COVNERSION OF COMPANY INTO LLP, AS PER COMPANIES ACT AND LLP ACT

Before starting with anything we shall have the overview of Limited Liability Partnership (LLP) its enactment, features, constitution etc.

 

BACKGROUND OF LLP:

LLP is a unique form of legally recognized corporate entity, which integrates the features of both the limited corporations and the traditional partnership firms. As it is a unique Hybrid Combination of both Company and Partnership, this LLP is especially suitable for small to medium-sized business enterprises and professionals particularly.

One hugely popular and highly preferred category of entity for doing business in almost all economic sectors in the majority of the countries worldwide is the Limited Liability Company (LLC), along with the Private and Public Limited Corporations. In India and many other countries, these limited liability Companies are better known as the Limited Liability Partnerships (LLPs). LLP as a structure is not new in the International Scenario, most western economies have provisions for hybrid business entities like the LLP’s.

LLP is governed by Limited Liability Partnership Act- 2008 which came in to force on 1st day of April 2008. This Act was introduced with the idea of promoting MSME Sector (Micro Small Medium Enterprise) with the advantage of self governance and less compliance.

LLP Act, 2008 constitute 81 Sections and 4 schedules. So far LLP Rules 2009 has prescribed many forms to be filed with MCA.

LLP is an alternate corporate body, comprising the benefit of both Company and Partnership.

  • It contains the benefit of Limited liability to partner and Flexibility of Partnership.

  • LLP is a corporate body and granted the legal status same as that of company.

  • Unlike the partnership in LLP the liability of the partner is limited up to the contribution made by them.

The Limited Liability Partnership (LLP) Act is a well-thought-out legislation. It codifies the inherent concepts of a LLP by combining best practices seen in private companies while protecting the inherent freedom of partners to decide the manner in which the firm has to be managed. It took time for the people to start switching to the LLP model. Earlier, not many people were interested in starting or investing in an enterprise like LLP.

LLP is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.

Owing to flexibility in its structure and operation, it would be useful for small and medium enterprises, in general, and for the enterprises in services sector and professional firms, in particular. Internationally, LLPs are the preferred vehicle of business, particularly for service industry or for activities involving professionals.

CONVERSION OF PRIVATE LIMITED COMPANY INTO LLP:

As all of us are aware that Companies Act-2013 came into force w.e.f. 01st April, 2014. Under Companies Act, 2013 there are very much compliances and many complications, which are cost consuming for small enterprises. Therefore, Small enterprises are thinking to switch their Companies into Limited Liability Partnership (LLP’s) Firm.

A registered limited company in India (Private or Public) has a lot of complex formalities and incurs additional overheads for managing affairs including mandatory board meeting, maintenance of statutory records, filling of e-forms with MCA etc. Absence of such mandates for LLP combined with advantages such as non-applicability of dividend distribution tax on profit repatriation, transfer of profit rules and deemed dividend profit issues, MAT provisions (discussed below).

In India, formation, registration, and regulation of an LLP is exclusively governed and controlled by the rules, provisions, and regulations provided in the LLP Act of 2008 and the LLP Rules of 2009. The Ministry of Corporate Affairs (MCA), Government of India, and its well-equipped web portal [www.llp.gov.in] is directly concerned for establishing an LLP.

HOW TO TAKE DECISION OF CONVERSION OF COMPANY INTO LLP.

For Conversion of Private Limited Company and Unlisted Public Company into LLP we must do Cost and Benefit analysis of same.

BENEFITS OF LLP AS COMPARED TO CORPORATE FORM:

COMPARITIVE ANALYSIS

Particulars

LLP

Private Company

Members

Minimum 2 Partner

Minimum 2 Member,

Maximum 200 Members

Liability

Limited, Except in case of Fraud and wrongful Act

Limited Liability

Forms to be filled

Regular-

E-form-8 & Eform-11

Regular-

MGT-14 (two times), 23AC, 23ACA, 20B, GNL-2

Transfer/ Inheritance of Shares

Transfer, But transferee may not have management right

By court order once the company have been wound up

Easy to Form, Run and manage

No Minimum Capital requirement for Incorporation

Minimum Capital for Incorporation of Private Limited Company is Rs. 1,00,000/- and for Public Limited Company is Rs. 5,00,000/-

Requirement as to maintenance of Statutory Records

NO such Requirement.

