Conversion From Private Limited Into Limited Liability Partnership
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Conversion From Private Limited Into Limited Liability Partnership [Section 56] : A Private Company may Convert into a Limited Liability Partnership in accordance with the provisions of this Chapter and the Third Schedule.
1. Eligibility for conversion of private companies into limited liability partnership
- A company may convert into a limited liability partnership by complying with the requirements as to the conversion set out in this schedules.
- A company may apply to convert into a limited liability partnership in accordance with this schedule if and only if -
- There is no security interest in its assets subsisting or in force at the time of application;
- The partners of the limited liability partnership to which it converts comprise all the shareholders of the
company and o one else.
- Upon such conversion the company, its shareholders, limited liability partnership into which the company has converted and the partners of that limited liability partnership shall be bound by the provision of this schedule that are applicable to them.
2. Statements to be filed- A company may apply to convert into a limited liability partnership by filing with the registrar -
- A statement by all its shareholders in such form and manner to be accompanied by such fees as the central Government may prescribe, containing the following particulars. Namely :-
- The name and Registration number of the company ;
- The date on which the company was incorporated; and
- A company may apply to convert into a limited liability partnership in accordance with this schedule if and only if-
- There is no security interest in its assets subsisting or in force at the time of application;
- The partners of the limited liability partnership to which it converts comprise all the shareholders of the
company and o one else.
- Incorporation documents and statement referred to in section 11.
3. Procedure for conversion :
- Deciding the Partners and Designated Partners
- Obtaining DPIN No. for Designated Partners by filling Form 7 & Digital Signature
- Application for conversion of Company to LLP in Form 18
- File the following forms along with a statement by all partners with registration
- Number and date of registration of the firm.
- Form 2: Details of partners, registered office etc
- Form 4: Consent of Partners – Consent of each partner to become a partner of
- Liability Partnership
- Form 3: LLP agreement – this can be filed within 30 days from the date of registration
- After verification, registrar will register all documents and issue Certificate of registration Upon registration of LLP, file an intimation to the Registrar of Companies inForm- 14 stating the fact that the company is converted into LLP.
4. Key benefits from conversion :
- Automatic Transfer : All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
- No Stamp Duty : All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
- No Capital Gain Tax : No Capital Gains tax shall be charged on transfer of property from Proprietorship firm to Company.
- Continuation of Brand Value : The goodwill of the Proprietorship firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.
- Carry Forward and Set off Losses and Unabsorbed Depreciation : The accumulated loss and unabsorbed depreciation of Proprietorship firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor company.