Conversion of a private limited company into an LLP
A private limited company converts into an LLP under the Third Schedule of the LLP Act, 2008. Company Suggestion files Form 18 with FiLLiP and checks the capital-gains conditions in section 47(xiiib).
How does a company become an LLP?
Sections 56 to 58 of the LLP Act, 2008, with the Third Schedule, are the conversion. The shareholders become the partners. The company does not keep a share capital.
Two conditions decide whether the application can be filed. No security interest may be subsisting on the company’s assets. The partners of the LLP must be all the shareholders of the company, and no one else.
On the certificate, the assets and liabilities of the company vest in the LLP. The company is dissolved.
An LLP cannot issue shares. The comparison of a private limited company and an LLP is the check before this filing.
Who should convert a company into an LLP?
Two plans fit this conversion:
- Shareholders who will fund the business themselves and do not need shares.
- A company with no charge on its assets, whose shareholders will all become partners.
A company that will raise equity should stay a private limited company.
Which documents does Form 18 need?
Form 18 is filed with five attachments.
- The list of shareholders and the consent of each to become a partner
- A statement that no security interest subsists on the assets
- The latest statement of assets and liabilities
- Consent of the secured creditors, if any charge is being released before filing
- The incorporation documents of the proposed LLP
What are the conversion steps?
Company Suggestion files the conversion in five steps.
- The board decides to convert, and the shareholders consent to become partners.
- Any subsisting charge on the assets is closed before the application.
- Form 18 and FiLLiP are filed together.
- The Registrar issues the certificate. The company is dissolved.
- The partners sign the LLP agreement, and Form 3 files it within 30 days.
Frequently asked questions
4 questions cover the rules that decide this registration.
Can every private limited company convert into an LLP?
No. At the time of the application there must be no security interest subsisting on the company’s assets. Every shareholder must become a partner, and no one else may be a partner.
Which forms are filed?
Form 18 is filed with FiLLiP. After the certificate, Form 3 files the LLP agreement within 30 days.
What happens to the company?
On registration the company is dissolved and removed from the register of companies. Its assets and liabilities vest in the LLP.
When is the transfer exempt from capital gains?
Section 47(xiiib) exempts the transfer when its conditions are met, including a turnover not above ₹60 lakh and a book value of assets not above ₹5 crore in any of the three preceding years. Company Suggestion checks those conditions before filing.