Conversion of LLP into Partnership - Company Registration

 In the realm of business entities, Limited Liability Partnerships (LLPs) have gained significant traction in India since their inception in 2009. LLPs offer a unique structure that blends the flexibility of a partnership with the limited liability protection of a company. However, as businesses grow and venture into new horizons, the need for greater access to capital and a more structured corporate framework often arises. This is where the conversion of an LLP into a private or public company becomes a viable option.

Navigating the Conversion Process

The process of converting an LLP into a company is governed by Sections 366 to 374 of the Companies Act, 2013, along with the Companies (Authorized to Register) Rules, 2014. To ensure a seamless transition, a well-defined procedure needs to be adhered to:

Step 1: Publicizing the Conversion

The first step involves publishing a newspaper advertisement in Form URC-2, both in English and the local vernacular language, seeking any objections to the proposed conversion. This notice must be published in a newspaper circulating within the district where the LLP is situated. The advertisement must run for 21 consecutive days from the date of publication.

Step 2: Notifying the Registrar of Companies

Alongside the newspaper advertisement, a notice of conversion must be submitted to the Registrar of Companies (ROC). This notice should be accompanied by a copy of the newspaper advertisement and proof of service of the notice. The proof of service should be attached to the e-Form URC-1, which will be filed with the ROC for the conversion process.

Step 3: Securing Name Approval

Before proceeding with the conversion, it is crucial to secure name approval for the proposed company. This is done by filing an application for name reservation in Part A of e-Form Spice+. Once the name is approved and reserved, it will remain valid for a period of 20 days from the date of approval. Within this timeframe, the company must file the requisite documents for the conversion.

Step 4: Filing Conversion Documents

The conversion process requires the submission of several documents to the ROC:

e-Form URC-1: This form contains details about the LLP's conversion into a company, including the consent of secured creditors (if applicable), a scanned copy of the newspaper advertisement, the notice served to the ROC, affidavits from Designated Partners, proposed directors and shareholders, the LLP agreement, a written consent from majority partners, an undertaking from proposed directors, a certificate from a CA/CS/CWA, the LLP's Income Tax Return, statements of accounts, a declaration of compliance with LLP Act filings, the LLP's Certificate of Incorporation, and a list of Designated Partners.

SPICe+: This form includes the Memorandum of Association, Articles of Association, INC-9 (in certain cases), proof of registered office address, a copy of a recent utility bill for the registered office, documents related to foreign body corporate subscribers (if applicable), resolutions passed by promoter companies (if applicable), interest of first directors in other companies, proof of identity and residential address for subscribers and directors, and copies of PAN for subscribers and directors.

AGILE PRO: This form provides proof of place of business, proof of appointment of authorized signatory, and passport-size photographs of the director acting as authorized signatory.

Effect of Conversion

Upon satisfactory scrutiny of the submitted e-Forms, the ROC will issue a fresh Certificate of Incorporation to the company. The effective date of conversion is the date of issuance of this certificate. From this date onwards, the LLP stands dissolved, and all its assets and liabilities are transferred to the newly formed company.

Conclusion

Converting an LLP into a company can be a strategic move for businesses seeking to expand their funding options, enhance their corporate image, and prepare for future growth. The conversion process, while detailed, is streamlined to ensure a smooth transition. By adhering to the prescribed procedures and assembling the required documentation, businesses can successfully navigate this transformation and embark on a new phase of their journey.