Conversion of Limited Liability Partnership (LLP) to Company: A Step-by-Step Guide

In 2009, when the Limited Liability Partnership Act, 2008 was enacted, numerous businesses in India opted for the Limited Liability Partnership (LLP) structure, offering the benefits of a partnership firm with limited liability for its partners. However, over time, certain disadvantages of LLPs emerged, primarily the difficulty in obtaining funds from public, banks, or financial institutions, hindering the growth and expansion of many businesses. As a result, several LLPs decided to convert into private or public companies.

In this article, we provide a detailed procedure for converting an LLP into a company, as per Section 366 to 374 of the Companies Act, 2013, and the Companies (Authorized to Register) Rules, 2014.

Step 1: Publication of Newspaper Advertisement

To initiate the conversion process, the LLP intending to become a private or public limited company must publish a newspaper advertisement in Form URC-2. The advertisement should be published in both English and a vernacular language circulating in the district where the LLP is located. The advertisement should call for objections, if any, within 21 clear days from the date of publication.

Step 2: Notice of Conversion to the Registrar of Companies

Simultaneously, the LLP must submit a notice of conversion to the Registrar of Companies along with a copy of the newspaper advertisement either on the date of publication or the following day. Proof of service for such notice must be attached to e-Form URC-1, which will be filed with the Registrar for the conversion process.

Step 3: Reservation of Name

An application for reserving the new company's name is required to be filed in PART A of e-Form Spice+. Once approved and reserved, the name will remain valid for 20 days from the approval date. The new company's name will be the same as the LLP's name, with the addition of the suffix "Limited" (for a public limited company) or "Private Limited" (for a private limited company) while removing the "LLP" suffix.

Step 4: Filing of Documents for Conversion

For the conversion to proceed, the following forms must be filed with the Registrar: e-Form URC-1, SPICe+, INC-9, and AGILE PRO. All individuals proposed to be appointed as directors must obtain a Director Identification Number (DIN). If the total number of subscribers and/or directors is less than or equal to 20, and all have DIN/PAN, INC-9 can be self-generated and submitted as an e-Form. Otherwise, a physical copy of INC-9 is to be submitted.

Documents required for URC-1:

Consent of secured creditors of the LLP to the proposed conversion or a no-objection certificate if the LLP has no secured creditors.

Scanned copy of the Newspaper Advertisement.

Scanned copy of the notice served to the Registrar, along with proof of service.

Affidavit from all Designated Partners for the dissolution of the LLP.

List of proposed Directors.

List of proposed shareholders.

Scanned copy of LLP Agreement.

Written consent from the majority of partners agreeing to the conversion.

An undertaking from the proposed directors to comply with the Indian Stamp Act, 1899 (as applicable).

Certificate from a CA/CS/CWA certifying compliance with the provisions of the Stamp Act, if applicable.

A copy of the latest Income Tax Return of the LLP.

A statement of accounts, prepared not later than fifteen days before seeking registration, certified by the Auditor, along with the Audited Financial Statements of the previous year, where applicable.

A declaration that the LLP has filed all required documents under the LLP Act with the Registrar.

Certificate of Incorporation of the LLP.

List of Designated Partners.

Documents required for SPICe+:

Memorandum of Association.

Articles of Association.

INC-9 (if total subscribers/directors > 20 or any subscriber/director lacks DIN/PAN).

Proof of the registered office address.

Copy of a utility bill for the registered office (not older than 2 months).

Copy of the certificate of incorporation of the foreign body corporate and the resolution passed if the subscriber to the proposed company is a body corporate.

Resolution passed by the promoter company if the subscriber to the proposed company is a company itself.

Interest of first directors in other companies.

Proof of identity and residential address of each subscriber and director.

Copy of PAN of each subscriber and director.

Documents required for AGILE PRO:

Proof of the place of business.

Proof of the appointment of an authorized signatory.

Passport size photographs of the Director who will act as the Authorized Signatory.

Step 6: Effect of Conversion

Upon scrutiny of the filed e-Forms and satisfaction with the conversion process, the Registrar will issue a fresh Certificate of Incorporation to the new company. From the date of issuance of the Certificate, the LLP will be dissolved, and all its property, movable and immovable, including actionable claims, will vest in the company.

Conclusion:

The conversion of an LLP into a company is a significant step for businesses seeking to expand and raise funds from public or financial institutions. By following the prescribed procedure and submitting the required documents to the Registrar, the LLP can successfully transform into a private or public limited company, providing enhanced growth opportunities and limited liability protection to its partners.