Procedure of Converting A Private Limited Company Into LLP

Even with immaculate planning, the nature of the business and the course it takes over the time is fairly unpredictable. This reason gives rise to the need for changing the business module. A Private Limited Company may want to convert itself into Limited Liability Partnership (LLP) due to various reasons such as tax benefits, less statutory compliances etc. Here is everything you need to know about the conversion of a Private Limited Company into a Limited Liability Partnership firm.

Effects of conversion

Conversion of a Private Limited Company into an LLP is subject to two major conditions which are:-

1. The Private Limited Company should have no security interest in its assets while it applies for the conversion into an LLP.
2. Only the shareholders of the company will continue to be the partners of the LLP.

The conversion of the Private Limited Company into LLP has the following effects:-

1. The Private Limited Company is dissolved by the way of conversion.
2. The Registrar of the companies removes the name of the Private Limited Company from its records and register.
3. By the virtue of conversion, all the assets, liabilities, interests and obligations of the Private Limited Company get transferred to the Limited Liability Partnership firm. However, the liabilities, contracts, agreements and continued employment remain the same.
4. Depending upon the term of the various licenses, the licenses and tax numbers such as GST also have to be reissued. The license doesn't get transferred automatically.

 

Documents required for conversion

If a Private Limited Company fulfills the above conditions, the following documents are required for the conversion along with the application for conversion:-

1. The consent from every shareholder of the company for conversion of the Private Limited Company into an LLP in a specified format.
2. Incorporation document in the specified form 2 format.
3. Form 3 which is for the application of conversion and declaration of the incorporation of Limited Liability Partnership.
4. No objection certificate from the tax authorities and tax clearance.
5. The assets and liabilities statement of the Private Limited Company.
6. List of all the creditors with their consent for the conversion.
7. Authorization letter to make the declaration.
8. Intimation to Registrar of Companies (ROC) about conversion in form 14.

The fees for the conversion ranges anywhere between Rs. 500 to 5,000 depending upon the contribution of the LLP.

 

Procedure of conversion

1. The Private Limited Company must inform the ROC about the conversion within fifteen days of the conversion after which the ROC provides the certificate of incorporation. If the ROC objects to the conversion, the Private Limited Company can appeal to the tribunal.
2. All the partners need to obtain the Directors Identification Number.
3. A board meeting needs to be conducted passing the resolution for the conversion of the company into LLP.
4. The board meeting also needs to authorize one of the directors to apply for the name of the LLP.
5. Form LLP 1 needs to be electronically filed to check for the availability of the name. It is also essential to attach the board resolution approving the conversion.
6. The name approval certificate needs to be obtained from the ROC.
7. The Limited Liability Partnership agreement needs to be drafted.
8. The incorporation documents need to be submitted in form 2.
9. An application for conversion needs to file in form 18.
10. Certificate of incorporation of the LLP needs to be obtained from ROC.

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