Structuring of any business model can be done in various ways. Any person willing to set up a business may opt for any form of business depending upon his/ her need and requirement i.e. Sole Proprietorship, Partnership Firm, LLP, Society, Trust, Company etc. It has been observed that people are generally inclined towards setting up of a Company because of the sense of reputation and features involved in this form of business besides the fact that running a company takes more effort than carrying any other form of business. We already know that company can be categorised under various heads like one person company, private company, public company, section 8 companies etc. and companies act, 2013 has also specified the provisions for conversion from one category of company into another. It often happens that a person carrying business in form of firm, LLP, society etc may want to convert its business into form of a Company. Say a partnership firm wants to convert itself into a company or a LLP thinks fit to run a company to carry its existing business instead of LLP. All these conversations are governed by the provisions of companies act 2013 (Act) which has specified the rules following which certain form of business can convert itself into company.

1. Convert business
into Company

2. Introduction
▪ Structuring of any business model can be done in various ways. Any person willing to set up a business
may opt for any form of business depending upon his/ her need and requirement i.e. Sole Proprietorship,
Partnership Firm, LLP, Society, Trust, Company etc.
▪ It has been observed that people are generally inclined towards setting up of a Company because of the
sense of reputation and features involved in this form of business besides the fact that running a company
takes more effort than carrying any other form of business.
▪ We already know that company can be categorised under various heads like one person company, private
company, public company, section 8 companies etc. and companies act, 2013 has also specified the
provisions for conversion from one category of company into another.
▪ It often happens that a person carrying business in form of firm, LLP, society etc may want to convert its
business into form of a Company. Say a partnership firm wants to convert itself into a company or a LLP
thinks fit to run a company to carry its existing business instead of LLP. All these conversations are
governed by the provisions of companies act 2013 (Act) which has specified the rules following which
certain form of business can convert itself into company.
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3. Form of Business alloted to convert into
Company
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Not every form of business can be converted into a Company. As per section 366 of the Act below given
conversions are allowed:
▪ Partnership Firm
▪ Limited Liability Partnership
▪ Cooperative Society
▪ Any other business entity formed under any other law for the time being in force i.e. Trust etc.
As per the provision a sole proprietorship cannot convert itself into a Company, also it is important to note
that partnership firm which are unregistered are also allowed to make application of conversion since act
only says for partnership firm without distinguishing for registered or unregistered.
These forms of business are referred collectively as “Company” in the Act.

4. Restriction on Conversion under Act
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Section 366 of the Act, specifies some prohibition and conditions with respect to the conversion which are
given as below:
1. A company which is already registered under the Indian Companies Act, 1882 or under the Indian
Companies Act, 1913 or the Companies Act, 1956
2. A company having the liability of its members limited by any Act of Parliament or by any other law, shall
not convert itself as an unlimited company or as a company limited by guarantee;
3. A company not having capital of fixed amount that can be divided into shares, and not formed on the
principle that its members will only be the holders of those shares or that stock. In simple term if a LLP is
willing to convert into company then the capital invested by LLP will remain same in form of shares and if
two partners are in LLP then Company must be registered with those 2 partners as members.
4. A trust cannot make application for conversion if any proceeding is pending under section 92 of the
Code of Civil Procedure (5 of 1908).

5. Status of Previous Assets & Liabilities
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It is imperative to understand that converting the form of business does not mean that it will put an end to its
existing asset, liability, property of the business. The same will remain with the company after registration
under the Act. Below given are some points mentioned in the act:
1. Vesting of Property on Registration: As per section 368 of the Act, all property, movable and
immovable (including actionable claims), belonging to or vested in a company at the date of its
registration shall, pass to and vest in the company as incorporated under this Act for all the estate and
interest of the company therein.
2. Saving of Existing Liabilities: As per section 369 of the Act, the rights or liabilities in respect of any
debt or obligation incurred, or any contract entered into, by, to, with, or on behalf of, the company
before registration shall not be affected post registration as Company.
3. Continuation of Pending Legal Proceedings: As per section 370 of the Act, all suits and other legal
proceedings taken by or against the company, which are pending at the time of the registration of a
company, will continue in name of the new company

6. Process of Conversion
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To convert one’s existing form of business into a Company, applicant has to follow below given process:
1. Consider the proposal of conversion of their business structure and seek approval of the entity through
resolution or written consent. Chalk out the management structure and other important aspects like
number of board of directors, members of the Company, registered office of the company if company is
to be registered with new name etc.
2. Name reservation application to be filed with the CRC and seek approval for new name in Spice+.
3. After name approval, a notice is required to be published in newspaper in English and vernacular language
where the entity is situated, for seeking objection within 21 days of notice for any person/authority who
might get affected with such conversion.
4. After 15 days but within 30 days of publication make an application to the CRC in Spice+ along with E-MOA
and E-AOA for conversion application.
5. File E form URC-1 along with Spice+. Attach all documents as required under Companies (Authorised to
Register Rules) Rules, 2014 like Affidavits, declarations, ITR, Undertakings etc.
6. After approval from CRC, the Registrar shall certify under his hand that the company applying for
registration is incorporated as a company under this Act and issue certificate of incorporation in Form
INC 11.

7. Entity obligation while converting into Company
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Every entity which is seeking registration under this act shall ensure below given compliance as per rule 3,
4,5 of the Companies (Authorised of Registered) Rules, 2014:
1. Consent of secured creditor to be accorded and no objection is received from them in written.
2. Members/Partners should ensure that after registration necessary documents or papers shall be
submitted to the registrar or other authority with which the company was earlier registered, for its
dissolution as partnership firm, LLP, cooperative society, society, as the case may be within 15 days of
conversion.
3. Notice in newspaper publication is required to submit to the Registrar of Firm, Society, Trust as the case
may be where the entity is registered to seek NOC from the concern authority. The Registrar shall, after
considering the application and the objections, suitably decide on grant of registration.
4. There shall be two or more members for the purposes of registration, a company with less than seven
members shall register as a private company.
5. In case a society or trust is registered under section 12A of the IT Act, for claiming exemption on its
income, intimation in this regard shall be sent to the IT authorities and proof of its service shall be
attached with Form No. URC. 1.
6. If any society or trust got converted into private company under this regulation then such company
cannot convert itself into any other form till the expiry of a period of ten years from the date of
incorporation under the Act, only conversion in public company is allowed.

8. Post Conversion Compliances
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Below given are some requirements needs to be complied post conversion:
1. Submission of physical documents of dissolution where entity was earlier registered for example
Partnership Firm will submit documents with Registrar of Firms..
2. Change in Sign Board, Letter head, stationary and other items where old name used to be displayed.
3. Application to update name in PAN.
4. Intimation and application to other authorities where entity was registered i.e. GST, EPF, ESI etc.
5. Intimation to various suppliers and parties with whom entity has had business.
6. Intimation to banks where entity was maintaining bank accounts.

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