Convert Partnership Firm into Private Limited Company (PLC)

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.

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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.
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Steps to convert Partnership Firm into PLC

Step by step guide to help you convert Partnership firm into PLC:

  1. 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.

  2. 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.

  3. 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.

  4. File Form URC-1 along with the necessary attachments with ROC

    File Form URC-1 within 30 days of name approval.

  5. 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.

  6. 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.

  7. File necessary forms with ROC

    File INC-32, INC-33, INC-34 and AGILE along with the earlier mentioned forms on MCA Website.

  8. 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.

  9. 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

FAQs

Is capital gain or stamp duty charged on conversion?

No Capital Gains tax or stamp duty shall be charged on transfer of property from Partnership firm to a Private Limited Company.

What are the minimum capital requirements to convert partnership into private limited?

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

How to Register a Public Limited Company?

A Public Limited Company is a separate legal business entity having limited liability. The securities of a Public limited company are traded on a stock exchange. In order to register as a Public Limited Company, the company must have a minimum of 3 Directors and 7 Shareholders. And should also have Rs 5 Lakhs as Paid-up Capital.

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Procedure to register a Public Limited Company

Follow the steps to register a Public Limited Company:

  1. Obtain a DSC of the proposed Directors of the Public Limited Company

    Obtain DSC of at least one director to sign the E-forms related to incorporation.

  2. Once a DSC is received. File Form DIR-3 with the ROC for getting a DIN if the directors does not possess DIN.

    For DIN application you will require Identity Proof and Address Proof. Every Director proposed to be appointed in the company should hold a valid DIN.

  3. Visit MCA website for name reservation/ availability.

    Click on RUN (Reserve Unique Name) under MCA Services on the MCA website.

  4. It will take you to another Portal. Now login using your MCA credentials.

    Under entity type select Public Limited Company.
    You don’t need to add CIN since it for existing registered companies.
    Enter the proposed name make sure it is not similar to the existing name.

  5. Fill in the required information.

    Click on the Auto check.
    Further, if the name matches an entry in the database, it will show an error. Once the proposed name is error-free, you need to pay a minimum amount of Rs. 1000 run the similarity test and to reserve the name.

  6. If the proposed name is approved by the Ministry. You will receive a notification about the same on your registered email address.

    Download all the forms of incorporation on MCA Website.

  7. File Form INC-12 also known as SPICe form.

    For application of licence for Public Limited Company.

  8. File SPICe MOA and SPICe AOA.

    Upload these form on MCA Website.

Documents for Incorporation

  • PAN number of all the shareholders and directors
  • Proof of identity of all shareholders and directors.
  • Proof of Address of all directors and shareholders.
  • Utility bill of the proposed registered office of the company.
  • NOC from the landlord if the office premises are on lease or rent.
  • DSC of Directors.
  • DIN of all directors.
  • Memorandum of Association (MOA).
  • Articles of Association (AOA),

FAQs

Can a salaried person become director of company ?

Yes, there is no legal hurdle. However employment agreement may have some restriction.

What are the primary requirements for a public limited company?

Following are the primary requirements of Public Company:
– The minimum number of shareholders must be 7.
– File accounts within 6 months of the year-end.
– The minimum Paid-up share capital must be Rs. 5 lakhs.
– The minimum number of Directors is 3.

Can an NRI/Foreign National be a director in Public Limited Company? and If Yes, then what are the conditions for the same?

Yes, an NRI or Foreign National can also be a shareholder or director in a Public Limited Company of India. However, for becoming a director, such a person must possess the DIN issued by MCA.

MCA : RUN (Reserve Unique Name) for Company Incorporation

MCA started an initiative to provide Ease of Doing Business in India. As a part of this initiative, MCA introduced RUN service. RUN can only be filed after you login on MCA Portal. Hence you either need to create an account on MCA Portal or Login to your MCA portal account to reserve the company name. In the process of company incorporation, apply for the name of the company through RUN service of MCA Portal.

RUN can be used for the following purposes:

  • To Reserve the name of New Company
  • To Change the name of any Existing Company
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Types of Company who can apply for name using RUN on MCA

Following are the type of companies who can use the RUN form on MCA to reserve name for Company Incorporation:

  • Producer Company,
  • Unlimited Company,
  • Private (OPC),
  • IFSC Company,
  • Section 8 Company,
  • New Company (Others),
  • Part I Section 8 Company,
  • Part I LLP to Company,
  • Nidhi Company,
  • Part I Firm to Company,
  • Part I Others.

