Private Limited to LLP

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Private Limited to LLP


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About Private Limited to LLP

LLP structure offers the benefits of both – a partnership and a company. Therefore, by converting the company to LLP, the business gains more operational flexibility. The characteristics of being a separate legal entity and limited liability remain the same. Further, the operations and management come directly in hands of the LLP partner(s) unlike in Private Company where it is with the director(s).

LLP is governed by the LLP Agreement executed by the Partners. It has lesser compliance requirements and it is easier to operate. It preserves the benefits of a partnership with providing security and credibility to a company. The conversion of Private limited to LLP must be followed by the approval of the Ministry by the online application providing necessary documents.

Benefits

Rewards and returns to partners

The partners of the LLP receives multiple returns, such as remuneration, the share of profit and also the interest on capital. The remuneration is paid for active participation by partners, whereas the share of profit is part of profit generated from business activities.

Less Statutory Compliance

The compliances to be fulfilled are less as compared to a Private Limited Company. An LLP is not required to maintain statutory records & registers. The requirement of a statutory audit is also relaxed in case of LLP.

Independent liability

No partner is liable on account of the unauthorized actions of other partners. Thus, individual partners are shielded from the burden of joint liability created by another partner’s wrongful business decisions or misconduct.

Operational Flexibility

The partners are directly associated with the day-to-day operations and management of LLP. Unlike a company, LLP is governed through the LLP Agreement which is executed mutually by the partners.

Documents Required

Consent of all the directors and shareholders of the company for conversion in the given format.

NoC from the tax authorities is required to be obtained

List of all the secured creditors along with their consent

The financial statement of the previous year to be provided aling with ITR filed

DSC of all existing directors

Copy of Property papers (If owned property)

Process

Convey Board Meeting of Directors: (As per section 173 and SS-1)

To Pass a board resolution to get in principal approval of Directors for conversion of a public company into a private company by altering the AOA subject to the approval of Central Government (Power of Central Government assigned to RD).

Held Board Meeting: (As per section 173 and SS-1)

  • To consider In-principal approval for conversion of Public Company into Private Company by altering Articles.
  • Get Approval to Alteration in Article of Association and recommending the proposal for members’ consideration by way of special resolution.
  • Fixing the date, time, and venue of the general meeting and authorizing a director or any other person to send the notice for the same to the members.
  • To approve Notice of EGM along with explanatory statement to be annexed with the notice as per Section 102(1) of the Act.

Issue Notice of General Meeting: (Section 101)

Notice of EGM shall be given at least 21 days before the actual date of EGM. EGM can be called on Shorter Notice with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting:

  • All the Directors.
  • Members
  • Auditors of Company
  • The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM

Hold General Meeting: (Section 101)

  • Check the Quorum.
  • Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146).
  • Pass Special Resolution.[Section-114(2)]
  • Approval of Alteration in AOA for conversion of Public Company into Private Limited Company
  • Approval of alteration in Memorandum of Association.

Filing of form with ROC: (Section 117)

  • File Form MGT-14 (Filing of Resolutions and agreements to the Registrar under section 117) with the Registrar along with the requisite filing within 30 days of passing the special resolution, along with given documents:-
  • Certified True Copies of the Special Resolutions along with explanatory statement;
  • Copy of the Notice of meeting send to members along with all the annexure;
  • A printed copy of the Altered Article of Associations and Memorandum of Association.

Note: It is relevant to note that First you have to file form MGT.14

Drafting an Filing of Application with Regional Director (in Form RD-1)

Application in Regional Director shall be file at within 60 days from passing of Special Resolution in e-form RD-1.

Frequently Asked Questions

What are the basic conditions for converting Private Limited Company to LLP?

Following are the conditions for conversion:

  • All the members of the Company shall become the partners of the LLP on conversion.
  • No security interest in the assets of the company should be subsisting or in force on the date of conversion i.e. the assets are free of any encumbrance.
  • Up-to-date Income-tax return has been filed under the Income-tax Act, 1961.
  • Any clearance, approval or permission for conversion of the company into Limited Liability Partnership, if required from anybody/ authority, etc. has been obtained.

On conversion of the Company/partnership into LLP, all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company/firm and the whole of the undertaking of the company shall be transferred to and vest in the Limited Liability Partnership without further assurance, act, or deed.

It has been provided in the Act that on conversion, any approval, permit or license issued to the Private Company under any other Act shall; subject to the provisions of such other Act under which such approval, permit or license was issued, be transferred in the name of converted entity viz. LLP. Barring some registrations like GST or which a new application needs to be filed.

LLPs are required to file an annual filing with the Registrar each year. However, if the LLP has a turnover of fewer than Rs.40 Lakhs and/or has a capital contribution of fewer than Rs.25 Lakhs, the financial statements needs no auditing.

A basic difference between the LLP and a company lays in the internal governance structure. The LLP has more flexibility and less compliance requirements compared to a Company.

Yes, the LLP Act 2008 allows Foreign Nationals including Foreign Companies & LLPs to incorporate LLP in India, provided at least one designated partner is resident of India. However, the LLP/Partners would have to comply with all the relevant Foreign Exchange Laws/ Rules/ Regulations/ Guidelines

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