CONVERSION FROM PRIVATE COMPANY INTO LIMITED LIABILITY PARTNERSHIP

[Mr. M. GOVINDARAJAN]

Section 56 of the Limited Liability Act, 2008 (‘Act’ for short) provides for conversion from private company into Limited Liability Partnership (‘LLP’ for short).  A private company may convert into a LLP in accordance with the provisions of Chapter X and the third schedule.  

Third schedule gives the procedure of conversion from private company into LLP.  Clause1(b) of the Schedule defines the term ‘convert’ in relation to a private company converting into a LLP means a transfer of the property, assets, interests, rights, privileges, liabilities, obligations and the undertaking of the private company to the LLP in accordance with this schedule.

Eligibility

A private company may convert into a LLP if any only if-

• There is no security interest in its assets subsisting or in force at the time of application; and
• The partners of the LLP to which it converts comprise all the shareholders of the company and no one else.

Upon such conversion, the company, its shareholders, the LLP into which the company has converted and the partners of that LLP shall be bound by the provisions of third schedule as applicable to them.

Statements to be filed

A private company, intending to be converted into an LLP may apply to the Registrar filing with the following along with the application in the format provided in Part A of Form 18-

• a statement by all its shareholders in part B of Form 18 along with fee, containing the following particulars-

• the name and registration number of the company;
• the date on which the company was incorporated; and

• incorporation document shall be in a LLP Form No. 2.The incorporation document shall-
  • state the name of the LLP;
  • state the proposed business of the LLP;
  • state the address of the registered office of the LLP;
  • state the name and address of each of the persons who are to be partners of the LLP on incorporation;
  • state the name and address of the persons who are to be designated partners of the LLP on incorporation;
  • contain such other information concerning the proposed LLP as may be prescribed;
• a statement in the prescribed form, made by either an Advocate or a Company Secretary or a Chartered Accountant or a Cost Accountant who is engaged in the formation of the LLP and by one who subscribed his name to the incorporation document, that all the requirements of the Act and the rules made there under have been complied with, in respect of incorporation and matters precedent and incidental thereto.

Fees payable

For conversion of private limited company into a LLP the following is the fee payable-

• LLP whose contribution does not exceed ₹ 1 lakhs – ₹ 500;
• LLP whose contribution whose contribution exceeds ₹ 1 lakhs but does not exceed ₹ 5 lakhs – ₹ 2000/-
• LLP whose contribution exceeds ₹ 5 lakhs but does not exceed ₹ 10 lakhs – ₹ 4000/-;
• LLP whose contribution exceeds ₹ 10 lakhs – ₹ 5,000/-

Registration of conversion

On receipt of the application, the Registrar shall verify the documents to be verified in such manner as he deems fit.  If he satisfies himself with the particulars furnished he may register the documents and issue a certificate of registration in Form No.19 as the Registrar may determine stating that the LLP is, on and from the date specified in the certificate, registered under this Act. The LLP shall, within 15 days of the date of registration, inform the concerned Registrar of Companies about the conversion and of the particulars of the LLP in Form No. 14.

Refusal of registration

If the Registrar is not satisfied with the particulars or other information furnished by the application, the Registrar may refuse to register the conversion.  An appeal may be made before the National Company Law Tribunal in such refusal by the Registrar. 

Effect of registration

On and from the date of registration the certificate of registration issued-

• there shall be a LLPby the name specified in the certificate of registration registered under this Act;
• all tangible and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the LLP without further assurance, act or deed; and
• the company shall be deemed to be dissolved and removed from the records of the Registrar of Companies.

Registration in relation to properties

If any property applies is registered with any authority, the LLP shall, as soon as practicable, after the date of registration, take such steps as required by the relevant authority to notify the authority of the conversion and of the particulars of the LLP in such form and manner as the authority may determine.

Pending proceedings

All proceedings by or against the company which are pending before any Court, Tribunal or other authority on the date of registration may be continued, completed and enforced by or against the LLP.

Continuance of conviction, ruling, order or judgment

Any conviction, order or judgment of any Court, Tribunal or other authority in favor or against the company may be enforced by or against the LLP.

Existing agreements/contracts

Every agreement to which the company was a party immediately before the date of registration, whether or not of such nature that the rights and liabilities there under could be assigned, shall have the effect as from that date as if-

• the LLP were a party to such an agreement instead of the company; and
• for any reference to the company, there were substituted in respect of anything to be done on or after the date of registration a reference to the LLP.

All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the date of registration relating to the company or to which the company is a party shall continue in force on and after that date as if they relate to the LLP and shall be enforceable by or against the LLP as if the LLP were named therein or were a party thereto instead of the company.

Continuous of employment

Every contract of employment shall continue in force on or after the date of registration as if the LLP were the employer there under instead of the company.  Every appointment of the company in any role or capacity which is in force immediate before the date of registration shall take effect and operate from that date as if the LLP were appointed.  Any authority or power conferred on the company which is in force immediately before the date of registration shall take effect and operate from that date as if it were conferred on the LLP.

Notice of conversion in correspondence

The LLP shall ensure that for a period of 12 months commencing not later than 14 days after the date of registration, every official correspondence of the LLP bears the following, namely-

• a statement that it was, as from the date of registration, convertedfrom a company into a LLP; and
• the name and registration number of the company from which it was converted.

Any LLP which contravenes the above shall be punishable with fine which shall not be less than ₹ 10,000/- but which may extend to ₹ 1 lakh and with a further fine and which shall not be less than ₹ 50/- but which may extend to ₹ 500/- for every day after the first day after which the default continues.