It is must to maintain statutory records as per Companies Act-2013.

Audit of Accounts

Require only if Turn over above 40 lacs or Contribution more than 25 lacs.

Audit is Compulsory.

Management through

LLP agreement.

Memorandum of Association and Article of Association of company.

COMPLIANCE REQUIREMENT:

MINIMUM COMPLIANCE LEVEL & COST SAVING:

After commencement of Companies Act, 2013 cost of compliance has increased many fold in the case of Companies, while a LLP has to comply with a very few compliances.

The comparative chart of compliances to be made by a company and LLP is given below.

Particulars

LLP

Private Company

Maintenance of Statutory Records

No such Registers are required to maintain

Many Registers are Required to Maintain Under Company as per Companies Act- 2013

Addition or Deletion of Directors

Require to amend LLP Agreement and File e-form- 3 & e-form-4.

Require to Pass Resolution in General Meeting, File e-form-DIR-12 and require many documents from the person who is appointed as Director. (As per Section-152 of Companies Act-2013.)

Change in Registered Office

Require to amend LLP Agreement and File e-form Form-15

There is Complete lengthy process for change in registered office of company as Per Section-13 of Companies Act-2013

Increase in Capital

Only require to amend LLP Agreement and File e-form Form-3.

Require to Pass Ordinary resolution in General Meeting and file form SH-7.

Annually form filling requirement

Only Two annual form

E-form- 8,

E-form-11

There are much forms

E-form-23AC, 23ACA

E-form- 20B, E-form- MGT-14

E-form-ADT-1

Disclosure of Interest

No such requirement

Require to Take disclosure from director under Section-184(1) and to file form- MGT-14.

Convening of Meetings

No such requirement

Require to hold Meetings as per Section- 173. (At least Two Board Meeting and one Annual General Meeting for Small Company and At least four Board Meeting and One Annual General Meeting for other then Small company).

Audit of Accounts

Require only if Turn over above 40 lacs or Contribution more than 25 lacs.

Audit is Compulsory.

Loans & borrowings

As per LLP Agreement. No other requirements

There is Cap for Loans and Borrowings as per section 179 & 180, Require to hold Board Meeting and file form with ROC.

Deposits

No such condition.

Loan from other then director is cover under deposit as per Definition of Deposit under Companies Act-2013.

Related Party Transactions

No Restrictions

Transaction to be at arm’s length price only and as per provisions of Secton-188 of Companies Act-2013.

BENEFITS UNDER INCOMETAX LAW:

  • Saving of Dividend Distribution Tax. (There is no provision of Dividend Distribution Tax in LLP)
  • Saving of MAT Tax. (Because LLP don’t give credit of MAT)
  • Saving of Income Tax due to Interest and remuneration payable to partners as salary payable to directors.

INCOME TAX PROVISIONS IN DETAIL:

The finance Act, 2009 amended the Income-tax Act, 1961 to clarify that LLPs will be taxed on the same lines as general/ traditional partnership firms. However the Tax implications upon the conversion of a Private Company or an unlisted company into LLP were not clear by The Finance Act, 2009 and leaves doubts;

  • The levy of Capital Gain Tax on Transfer of assets to LLP on conversion.

  • Availability of carry forward of losses and of unabsorbed depreciation to the successor LLP.

  • Availability of MAT credit to the successor LLP.

Lack of clarity on above matters was a roadblock to conversion of company into LLPL. But The Finance Bill, 2010 Finance ministry addressed the above issues and opened the doors of conversion of Company to LLP. These amendments took effect from assessment year 2011-2012.

Is there any liability on account of capital gain tax on transfer of assets and liability in a company on conversion into llp?

The finance Act, 2010 has inserted a new Clause (xiiib) in section-47 and a new sub-section (4) in section 47A of the Act with effect from assessment year-2011-12.

If the following conditions are satisfied then the transfer of capital asset or intangible asset to LLP or any transfer of share or shares held in company by a share holder on conversion of Company into LLP shall not be regarded as transfer:

S. No.

Condition

Particulars

Turnover Limit

The Total sales, turnover or gross receipts in business of the company do not exceed Sixty Lacs (60 Lacs) Rupees in any of the three preceding previous years

All the shareholders of company became partner of the LLP

All the shareholders of the company become partners of the LLP in the same proportion as their shareholding in the company.

