CONVERSION OF PARTNERSHIP FIRM INTO PRIVATE LIMITED COMPANY

A partnership firm can convert itself into Private Limited Company any time. The main advantage of a Private Limited Company is limited liability, perpetual succession, more transparency etc. Private Limited Company has limited liability whereas in partnership firm the liability of the partners is unlimited, that is they are personally liable for all the debts of the partnership firm.

PRE-REQUISITES FOR CONVERSION:

• Partnership deed must contain the provision for conversion of firm into Company.
• Partnership firm should have minimum 7 Partners for conversion into Public Company and Minimum 3 directors in case of Public Company. (2 in case of Private Company)
• All partners of the partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.
• The partners receive consideration only by way of allotment of shares in company.
• If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered.

STEPS FOR CONVERSION:

1. Convene a Meeting of partners for approving the conversion of partnership firm into company and to authorize one or more partners to do all acts, sign documents for conversion of partnership firm into company.
2. Execute a supplement deed for having a provision to convert partnership firm into company.
3. Apply for name of company in RUN
4. Approve draft advertisement in URC 2
5. Publish advertisement URC 2 in English and vernacular newspaper for seeking objections.
6. File form Spice, Spice MOA, Spice AOA & URC 1 (To be filed after fifteen days of publishing advertisement in newspaper but before the expiry of thirty days)

Details required for URC1:

• SRN of RUN, Name & registration no of partnership firm
• Date of partnership deed
• Date of partners resolution
• Total amount of property
• Secured debt (if any)

Attachment to URC 1

• A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them respectively, showing separately shares allotted & a list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN , passport number(if any) with expiry date, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company
• Affidavit duly notarized from all the partners for dissolution of the firm
• Declaration by 2 or more directors verifying the list of particulars of members, directors or any other particulars related to company
• Original partnership deed along with all supplementary deeds
• Certificate of registration of partnership firm (If any)
• NOC from the Registrar of Firms (If Registered)
• NOC from secured creditors, if any
• Resolution or consent from majority of members agreeing for the conversion
• Undertaking from Directors for compliance with requirements of Indian Stamp Act, 1899
• A copy of latest IT return
• Copy of newspaper advertisement both in English and vernacular language and copy of notice published.
• statement of accounts, prepared not later than fifteen days preceding the date of seeking registration and certified by the Auditor together with the Audited Financial Statements of the previous year
• List of proceeding, if any, by or against the partnership firm
• Certificate from a CA/CS/CWA certifying the compliance with all the provisions of Stamp Act, to the extent applicable
• An undertaking from all the partners providing that in the event of registration as a company under Part I of Chapter XXI of the Act, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution
• An intimation to this effect shall be given within fifteen days of such registration to the concerned Registrar of Firms, under which it was originally registered, along with documents for its dissolution as a firm.

POST- REQUISITES FOR CONVERSION:

• All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
• All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed.
• No Capital Gains tax shall be charged on transfer of property from firm to Company.
• The goodwill of the firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.

ATTACHMENT TO FORM SPICe (INCORPORATION OF COMPANY):

1. Purposed Name (s) of Company (Maximum 2 Names can be proposed)
2. Nature of Business to Carried out.
3. Address of the Reg. Office
4. Names of Shareholders and Directors
5. Total Authorized and Paid-Up Capital as mention in the deed (fixed capital)
6. Number of Shares to be taken by each as per ratio mention in the deed
7. Copy of PAN of each Shareholder/Director (Not Having DIN)
8. Copy of Aadhar/DL/Voter Card/Passport of each Director/Shareholder (Not Having DIN)
9. Latest Copy of Bank Statement/Electricity Bill/Telephone Bill/Mobile Bill of each Shareholder/Director (Not older than Two Months)
10. Passport Size Photo of Each Director
11. Mobile No. and Email Id of each Director/ Shareholder
12. Educational Qualification and Occupation of Each
13. Copy of Rent Agreement/Title Proof/Lease Deed/Allotment Letter etc. of the Reg. Office
14. Latest Copy of Utility Bill of the Reg. Office (Not older Than Two Months)
15. NOC from Owner of the premise for Reg. Office
16. Name of Bank in which Bank Account to be opened (currently out of PNB and ICICI Bank)
17. Name of Director to be authorized as Bank Signatory and EPFO.
18. Digital Signature of each Shareholders.