Conversion of Limited liability Partnership into Private Limited Company

A Limited Liability Partnership (LLP) is a hybrid business structure that combines the best aspects of a Partnership and a Company. The internal structure of an LLP  is more flexible and simpler to organize and by virtue of these characteristics many new entities have been established in India since 2009 as Limited liability Partnerships.  

An LLP, however, comes with some restrictions for instance an LLP is not allowed to raise funds from general public, therefore if the designated partners of an LLP want to expand and wish to raise funds , they have to convert the LLP into a private limited company. In such a situation, the LLP may be converted into a Private limited company by following the provisions contained in Sections 366 to 374 Part XXI of the Companies Act,2013 and Companies (Authorised to Register) Rules, 2014. 

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What is the procedure for conversion of LLP into a Private Limited Company

Step 1 - Approval of Name

The approval of name will be acquired from the Registrar of Companies (ROC) after submitting the application in RUN form. The advantage of this step is that the Company can have the same name as the LLP (subject to availability of name according to the Name availability guidelines of companies Act). It is important to note that the name of the company should end with the words “limited” or the “private limited’ instead of “LLP”. Upon submission of the name reservation application, the RoC may reject or accept the proposed name. If accepted, the proposed name is valid for 20 days.

Step 2 - Securing Digital Signature Certificate (DSC) and Director Identification Number (DIN)

If all the designated partners are going to become directors of the proposed company after conversion, all partners should have a valid DSC and DIN. Designated partners may already have a DPIN can be used as DIN in the proposed company, in which case there is no need to apply for a new DIN for proposed directors. 

Step 3 - Memorandum of Association (MOA) and Articles of Association (AOA)

In case of conversion, there is no need to file eMOA (Form INC-33) and eAOA (Form INC-34) along with the SPICe+ form (Form INC-32). However, it is mandatorily required to file MOA and AOA as Pdf Attachments to SPICe+ along with the form URC-1 which is to be filed as a linked form and should be signed by all the subscribers of the company in presence of at least one witness. One such witness shall attest the signature of all the subscribers.

Step 4 - Filling form URC-1

After completing the above-mentioned steps, the LLP must file form URC-1 along with the below mentioned documents. Form URC-1 is to be filed as a linked form along with SPICe+ form with all the attachments.

Form URC-1 is required to be attached with the following documents for registration as a Private company limited by shares

Mandatory Attachments 

1. A list that shows the names, addresses, and occupations of the partners of the company along with details of share held by them respectively,
2. A list showing the particulars of the persons proposed as the first directors of the company along with DIN, Address and their interests in any other firm or body corporate along with their consent to act as directors of the company.
3. An affidavit from each of  the first directors proposed to be appointed by the company clearly stating that the proposed director is ‘not disqualified to be a director’ as per sub-section 1 of Section 164 of the Companies Act, 2013.
4. A list that contains the names and addresses of the partners of the LLP
5. In case the LLP agreement was revised at any time in the past, copies of the principal and all subsequent amended agreements including the latest agreement 
6. Copy of certificate of registration of the entity to be attached
7. A copy of the recent Income Tax Return (ITR) of LLP 
8. An undertaking by the proposed directors of the company for compliance with requirements of the Indian Stamp Act, 1899
9. Written consent or No Objection Certificate (NOC) from all the secured creditors of the LLP. 
10. Consent of majority of members 
11. No objection certificate from the concerned Registrar of Companies (LLP) 
12. Certificate from a CA/CS/CWA certifying the compliance with all the provisions of the Stamp Act
13. Copy of Newspaper advertisement which is to be given in form URC-2.

Optional Attachments

1. Statement of accounts of the existing entity, prepared not later than 15 days preceding the date of application duly certified by auditor, if applicable.

Step 5 - Filling of E-form SPICe+ (INC- 32) 

The company shall mandatorily file SPICe+ form with the linked form URC-1 along with all the below mandatory documents required for incorporation of company. 

1. INC-9 – Declaration by first Subscriber(s) and Director(s)
2. DIR-2- Declaration from first Directors along with Copy of Proof of Identity and residential address
3. NOC from the owner of the property if property belongs to a person who is not a director of the company
4. Proof of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts)
5. Copy of the utility bills (not older than two months)

Step 6 – Issue of the Certificate of incorporation

On the completion of all the above steps and on payments of required RoC fees, if any, as payable under section 403 read with the Companies (Registration Offices and Fees) Rules, 2014, the Registrar shall register the Company under Part XXI of the Companies Act, 2013. and issue a certificate of Incorporation in the form INC-11.

Mandatory requirements for conversion of the LLP into a private limited company 

• Minimum number of partners: According to the law an LLP was required to have at least 7 partners in order to initiate the process of conversion into private limited company, However, as per the companies (Authorized to register) Rules, 2014 the requirement of minimum members was amended and reduced to 2 partners. Note that the same has been come into force w.e.f.15^Th August 2018.

• Newspaper advertisement: An advertisement shall be published in form “URC-2” in English and in the principal vernacular language newspaper circulated in that district in which the LLP is in existence. The objective of the advertisement is to seek objections, if any, within 21 days from date of publication.

• Statement of accounts: The LLP shall prepare a statement of accounts, not later than 15 days preceding the date of application duly certified by the Auditor and submit it together with the Audited financial Statements of the previous year, wherever applicable. No revaluation of the assets is permitted in the preceding one year from the date of application for the conversion.

• No Objection Certificate (NOC): LLP shall give a notice to the concerned Registrar of Companies (RoC) of the LLP under which LLP is registered. LLP shall require the NOC from the concerned RoC of the LLP for conversion into Private Limited company. If the ROC has any objections it shall intimate the applicant within 21 days from the date of such notice, if it fails to do so in the prescribed timeline it shall be assumed that there are no objections.

• For the conversion of LLP into a company, a declaration shall be given by all designated partners of the LLP which shall be duly printed on stamp paper.
• If any legal proceedings and suits by or against the LLP are pending in any court or any other authority in India, brief details of such proceedings shall be submitted with the RoC. 
• To complete the conversion process, the LLP shall ensure that all relevant filings such as  Annual return filling of the LLP with the RoC have been completed such as submission of  “form 8” and “form 11”. 

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