Capital Contribution and Profit Sharing Ration on Conversion.

The Capital Contribution and Profit Sharing ration of the shareholders of company should be in the same proportion as their shareholding in the company as on the date of Conversion.

No other consideration to partners.

No consideration other than share in profit and capital contribution in the LLP arises to partners.

Profit Sharing Ration after conversion

The erstwhile shareholders of the company continue to be entitled to receive at least 50 per cent in aggregate of the profits of the LLP for a period of 5 years from the date of conversion

Assets and Liabilities

All assets and liabilities of the company become the assets and liabilities of the llp.

Accumulated Profit (Reserve)

No amount is paid, either directly or indirectly, to any partner out of the accumulated profit of the company for a period of 3 years from the date of conversion

  • If all the above conditions (i) to (vi) are complied with, the conversion shall not attract capital gains tax either for the company or the Successor LLP or for the shareholders of the Company, who became partner in the successor LLP and get share of profits and capital in the LLP in lieu of their shares in the company.

  • If any of the above conditions (i) to (vi) is not complied with, then as per provisions of Section 47 A (4) such transfer of Capital Assets & Intangible assets deemed to be liable to Capital gains of the successor LLP or the Shareholders of the predecessor company in the previous year in which such non-compliance took place.

BREACH OF CONDITIONS OF SECTION 47(xiiib)

Example:

If the profit sharing ratio of the partners is changed within 5 years, bringing their ratio less than 50% in aggregate of the profits of the LLP of the accumulated profits (reserves) paid directly or indirectly to any partner within a period of 3 years from the date of conversion.

Subsequent breach of conditions would render the LLP ineligible for the benefit and the benefits would be withdrawn.

Section of Breach

Section of Benefit

Consequences

Section- 47A(4)

Capital Gain u/s 47(xiiib)

Profits arising from the transfer of assets not earlier charged to tax would be deemed to be the profits in the hands of succeeding LLP in the year of breach.

Section- 47A(4)

Capital Gain u/s 47(xiiib)

Profits arising from the transfer of shares not earlier charged to tax would be deemed to be the profits in the hands of the shareholder of the predecessor company in the year of breach.

Section- 72A(6A)

Accumulated loss and unabsorbed depreciation u/s 72A(6A0

The benefit of set-off availed by the LLP would be deemed to be the profits in the hands of the LLP in the year of breach.

Are unabsorbed depreciation and accumulated loss of company can be carries forward and set off by successor LLP?

First let’s discuss the terms:

  • Unabsorbed Depreciation: means so much of the allowance for depreciation of the predecessor private company or unlisted public company before conversion into limited liability partnership, which remains to be allowed and which would have been allowed to the predecessor company, under the provisions of this Act, if the conversion has not take place.

Section 32(2) of the Income Tax Act, provides for carry forward of unabsorbed depreciation. Unabsorbed depreciation is that part of current year depreciation which could not be allowed due to the absence or inadequacy of income. Such depreciation can be carried forward and treated as part of depreciation above under section- 47(xiiib).

  • Accumulated Loss: means so much of the loss of private company or unlisted Public company before conversion in to LLP, under the head “Profit and gains of business or profession” which predecessor company, would have been entitled to carry forward and set off under the provisions of section-72 if the reorganization of business or conversion or amalgamation or demerger had not taken place.

Under Section 72 of the Income Tax Act, the assess has the right to carry forward the loss in cases where such loss cannot be set-off due to the absence of inadequacy of income. The loss so carried forward can be adjusted against the profits of subsequent years.

The Finance Act-2010 has amended Section-72A of the Act by insert of new sub-section (6A). The new sub-section (6A) provides that the accumulated business losses and unabsorbed depreciation of the predecessor company shall be allowed to be carried forward and set-off by the successor LLP if all the conditions {(i) to (vi) above} in (clause xiiib of section 47 are satisfied).

Thus Unabsord Depreciation and Accumulated Losses of company can be carrie forward and set off by successor LLP.

Is MAT (Minimum Alternate Tax) benefit is available to successor LLP?

