The major benefit of registering a Private Limited Company is that it has the status of a separate legal entity that a Partnership firm does not have. Private Limited Company has Limited Liability whereas in the case of partnership firm partners are personally liable for each and every debt. Private Limited structure is more transparent than other business structures. PLC has its own advantages such as Limited Liability, Perpetual Succession, easy access to funds, etc. Convert your Partnership Firm into PLC following the procedure mentioned below.
Pre-requisites to Convert Partnership Firm to PLC
- Partnership Deed must be registered with ROC.
- Should have 2 or more partners.
- NOC from all secured creditors.
- Further, 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.
- Amend Partnership deed – Add clause for conversion in deed, if required
- In addition, consent of the majority of members by calling a general meeting for conversion.
Steps to convert Partnership Firm into PLC
Step by step guide to help you convert Partnership firm into PLC:
- Convene a meeting for the Conversion of Partnership Firm Into Private Limited Company
– To take assent of majority of its partners, not less than three-forth of the partners should be present in person.
– To authorize two or more partners to take all steps necessary and to execute all papers, deeds, documents etc.
- Apply for DSC and DIN for all directors and shareholders of the company.
Obtain DSC of all directors and shareholders. In addition to that obtain written consent or No Objection Certificate from the secured creditors of the firm, if any.
- Obtain name Approval in RUN
File an application in RUN on the MCA website to obtain the name for the proposed company after conversion. Along with various attachments. Further also stating the proposal for conversion of the partnership firm.
- File Form URC-1 along with the necessary attachments with ROC
File Form URC-1 within 30 days of name approval.
- Publish an advertisement in Two Newspaper
– As per section 374(b) of Companies Act, 2013 firm seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration.
– Seeking objections, if any within 21 clear days from the date of publication of the notice.
– The said advertisement shall be in Form No. URC-2.
– Further, these shall be published in 2 newspapers one in English and other in the principal vernacular language of the district.
- Draft MOA and AOA
Therefore, after obtaining name approval, and approval of E-FORM URC-1 from the Registrar, the applicant is required to draft the Memorandum and Articles of Association and other relevant documents necessary for incorporation.
- File necessary forms with ROC
File INC-32, INC-33, INC-34 and AGILE along with the earlier mentioned forms on MCA Website.
- Once the Registrar in satisfied on the basis of documents and information filed by the applicants,
He shall issue a certificate of incorporation in Form No. INC.11.
- Intimate ROC under which it was previously registered.
Along with documents for its dissolution as a firm
List of documents to be attached
With Form URC-1
- A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them.
- Also, a list of persons proposed as the first directors of the company.
- An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under section 164(1). Further that all the documents filed with the Registrar for registration of the company contain correct, complete, and true information to the best of his knowledge and belief.
- Partnership deed, along with the revised deeds, in case the firm is regd.
- A statement of assets and liabilities of the partnership firm duly certified by a chartered accountant.
- Further, a copy of the latest income tax return of the Partnership Firm.
- A statement specifying the following particulars:
- The nominal share capital of the company and the division of shares.
- The number of shares taken and the amount paid on each share.
With Form_INC-32, INC-33, INC-34
- DIR-2 Consent to Act as Director.
- INC-9 Declaration by subscriber/first director.
- KYC document of Directors and shareholders of the proposed converted company.
- Utility Bill (not older than two months).
- Lease deed/ title deed for the regd. office address of the company.
- Detail of main and other objects of the company.
No Capital Gains tax or stamp duty shall be charged on transfer of property from Partnership firm to a Private Limited Company.
Following are the minimum requirements:
– Appointment of minimum 2 directors, out of which one must be a resident of India.
– Minimum requirement of 2 shareholders for this registration. Further, an individual may become shareholder and director at the same time.
– A place of business in India must be provided as a regd. office address