners who are individuals and at
least one should be resident in India, Body corporates can also be members of LLP then nominee of such
body corporates will be considered as designated partner.
╸ LLP Agreement: All the mutual rights and liabilities of partners will be governed by LLP agreement including
its objectives, duties, manner of induction and cessation, termination and other important clause.
╸ Partner Status: Every Partner of LLP is agent of LLP for the purpose of carrying business of LLP.
╸ Liability: Partners are not held personally liable directly or indirectly solely for the reason of being partners,
unless they have acted without authority and breached clauses of partnership by wrongful act.
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4. Difference in LLP and
Private Company
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Particular Limited Liability Partnership Private Company
Act LLP is governed by LLP Act, 2008 Companies are governed by Companies Act,
2013
Primary Document LLP agreement MOA & AOA
Name Name shall have word “LLP” Name shall have word “Private Limited
Company”
Minimum number of partners/
directors
Minimum 2 Designated Partners Minimum 2 Directors
Maximum number of
partners/members
No limit on maximum partners Maximum 200 members with exclusions
given in definition
Books of Accounts Within 6 months from end of financial year,
prepare statement of asset & liability and shall
be signed by designated partners,
Within 6 months of end of financial year,
prepare Balance Sheet and P&L account to
be adopted by members in AGM.
Compliance Lesser Compliance Various Compliance
Statement of Accounts File E Form 8 within 6 months of closure of
financial year
File E-form AOC 4 within 30 days from the
date of adoption of accounts at AGM
5. Process to Convert
Company to LLP
Section 56 of Chapter X and third schedule of LLP Act, 2008 mentions the provisions for conversion of Private
Company into LLP. A Private Company may apply to convert itself into LLP in accordance with third schedule after
following below given procedure:
1. Any director or person authorised by the Board will dispatch a notice to call for Board Meeting. Notice shall be give
as per section 173 of Companies Act, 2013 read with SS 1 on Board Meetings.
2. Conduct Board Meeting and analyse the proposal of conversion of Company to LLP.
3. Post approval, dispatch notices for calling an EGM/ AGM to all the members in accordance with provisions section
101 of Companies Act,2013 read with SS 2 on General Meetings.
4. Approval of Members through unanimous Resolution at an EGM/ AGM for conversion of Company to LLP and file E
form MGT-14 with the ROC.
5. Make an application in Form RUN_LLP with CRC and get name approval and thereafter file FiLLiP.
6. After approval, file E-form 3 within 30 days with the CRC and file E Form 18 for application for conversion and filing
statement for conversion of a Company into LLP.
7. After approval of incorporation & Form 18, form 14, required to be filed within 15 days for intimating the Registrar of
Firms about conversion of Company into LLP.
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6. Condition for Conversion
╸ All shareholders of the Company should become partners of LLP and no else cannot be partner at the time of
application.
╸ There should be no security interest in its assets subsisting or in force at time of conversion application.
╸ All applicable clearances, approvals and permissions for conversion of the Company into LLP to be obtained.
╸ Consent of all creditors has been obtained.
╸ Provision with respect to submission of returns and annual accounts under Companies Act,2013 should be
complied.
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7. Legal Aspects of
Conversion
╸ After conversion Company shall be deemed to dissolved and removed from the records of the Registrar of
Companies
╸ All property, asset, liability, interest, rights , privileges, obligations of the Company will be transferred to the
LLP.
╸ All proceeding pending against the Company will continue against the LLP.
╸ Any conviction, order, judgment, ruling of any court, tribunal or any other authority in favour or against the
Company may be enforced by or against LLP.
╸ LLP will be deemed to be a party of any agreement which was entered into by Company initially.
╸ Every contract of employment shall continue to remain in force after conversion into LLP.
╸ If Company is appointed anywhere for some role or capacity it will continue to remain with LLP as if LLP was
appointed for such role.
╸ Every director of the Company will remain personally liable for the acts conducted prior to the conversion of
Company into LLP.
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8. Points to Remember for
Conversion
╸ Change in Sign Board, Letter head, stationary and other items where old name as Company used to be
displayed
╸ Application to update name in PAN.
╸ Intimation and application to other authorities where Company is registered i.e. GST, EPF, ESI etc.
╸ Intimation to various suppliers and parties with whom Company has business.
╸ Intimation to banks where Company is maintaining bank accounts.
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9. Thanks!
You can find me at:
╸ +91-9311017074
╸ legaldelight21@gmail.com
╸ www.legaldelight.com
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