The Finance Act, 2010 has inserted a new sub- section (7) in section 115JAA to provide that MAT credit of the predecessor company shall not be available to the successor LLP. Thus, it may make sense for the company to first avail the MAT credit before converting to LLP.

LLP don’t have concept of MAT. LLP have concept of AMT (Alternate Minimum Tax). Therefore, the succeeding LLP will not be allowed the credit of MAT paid by the preceding company.

Cost of Conversion of Company into LLP:

Cost on conversion of company into LLP which will be incurred by company will be as under:

  • Unabsorbed Depreciation and Accumulated Loss not carried over {if, all the conditions {(i) to (vi) above} in clause xiiib of section 47 are not satisfied.}

  • Capital Gain on transfer of capital asset or intangible asset to LLP or any transfer of share or shares held in the company by a shareholder on conversion of a private company or unlisted company into an LLP. {If, all the conditions {(i) to (vi) above} in clause xiiib of section 47 are not satisfied.}

  • Loss of Credit of MAT. {LLP don’t have concept of MAT. LLP have concept of AMT (Alternate Minimum Tax). Therefore, the succeeding LLP will not be allowed the credit of MAT paid by the preceding company.}

  • Stamp Duty on Transfer of Immovable Assets, If any.
  • Cost on transfer of Brand Name, Patent and Trade Mark on conversion, if any.
  • Cost of forming of LLP for the purpose of conversion.

 

 

CHECKS FOR CONVERSION OF COMPANY INTO LLP

The partners of the limited liability partnership to which it converts comprise all the shareholders of the company and no one else.

  • Also there will be NO SECURITY INTEREST subsisting or in force at the time of application in the assets of the Company. (As per Third Schedule).

Every Designated Partner is required to obtain a DIN from the Central Government.

All the E-FORMS which are required for the purpose of incorporating the LLP are filed electronically through the medium of Internet; it is not possible to sign them manually. Therefore, for the purpose of signing these forms, the Designated Partner of the proposed LLP needs to obtain a Digital Signature Certificate (DSC) from government recognized DSA’S.

Whether up to date Income-tax return is filed under the Income-tax Act, 1961.

Whether any prosecution initiated against or show cause notice received by the company for alleged offences under the Companies Act, 1956. (As per Third Schedule.){Any conviction, ruling, order or judgment of any court, tribunal or other authority in favour of or against the company may be enforced by or against the Limited Liability Partnership.}

Whether any proceeding by or against the company is pending in any Court or Tribunal or any other Authority.

Whether any conviction, ruling, order, judgment of any Court, Tribunal or other authority in favour of or against the company is subsisting.

Whether any clearance, approval or permission for conversion of the company into limited liability partnership is required from anybody/ authority.

Whether company have Creditors if, yes then NOC from Unsecured creditors.

 

PROCESS OF CONVERSION OF COMPANY INTO LLP

 

  1. OBTAIN DIN:

Earlier there was Concept of DPIN, which has been abolished therefore. Now obtain DIN for those designated partners who don’t posses DIN already.

 

  1. BOARD MEETING:
  • Call meeting of board of Director.
  • Pass Resolution for Conversion of Company into LLP.
  • Pass Resolution to authorize any director to Apply for Name of LLP.

APPLICATION FOR NAME AVAIBILITY:

File e-form LLP-1 with ROC.

Attachments: Board Resolution Board resolution passed by the Company approving the conversion into LLP shall be attached with the aforesaid form

 

  1. Obtain name Approval Certificate from ROC.

 

  1. DRAFTING OF LIMITED LIABILITY PARTNERSHIP AGREEMENT:

Contents of Agreement are:

  • Name of LLP

  • Name of Partners & Designated Partners

  • Form of contribution

  • Profit Sharing ratio

  • Rights & Duties of Partners

  • Proposed Business

  • Rules for governing the LLP

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.

