CONVERSION OF PRIVATE LIMITED COMPANY INTO LLP.
PROCESS OF CONVERSION OF
COMPANY INTO LLP UNDER COMPANIES ACT.
A Private
Company may convert into LLP in accordance with the procedure prescribed in the
Third Schedule. Process as given below:
1. OBTAIN DIN:
Now obtain
DIN for those designated partners who don’t posses DIN already.
2.MEETING:
o
Call meeting of
board of Director.
o
Pass board Resolution
for Conversion of Company into LLP.
o
Pass Resolution
to authorize any director to Apply for Name of LLP.
3. APPLICATION FOR NAME AVAIBILITY:
o
File e-form INC-1 with ROC.
o
Attachments:
Board resolution passed by the Company approving the conversion into LLP shall
be attached with the aforesaid form
4. Obtain name Approval Certificate from ROC.
5. DRAFTING OF LIMITED LIABILITY PARTNERSHIP
AGREEMENT:
o
Contents of
Agreement are:
o
Name of LLP
o
Name of Partners
& Designated Partners
o
Form of
contribution-cash or kind
o
Profit Sharing
ratio
o
Rights &
Duties of Partners
o
Proposed Business
o
Rules for
governing the LLP
o
It is not
necessary to have the LLP Agreement signed at the time of incorporation, as the
details of the same needs to field in E form
3 within 30 days of incorporation but in order to avoid any
dispute between the partners as to the terms & conditions of the agreement
after the conversion into LLP.
6. FILLING OF INCORPORATION DOCUMENTS:
o
File E-Form- 2 with ROC along with
following ATTACHMENTS:
o
Proof of Address
of Registered office of LLP.
o
Subscription
sheet signed by the promoters.
(Notice of
Consent & Appointment of Designated Partners with their personal details)
o
Detail of LLP(s)
and/ or company(s) in which partner/ designated partner is a director/ partner
7. FILLING OF APPLICATION FOR CONVERSION:
o
File E-FORM- 18 with ROC along with
following ATTACHMENTS:
o
Statement of
shareholders.
o
Incorporation
Documents & Subscribers Statements in Form
2 filed electronically.
o
Statement
of Assets and Liabilities of the company duly certified as true and
correct by the auditor.
o
List of all the
Secured creditors along with their consent to the conversion.
o
NOC from Income
Tax authorities and Copy of acknowledgement of latest income tax return.
o
Approval from any
other body/authority as may be required.
o
Particulars of
pending proceedings from any court/Tribunal etc.
o
After all
formalities and filings been complied with by the applicants and approved by
the Ministry, REGISTRAR OF LLP TO ISSUE
A CERTIFICATE OF REGISTRATION in form no. 19 as to conversion of the LLP.
The Certificate of Registration issued shall be the conclusive evidence of
conversion of the LLP.
8. FILLING OF E-FORM-3:
o
This form
provides information in respect to the LLP Agreement entered into
between the partners.
o
ATTACHMENT:
LLP Agreement
09.
CERTIFICATE OF INCORPORATION AS LLP FORM ROC.
10. FILLING
OF E-FORM-14: (INTIMATION TO ROC)
o
After Receiving
Incorporation Certificate Limited liability partnership to file within 15
(fifteen) days of the date of registration, information to the concerned
Registrar of Companies with which it was registered under the provisions of the
Companies Act, 2013 about the conversion
and of the particulars of the limited liability partnership in E Form
14 within 15 days of conversion into LLP.
o
ATTACHMENTS
OF E-FORM 14
o
Copy of
Certificate of Incorporation of LLP formed.
o
Copy
of incorporation document submitted in Form 2
Eligibility for conversion
of private companies into limited liability partnership as per LLP Act 2008.
o
A company may convert into a limited liability
partnership by complying with the requirements as to the conversion set out in
third Schedule of LLP act.
(1) A
company may apply to convert into a limited liability partnership in accordance
with this Schedule if and only if—
(a) There is no security interest in its assets subsisting or in force at the time of application; and
(b) The
partners of the limited liability partnership to which it converts comprise all
the shareholders of the company and no one else.
(3) Upon
such conversion, the company, its shareholders, the limited liability
partnership into which the company has converted and the partners of that
limited liability partnership shall be bound by the provisions of this Schedule
that are applicable to them.