While filing the RUN you can propose 2 names. While adding the names it is mandatory to add Suffix. Following are the suffix allowed for the above-mentioned type of companies in RUN:

Company Type Suffix Allowed Example
New Company (Others) Limited / Private Limited XYZ Limited
ABC Private Limited
Private (OPC) (OPC) Private Limited DEF (OPC) Private Limited
Producer Company Producer Company Limited GHI Producer Company Limited
Unlimited Company Unlimited JKL Unlimited
IFSC Company (IFSC) Limited / (IFSC) Private Limited / IFSC Limited / IFSC Private Limited MNO (IFSC) Limited / MNO IFSC Limited
PQR (IFSC) Private Limited / PQR IFSC Private Limited
Section 8 Company i.e, Trust Other than ‘Private Limited / Limited / (OPC) Private Limited’ STU Electoral
Nidhi Company Nidhi Limited VWX Nidhi Limited
Part I Section 8 Company Other than ‘Private Limited / Limited / (OPC) Private Limited’ ABC Education Institute
Part I LLP to Company Limited / Private Limited DEF Limited
GHI Private Limited
Part I Firm to Company Limited / Private Limited/ Unlimited JKL Limited
MNO Private Limited
PQR Unlimited
Part I Others N/A N/A

Rules to select proposed name of Company

  • Name must be unique,
  • The name shall not be identical or resemble too nearly to the name of any existing company or LLP, you can check the company name from here,
  • The name shall not be a registered trademark, you can check out the registered trademark from here.

Information Required to file RUN for Company Incorporation

  • Type of the company,
  • Two proposed names for the company,
  • The objective of the proposed company,
  • NOC for the proposed name if applicable,
  • CIN / LLPIN of the existing entity in case of a change in the name of an existing company,
  • SRN of RUN in case of Resubmission of RUN.

Steps to file RUN Form for Company Incorporation on MCA

  • Login to your account on MCA Portal
  • Go to MCA Services > Company Services > RUN (Reserve Unique Name)
  • Enter the required details and click on Submit
  • Make the payment of Rs.1000
  • Use SRN to track the status of name approval

Fees and Validity of RUN

Fees of INR. 1,000 is payable at the time of submission of RUN. An approved name is valid for a period of:

  • 20 days from the date of approval in case of a New Company,
  • 60 days from the date of approval in case of an Existing Company.

Post Submission Process

Once RUN is submitted along with fees. SRN (Service Request Number) gets generated. You can track the status of your application through the SRN so make sure to save it. Challan for payment of fees also gets generated. An email will be sent to your registered mail id once an application gets processed. An application can be approved or rejected by the MCA.

Reasons for Rejection of RUN

Rejection happens when names proposed in RUN form are found undesirable by MCA Administrator Following are the common reasons for rejection of RUN:

  • Proposed name resembles the name of an already registered company,
  • The proposed name includes the word for which Trade Mark is registered by someone else,
  • The proposed name is a name of a registered partnership firm and NOC is not attached with RUN.

In case of Rejection of RUN, you can Resubmit the RUN Form. Resubmission needs to be done within 15 days from the date of rejection of RUN.

FAQs

Who can file RUN to reserve name?

Any individual who wishes to incorporate a new company can file RUN to reserve a name. The only prerequisite is to have an account on MCA Portal. You can either create a new account or use your current account to file RUN.

I want to incorporate Private Limited Company which Entity type should I select in RUN?

You need to select the New Company (Others) from the dropdown list. And while entering name add Private Limited as a suffix.

Can I change the name of my LLP while converting it into Private Limited Company?

No. You can start the conversion of LLP into a Private Limited Company by using RUN. But the LLP name and proposed company name should remain the same.

Rules to select Company Name to avoid rejection on MCA

You can easily reserve a name for your new company using RUN service of MCA. However, MCA has provided rules to keep in mind while selecting a name of company. The following are some basic rules to keep in mind:

  • Name must be unique,
  • The name shall not be identical or resemble too nearly to the name of any existing company or LLP, you can check the company name from the MCA portal,
  • The name shall not be a registered trademark, you can check out the registered trademark from here.

Rules to select Company Name on MCA

  1. The name shall not include the words indicative of a separate type of business constitution. For example, the name should not contain co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, Inc., PLC, etc. in the name.
  2. The proposed name shall not contain the words ‘British India’
  3. The name shall not imply association or connection with the embassy or consulate or a foreign government.
  4. The name shall not imply association or connection with or patronage of a national hero or any person held in a high esteem position in Government.
  5. The proposed name shall not include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual Fund’ etc. To include such words in the name, the applicant must submit a declaration based on the requirement of different regulators such as IRDA, RBI, SEBI, MCA, etc.
  6. The name shall not include the name of a continent, country, state, city. For example, an applicant cannot choose names like Asia Limited or Germany Limited or Haryana Limited.
  7. The proposed name shall not imply any connection with the Central Government, State Government, or any local authority. For the use of such words, a previous approval from the authority is necessary.
  8. The name shall not include the name of a person other than promoters or their close blood relatives. In such a case, the applicant shall take NOC i.e. No Objection Certificate, and attach it with RUN Form.
  9. The name shall not include the name of any sole proprietor or partnership firm already registered. In such a case, the applicant shall take NOC i.e. No Objection Certificate from the proprietor or partnership firm.
  10. For the Companies under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like, etc. Every company incorporated as a “Nidhi” shall have the last word ‘Nidhi Limited’ as part of its name.
  11. The proposed name shall not include words such as Board, Commission, Authority, Undertaking, National, Union, Central, Federal, Republic, President, Municipal, Panchayat, Development Authority, Minister, Nation, Small Scale Industries, Governor, etc. To use such words, previous approval from the Central Government is required.
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FAQs