  1. FILLING OF INCORPORATION DOCUMENTS:File E-Form- 2 with ROC along with following ATTACHMENTS:

  • Proof of Address of Registered office of LLP.
  • Subscription sheet signed by the promoters.
  • (Notice of Consent & Appointment of Designated Partners with their personal details)
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner
  1. FILLING OF APPLICATION FOR CONVERSION:

File E-FORM- 18 with ROC along with following ATTACHMENTS:

  • Statement of shareholders.
  • Incorporation Documents & Subscribers Statements in Form 2 filed electronically.
  • Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor.
  • List of all the Secured creditors along with their consent to the conversion.
  • Approval of the governing council (In case of professional private limited companies)
  • NOC from Income Tax authorities and Copy of acknowledgement of latest income tax return.
  • Approval from any other body/authority as may be required.
  • Particulars of pending proceedings from any court/Tribunal etc.
  1. 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.

  1. FILLING OF E-FORM-3:

This form provides information in respect to the LLP Agreement entered into between the partners.

ATTACHMENT: LLP Agreement

  1. CERTIFICATE OF INCORPORATION AS LLP FORM ROC.

  2. FILLING OF E-FORM-14: (INTIMATION TO ROC)

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 (1 of 2013) about the conversion and of the particulars of the limited liability partnership in within 15 days of conversion into LLP.

ATTACHMENTS OF E-FORM 14

  • Copy of Certificate of Incorporation of LLP formed.
  • Copy of incorporation document submitted in Form 2

Above we talked about procedure for conversion of Private Company into LLP according to Companies Act and LLP Act.

Event Based Compliance by LLP:

Compliance

Section

e-form

Time Limit

Filing of Consent of Designated Partners

7(3)

Form 4

Within 30 days of incorporation or subsequent appointments
Filing of Change in Partners

25(2)

Form 3 and Form 4

Within 30 days of Change
LLP Agreement & Changes therein

23(2)

Form 3

Within 30 days of incorporation or Changes in LLP Agreement
Shifting of Registered Office

13(3)

Form 15

Within 30 days of Compliance
Change of Name

19

Form 5

Within 30 days of Compliance.

Regular Compliance by LLP:

Compliance

e-form

Time Limit

Filing of Statements of Accounts & Solvency

Form-8

Within 30 days from the end of 6 months from the closure of Financial Year

Filing of Annual Return

Form-11

Within 60 Days of closure of Financial Year

TABLE OF STEPS OF CONVERSION:

S. NO.

PARTICULAR

REQUIREMENT

Call BM- to change name – ending with word LLP
File Form for Name approval with work LLP

E-form LLP-1

ROC issue name approval certificate
Incorporation documents with registrar

File e-form -2

Application of Conversion

e-form – 18

LLP Agreement- within 30 days of approval of above forms

e-form- 3

If incorporation certificate is issued by department; then
Intimation of Conversion to Registrar

e-form-14

 

RELEVANT SECTIONS OF LLP ACT-2008

Conversion of Company into LLP Govern by Following Sections of LLP Act-2008:

Section-56: A private company may convert into a Limited Liability partnership is accordance with the provisions of this Chapter and the Third Schedule.

Section-57: An unlisted Public Company may convert into a Limited Liability Partnership in accordance with the provisions of this Chapter and the Fourth Schedule.

THE THIRD SCHEDULE

(See section 56)

CONVERSION FROM PRIVATE COMPANY INTO LIMITED LIABILITY PARTNERSHIP:

1.     Interpretation:-

In this Schedule, unless the context otherwise requires, —

a.     “company” means a private company as defined in clause (iii) of sub-section (1) of section 3 of the Companies Act, 1956(1 of 1956);

b.    “convert”, in relation to a private company converting into a limited liability partnership, means a:

  • Transfer of the property, assets, interests, rights, privileges, liabilities, obligations and

  • the undertaking of the private company to the limited liability partnership in accordance with this Schedule.

2.     Eligibility for conversion of private companies into limited liability partnership:-

1.     A company may convert into a limited liability partnership by complying with the requirements as to the conversion set out in this Schedule.

2.     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.

3.     Statements to be filed:-

A company may apply to convert into a limited liability partnership by filing with the

Registrar–

a.     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:–

                      i.        The name and registration number of the company;

                     ii.        The date on which the company was incorporated; and

b.    Incorporation document and statement referred to in section 11.