Income Tax Implication of
Conversion of Private Limited into LLP
Section
47(xiiib)
o
Following shall
not be regarded as a ”transfer” , therefore, no capital shall arise on the
following :
1. Any
transfer of a capital asset or intangible asset by a private company to a
limited liability partnership
2. Any
transfer of a share or shares held in the company by a shareholder as a result
of conversion of the company into a limited liability partnership in accordance
with the provisions of section 56 or section 57 of the Limited Liability
Partnership Act, 2008
Conditions for claiming exemption
Exemption
shall be available only if the conversion satisfies all the below mentioned six conditions.
o
All the assets and liabilities of the company
immediately before the conversion become the assets and liabilities of the
limited liability partnership.
o
(a) All the
shareholders of the company immediately before the conversion become the
partners of the limited liability partnership
(b) Their
capital contribution and profit sharing ratio in the limited liability
partnership are in the same proportion as their shareholding in the company on
the date of conversion.
o
The shareholders
of the company do not receive any consideration or benefit, directly or
indirectly, in any form or manner, other than by way of share in profit and
capital contribution in the limited liability partnership.
o
The aggregate of
the profit sharing ratio of the shareholders of the company in the limited
liability partnership shall not be less than fifty per cent at any time during
the period of five years from the date of conversion.
o
The total sales,
turnover or gross receipts in the business of the company in any of the three
previous years preceding the previous year in which the conversion takes place
does not exceed sixty lakh rupees.
o
No amount is
paid, either directly or indirectly, to any partner out of balance of
accumulated profit standing in the accounts of the company on the date of
conversion for a period of three years from the date of conversion.
o
Other relevant
points:- (In Income tax act)
Set-Off and Carry-Forward of losses
o
As per
section 72A (6A), accumulated loss under head business/profession (Except
speculative loss) and the unabsorbed depreciation of
the predecessor company, shall be deemed to be the loss or allowance for
depreciation of the successor LLP of the year in which conversion takes place.
o
However,
if any of the aforementioned six conditions are not complied with, the set off
of loss or allowance of depreciation made in any previous year by LLP, shall be
deemed to be the income of the LLP chargeable to tax in the year in which
such conditions are not complied with.
MAT
Credit
o
MAT
credit in the hands of the predecessor company shall not be allowed to the
successor LLP
Deprecation apportionment of the year
of conversion between the Company and LLP
o
As per
5th proviso to section 32(1), depreciation of the year in which conversion took
place, shall be apportioned between the predecessor company and succeeding LLP
in the ratio of number of days for which assets were used by them.
Consequence of Effect of
Conversion of Company Into LLP
If an
existing company is converted into LLP and registered as such, as stated above,
under section 55 to 57 Of LLP act, the effect of such registration shall be as
under.
On and
from the date of registration specified in the certificate of registration-
1. All tangible and intangible properties vested
in the company, all assets, interests, rights, privileges, liabilities,
obligation, relating to the company and whole of the undertakings of company
shall be transferred and shall vest in the LLP without further assurance, act
or deed.
2. The company shall be deemed to be dissolved and
removed from the records of the registrar of companies.
3. If any of the above properties is registered
with ant authority, the LLP shall, as soon as practicable, after the date of
registration, take all necessary steps as required by the relevant authority to
notify the authority of the conversion and of the particulars of the LLP in
such medium and form as the authority may specify
4. All proceedings by or against the company which
are pending in any court ,Tribunal or any authority in favor of or against the
company shall be enforced by or against the llp
5. Any conviction, ruling, order or judgment of
any court, Tribunal or other authority in favor of or against the company shall
be enforced by or against the LLP
6. All deeds, contracts, schemes, bonds,
agreements, application, instruments and arrangements subsisting immediately
before the date of registration of LLP, relating to the company or to which the
company is partly, shall continue in force on or agter that date as if they
relate to the LLP and shall be enforceable by or against the LLP as if the LLP
was named therein or was a party thereto instead of the company
7. The amount of paid up share capital (preference
or equity ) of the company can be credited to the capital account of each
partner in proportion to his/her shareholding in the company on the date of
conversion into LLP
8. The credit balances of general reserve and
other reserve can be retained by LLP or transferred to the capital or loan
account of each equity shareholder in the proportion if his/ her shareholdings
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