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Conversion-of-LLP-to-Private-Limited-Company
Conversion of LLP to Private Limited Company
The conversion of a Limited Liability Partnership (LLP) to a Private Limited Company is governed by Section 366 of the Companies Act, 2013, and the Companies (Authorised to Register) Rules, 2014. This conversion allows businesses to raise capital, gain credibility, and attract investors while retaining the benefits of limited liability.
Eligibility Criteria for Conversion
The LLP must fulfill the following criteria before proceeding with the conversion:
| Criteria | Description |
|---|---|
| Minimum Partners & Directors | The LLP must have at least two partners before conversion. Upon conversion, it should have a minimum of two shareholders and two directors, with at least one director being a resident of India. |
| No Unresolved Liabilities | The LLP should have no outstanding unsecured debts or must obtain written consent from creditors. Additionally, its financial records should comply with statutory audit requirements. |
| Approval of Name | The proposed name for the Private Limited Company must be approved by the Registrar of Companies (RoC) before proceeding with the conversion. |
| Compliance with Financial Reporting | The LLP must submit its latest audited financial statements, which should not be older than six days from the date of submission to RoC. |
Steps Involved in the Conversion
| Step No. | Procedure | Details |
| 1 | Obtain Partner Consent | Pass a special resolution in a meeting of the LLP’s partners. File the resolution with the RoC within 30 days. |
| 2 | Name Approval from RoC | Submit e-Form INC-1 to the RoC for name reservation. The name approval is valid for 60 days. |
| 3 | Filing of Form URC-1 | Submit Form URC-1 with details of partners, the financial position of the LLP, the proposed directors, and a declaration of compliance with applicable laws. |
| 4 | Preparation of Constitutional Documents | Draft the Memorandum of Association (MOA) and Articles of Association (AOA)and file them with RoC. |
| 5 | Submission of No-Objection Certificates (NOC) | Obtain NOCs from all secured creditors of the LLP, confirming no objections to the conversion. |
| 6 | Incorporation Forms Submission | File INC-32 (SPICe), INC-33, and INC-34 for the incorporation of the new Private Limited Company. |
| 7 | Issuance of Certificate of Incorporation | Upon verification, the RoC issues the Certificate of Incorporation, legally recognizing the conversion. |
Documents Required for Conversion
| Document | Purpose |
| LLP Agreement & Certificate of Incorporation | To prove the legal existence of the LLP before conversion. |
| List of Partners & Directors | Contains details of partners and proposed directors (including DIN, PAN, passport number, and residential addresses). |
| No-Objection Certificate (NOC) from Creditors | Confirms that creditors have no objections to the conversion. |
| Special Resolution Copy | Proof of partner consent, to be filed with RoC within 30 days. |
| Statement of Accounts | Audited financial statements, not older than six days from the application date. |
| Affidavit from Partners | Declaration that all filed documents are accurate and true. |
| Draft Memorandum of Association (MOA) & Articles of Association (AOA) | Governing documents of the new Private Limited Company. |
Post-Conversion Compliance Requirements
Once the conversion is completed, the newly formed Private Limited Company must comply with the following obligations:
| Compliance Requirement | Details |
| Intimation to LLP Registrar | Notify the Registrar of LLP within 15 days of receiving the Certificate of Incorporation to formally dissolve the LLP. |
| Alteration of Stationery & Signage | Update all official documents, such as letterheads, invoices, and signage, to reflect the new company name. |
| GST & Other Registrations | Update GST, PAN, TAN, and other statutory registrations to reflect the new Private Limited Company status. |
| Bank Account & Contracts Update | Update the company’s bank accounts and contractual documents to reflect the new entity name. |
| Annual Filings | File Form AOC-4 (Financial Statements) and Form MGT-7 (Annual Returns) under the Companies Act, 2013. |
Conclusion
The Conversion of LLP to Private Limited Company is a strategic decision for businesses seeking better growth opportunities, improved corporate credibility, and access to equity funding. While an LLP provides flexibility and tax benefits, its limitations in raising capital make conversion a preferable option for scaling operations. By successfully converting to a Private Limited Company, businesses gain better governance structures, limited liability protection for shareholders, and a wider investor base.
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Article Compiled by:-
~Neel Lakhtariya
(LegalMantra.net Team)