4.     Registration of conversion:-

On receiving the documents referred to in paragraph 3, the Registrar shall, subject to the provisions of this Act and the rules made there under, register the documents and issue a certificate of registration in such form as the Registrar may determine stating that the limited liability partnership is, on and from the date specified in the certificate, registered under this Act:

Provided that the limited liability partnership shall, within fifteen days of the date of registration, inform the concerned Registrar of Companies with which it was registered under the provisions of the Companies Act, 1956(1 of 1956) about the conversion and of the particulars of the limited liability partnership in such form and manner as the Central Government may prescribe.

5.     Registrar may refuse to register

1.     Nothing in this Schedule shall be construed as to require the Registrar to register any limited liability partnership if he is not satisfied with the particulars or other information furnished under the provisions of this Act:

Provided that an appeal may be made before the Tribunal in case of refusal of registration by the Registrar.

[Provided further that until the Tribunal is constituted under the Companies Act, 1956, the appeal under this sub-paragraph may be made before the Company Law Board]

2.     The Registrar may, in any particular case, require the documents referred to in paragraph 3 to be verified in such manner, as he considers fit.

6.     Effect of registration

On and from the date of registration specified in the certificate of registration issued under paragraph 4–

a.     there shall be a limited liability partnership by the name specified in the certificate of registration registered under this Act;

b.    all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed; and

c.     the company shall be deemed to be dissolved and removed from the records of the Registrar of Companies.

7.     Registration in relation to property

If any property to which clause (b) of paragraph 6 applies is registered with any authority, the limited liability partnership 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 limited liability partnership in such form and manner as the authority may determine.

8.     Pending proceedings

All proceedings by or against the company which are pending before any Court, Tribunal or other authority on the date of registration may be continued, completed and enforced by or against the limited liability partnership.

9.     Continuance of conviction , ruling, order or judgment

Any conviction, ruling, order or judgment of any Court, Tribunal or other authority in favour of or against the company may be enforced by or against the limited liability partnership.

10.  Existing agreements

Every agreement to which the company was a party immediately before the date of registration, whether or not of such nature that the rights and liabilities there under could be assigned, shall have effect as from that date as if–

a.     the limited liability partnership were a party to such an agreement instead of

the company; and

b.    for any reference to the company, there were substituted in respect of anything to be done on or after the date of registration a reference to the limited liability partnership.

11.  Exiting contracts, etc.

All deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements subsisting immediately before the date of registration relating to the company or to which the company is a party shall continue in force on and after that date as if they relate to the limited liability partnership and shall be enforceable by or against the limited liability partnership as if the limited liability partnership were named therein or were a party thereto instead of the company.

12.  Continuance of employment

Every contract of employment to which paragraph 10 or paragraph 11 applies shall continue in force on or after the date of registration as if the limited liability partnership were the employer there under instead of the company.

13.  Existing appointment, authority or power

a.     Every appointment of the company in any role or capacity which is in force immediately before the date of registration shall take effect and operate from that date as if the limited liability partnership were appointed.

b.    Any authority or power conferred on the company which is in force immediately before the date of registration shall take effect and operate from that date as if it were conferred on the limited liability partnership.

14.  Application of paragraphs 6 to 13:-

The provisions of paragraphs 6 to 13 (both inclusive) shall apply to any approval, permit or license issued to the company under any other Act which is in force immediately before the date of registration of the limited liability partnership, subject to the provisions of such other Act under which such approval, permit or license has been issued.

15.  Notice of conversion in correspondence:-

1.     The limited liability partnership shall ensure that for a period of twelve months commencing not later than fourteen days after the date of registration, every official correspondence of the limited liability partnership bears the following, namely:–

a.     a statement that it was, as from the date of registration, converted from a company into a limited liability partnership; and

b.    the name and registration number of the company from which it was converted.

2.     Any limited liability partnership which contravenes the provisions of sub-paragraph (1) shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees and with a further fine which shall not be less than fifty rupees but which may extend to five hundred rupees for every day after the first day after which the default continues.

Conclusion:

As per above discussions the LLP is more advantageous form of organization over a company from

Compliances, tax and operational flexibility stand point. Therefore LLP may be more suitable for small entrepreneur and professionals particularly. The conversion from the existing corporate structure can be made to a LLP while retaining the advantages of Limited Liability and less compliances.

(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections, rules under the Companies Act, 2013. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written.

 

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