New Businesses opt for an LLP Business Model as LLP has very many benefits which make it a lucrative option to avail: Tax Benefits, Audit and Accounting Procedure, Easily Transferable, Low Compliance Costs, No Minimum Capital Requirements, No Cap On Maximum Partners, etc. However, as Businesses grow the requirement of Equity Capital Raising increases and as such companies which started out as limited Liability Companies prefer to be converted to Private Limited Companies. Previously there was no mechanism to facilitate the same, however, now, with the legislation of Companies Act, 2013 the same can take place with the element of limited liability firm coming under the ambit of being registered under the Companies act vis-à-vis Section 366.
To convert a Limited Liability Partnership into a Private Limited Company, the following procedure needs to be observed:
Before beginning the official conversion process, it is important to get the approval of the secured creditors on the decision of such conversion. Other than this, a notice in the English and one vernacular newspaper with prominent local circulation to call for any objections regarding such conversion shall be published. Other than this the minimum member requirement of private limited companies, i.e., at least seven members must be there. Also, a general meeting with a special notice to this objective of the meeting must be convened to ensure the consent of the members to such conversion.
DIGITAL SIGNATURE CERTIFICATE/ DIGITAL IDENTIFICATION NUMBER:
The first step in the formation of a company is obtaining a Digital Signature Certificate(DSC) and Digital Identification Number(DIN) for all the directors of the company if they do not have the same.
A DIN is a unique identification number allocated apropos the provisions of Companies Act- Sections 266A to 266G in pursuance of Section 154 and section 155, to every individual intending to be the Director of a Company. The rationale behind the introduction of these sections and the concept of DIN is as the name suggests ensuring identification of the Director and promoting accountability and transparency in the case of unfair practices by the Directors or the Company.
A Digital Signature Certificate is provided under the provisions of the Information Technology Act, 2000. It provides a digital signature to be used for the electronic submission of documents for the purposes of ensuring accountability and authenticity of the documents submitted online.
APPROVAL OF NAME: For Approval and Reservation of the name of the Company an application as per Form INC-1 needs to be filed with the Registrar of Companies. The Ministry of Corporate advises companies to pick out one to six names for the company to be safe in situations of name rejection. Furthermore, it is provided that the names selected should denote the objectives, vision, and mission of the company; it should not be same or excessively similar to already registered firms as well as should not violate the provisions of Prevention of Improper Use Act, 1950. The proposed name, once approved is valid for 60 days after the grant of approval, the consequence of which is that the procedure of incorporation should be completed within this time frame.
FILING OF FORM URC-1:
Subsequent to obtaining name approval from the registrar of companies, the Applicant LLP needs to make an application as per form URC-1 along with the prescribed supporting documents:
- Details of the proposed Directors including Name, Address, DSC, DIN as well as their interests in any other businesses along with their consent for being the Director of the Private Limited Company.
- An affidavit in support of the above proposition stating that the member is qualified for Directorship and not disqualified vis-à-vis Section 164 and that all the details furnished in the Registration Document are true as per the knowledge of the applicant.
- A list of all the members of the newly compounded private limited company along with their details and share holdings in the company.
- A list containing the names and details of the partners in the limited liability partnership firm.
- A copy of the LLP Agreement along with the Certificate of Registration verified by at least two of the partners of the limited liability firm.
- A Statement declaring the nominal capital of the firm and the number of shares into which it is to be divided, the number of shares taken as well as the amount paid for the same, name of the company along with the word limited/ private limited as the case may be.
- NOC by the secured creditors as aforementioned.
- Written consent of the members of the LLP at the General Meeting on conversion to LLP
- A duly notarized Affidavit from all the members of the LLP towards the dissolution of the same in respect of the registration of the same as a Private Limited Company along
with the necessary prescribed supporting documents.
- Statement of Accounts prepared not later than 6 days before the date of application certified by the auditor
- Declaration of two or more Directors certifying the authenticity of the particulars of the members and details furnished thereby.
- Copy of Newspaper Advertisement published to invite objections if any
- Certificate by a practicing Chartered Accountant/ Company Secretary/ Cost Accountant currently in practice certifying the compliance of all the requisite provisions
- NOC from the Registrar of LLP
MEMORANDUM OF ASSOCIATION (MOA) AND THE ARTICLES OF ASSOCIATION (AOA):
Subsequent to obtaining the approval of the proposed name of the Company, the company is required to draft the Memorandum of Association (MoA) and the Articles of Association (AoA). The same is to be signed by all the subscribers, along with the name, address, description, and occupation, if applicable, attested by at least one witness along with the details of the witness as well. These Memorandum of Association (MoA) and the Articles of Association (AoA) are to be filed with the Registrar of Companies as per Form INC-12 while making the application.
Along with this, Form INC-22, which is proof of the existence of a registered office for receiving and sending notices, acknowledgments, and other official communication, is required to be filed with the Registrar of Companies.
Also, Form DIR-12, Appointment of Directors of the Company attached along with DIR-2- Consent to act as Directors, Affidavit to the same purpose by the Director is also required to be filed with the Registrar of Companies.
CERTIFICATE OF INCORPORATION: Upon successful completion of the aforementioned procedure, the Registrar of Companies will issue a Certificate of Incorporation along with the Company Identification Number (CIN) and an LLP is converted to Private Limited Company