Conversion of Company Into Limited Liability Partnership

1. Pre-requisites for conversion

1. No e-form should be pending for payment or processing in respect of the company proposed to be converted into LLP;
2. No open (unsatisfied) charges should be pending against the company;
3. Company should be having a share capital;
4. Company should not be a Section 25/ Section 8 Company;
5. At least one Balance Sheet and Annual Returns should be filed by the Company after its incorporation;

2. Procedure for conversion

Any Company other than Section 25/ Section 8 Company can be converted into a LLP by complying with the procedure as provided below:

1. Convening a Board meeting: The company is required to convene a Board Meeting to approve conversion of the Company and authorise its Directors to file necessary forms and documents.
2. Filing of application for reservation of name: For reservation of name of LLP, web based Form RUN-LLP (Reservation of Unique Name for LLP) is required to be filed with the Registrar of Companies (ROC). This step is optional and the name can also be applied in Form FiLLip to be filed for incorporation.
3. Filing of requisite e-Forms with the Registrar of Companies: Upon approval of the name, the Company is required to file e-Form FiLLiP (Form for incorporation of Limited Liability Partnership) and e-Form 18 with the following attachments:

For e-Form FiLLiP:

1. Where the appointed partner is a body corporate, copy of resolution on the letterhead of such body corporate to become a partner in the LLP and a copy of resolution/ authorization on the letterhead mentioning the name and address of an Individual nominated to act as nominee/ designated partner on its behalf;
2. Proof of address of registered office of LLP;
3. Subscribers’ sheet including consent;
4. Consent to act as designated partners in Form 9;
5. In-principle approval of the regulatory authority (if applicable);
6. Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner;
7. Proof of identity and address of the designated partners
8. Approval of owner of Trademark if proposed name is based on a registered trademark

For E-Form 18:

1. Statement of consent of shareholders;
2. Statement of assets and liabilities of the Company duly certified as true and correct by the auditor;
3. List of all secured creditors along with their consent
4. Copy of acknowledgement of latest income tax return;
5. Approval from any other regulatory body/ authority (if required);

4. Filing of LLP Agreement: After the company has been converted into LLP, a LLP Agreement needs to be executed between the designated partners and the same shall be filed in e-Form 3 within 30 days from the date of conversion with the Registrar of Companies.

 
Filing of E-Form 14- As per Third Schedule of LLP Act, 2008, upon conversion, an application in E-form 14 to be filed in physical form and be submitted to Registrar of Firms along with Certificate of Incorporation within 15 days of such conversion. (Although contradictory to the rules, help kit of e-form 18 clearly mentions that e-form 14 is not required to be filed after filing of Form 18)

3. Effect of conversion

Upon approval of e-Form 18, a certificate of incorporation will be issued to the LLP and the status of the company will be changed to ‘Converted to LLP’. Further, all the existing assets and liabilities of the company will get transferred to the LLP.

4. Introduction

Recently a number of companies (public as well as private companies) are opting for conversion into a Limited Liability partnership (LLP) for various reasons, which inter-alia include:

1. Lesser regulatory compliance requirements;
2. No mandatory statutory audit of accounts;
3. Fund of LLP can be managed freely by the Designated partners/ Partners;
4. No need to pay Dividend Distribution Tax
5. No restrictions on transactions with Related parties