TaxTMI 
TaxTMI 
TaxTMI 
INTRODUCTION
Most of the Entrepreneurs opting for LLP registration are small businesses that do not foresee any requirement for raising equity funds. However, some of these small businesses may at some point have a requirement to convert to a private limited company due to various reason. Therefore, in this article, we look at whether a LLP can be converted into a private limited company.
Section 366 of the Companies Act, 2013 deals with Part I Companies which includes conversion of any partnership firm (“Firm”), limited liability partnership (“LLP”), cooperative society, society or any other business entity formed under any law for the time being in force.
Note:-
LLP Act, 2008 does not cover the conversion of LLP into Company but in Companies Act, 2013 conversion of LLP into Company is covered in section 366.
MCA has notified Companies (Authorized to Register) Amendment Rules, 2018 which shall came into force on 15.08.2018 in which MCA hasloosened the grip on limits of membership from even to two members for registration of other business entities as private company under section 366 of the Companies Act, 2013.
ADVANTAGES OF CONVERSION
No capital gain tax
Carry forward of unabsorbed losses and depreciation
Continuation of Brand Value
PRE-REQUISITES FOR CONVERSION
There must be at least seven members in the said firm or LLP. However, it is to be note that there has been an amendment in this section vide Companies (Amendment) Act, 2017 that a firm or LLP with even two members via Companies (Authorized to Register) Amendment Rules, 2018 may be converted into a private Company but the same has been came into force on 15.08.2018.
The partnership firm/LLP shall be a registered once. But in case the same is not registered, an application for registration of partnership firm shall be filed with the SDM having jurisdiction over the district of the registered address of the partnership firm.
PROCEDURE FOR CONVERSION
Apply for issuance of No objection certificate from the concerned SDM having jurisdiction.
Obtain availability of name under section 4 of Companies Act, 2013
Publish advertisement in Form URC-2 in an English newspaper and in any vernacular language newspaper (seeking objections, if any within 21 days from publication)circulating in the district in which LLP situated after reservation of name.
After twenty one days of publication of advertisement, file URC-1 along with the requisite SPICE Forms i.e. INC-32, INC-33, INC-34 etc. with the Registrar.
File E-form URC-1 and attach documents as mentioned in the form as per Rule 3 & 4. The important ones are as mentioned below:
No objection certificate from the concerned Registrar of Firms/LLP.
Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Stamp Act, to the extent applicable.
Statement of accounts of the company, prepared not later than 30 days(*) preceding the date of application duly certified by auditor; if applicable.
*Please note that there is a amendment via Companies (Authorized to Register) Amendment Rules, 2018 in which Statement of accounts of the company, prepared not later than 15 days instead of 30 days preceding is amended which came into force on 15.08.2018.
Registrar shall within 30 days from filing the form, decide whether registration will be granted or not. If ROC satisfied with the documents presented then may issue Certificate of Incorporation (COI) in form INC-11.
Hope the information will assist you in your Professional endeavours. In case of any query / information, please do not hesitate to write back to us at [email protected].