I have a partnership firm registered in Tamil Nadu? Can I give my new company the same name as my Partnership Firm?

Yes. You can give your new company the same name as your partnership firm. But while filing RUN form you need to attach NOC from the partnership firm.

Can I name my company after my name?

Yes, you can name your company after your name. However, you need to keep in mind that you are a promoter of that company.

What is a NIDHI company?

A NIDHI Company is notified under section 620-A of the Companies Act and is classified as “Mutual Benefit Financial Company” by the RBI. Essentially, a Nidhi Company differs from a regular finance
investment company or a Non-Banking Finance company (NBFC), as it deals only with its shareholders or members, for mutual benefits of its members. A Nidhi Company accept deposits only
its members and lends funds only to them on demand. A Nidhi Company is not entitled to carry out business/activities related with hire purchase financing, leasing finance, chit funds, acquisition of
securities issued by any corporate body, etc. or issue any debt instruments (such as preference share,debentures, etc.) in any form

RUN Form – Apply for Name Reservation for Company Incorporation

As part of the incorporation process of a Company, it should apply for name reservation through RUN Form on MCA Portal. A Company can file RUN (Reserve Unique Name) on MCA for the following purposes:

  • To Reserve the name of New Company,
  • To Change the name of any Existing Company.

Before applying for name reservation, the applicant must check the available names of the proposed company before filing RUN form to avoid rejection.

Steps to file RUN for Name Reservation for Incorporation of Company

  1. Login to MCA Portal

    Log in to your account on MCA Portal

  2. Navigate to RUN Service

    Go to MCA Services > Company Services > RUN (Reserve Unique Name). Click on New Request

  3. Select Entity Type

    Select Entity Type i.e. Type of Company. Select New Company (Others) if reserving name for Private Limited Company. Select Private (OPC) if reserving a name for One Person Company

  4. Enter Proposed Name

    Enter the new Proposed Name 1 and Proposed Name 2 with a suitable suffix

  5. Click on Auto Check

    The system performs the primary check for the name entered and displays the message whether it is valid or invalid

  6. Enter Objective of Company

    Enter the objective of the new company in brief under Comment

  7. Attach Documents

    Attach NOC i.e. No Objection Certificate or any other certification by clicking on Choose File. It is not mandatory to attach relevant documents

  8. Success Message

    Click on Submit, a pop up with the successful submission will appear

  9. Payment of Fee

    Make a payment of fees. INR. 1,000 is charged as fees. You can not file RUN without making payment. There is no Pay Later Option available in case of RUN

  10. SRN generated

    Upon successful submission, SRN and a Challan will be generated. Save the SRN and challan. You can track the status of RUN through its SRN on MCA portal

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Once the Company files RUN Form, it is approved or rejected by MCA. You will receive an email from MCA Administrator on approval or rejection of an application. In case of rejection of RUN, Resubmission of RUN is allowed in certain specific situations. You will have 15 days for resubmission of RUN.


FAQs

How does one reserve a name? Are there any considerations to be kept in mind while providing a name to the company?

An applicant can pick up any suitable name for the company, provided that
(i) the company cannot be registered with a name which is undesirable as per the Central Government
(ii) the name of the company has to end with ‘Private Limited
(iii) the name which is chosen for the company should not resemble or be identical to the name of another registered company. One can reserve the name of its company via Reserve Unique Name form (“RUN”).

How long is the approved name valid for?

An approved name is valid for a period of twenty (20) days from the date of approval of such name.You can file the remaining incorporation forms i.e, SPICe INC -32, 33 & 34 from the date of the name approval letter to incorporate a company

Is it mandatory to reserve a name in advance?

No, it is not compulsory to reserve a name through the RUN service. The approval of a name can also be sought while filing the SPICe (INC-32) form.One can apply for the proposed name through SPICe (INC-32) form on the MCA portal. Only one name can be applied for under this form. However, in case of rejection due to non-approval of the name, the applicant in this case gets a second chance of refilling the same SPICe (INC-32) form without any further charges.