Bangalore Chapter-The ICSI, Fully Day Seminar on LLP Act, 2008

on 23-11-2013

Conversion of Companies and Partnership Firms into LLP

By CS Thirupal Gorige,Practising Company Secretary

Conversion of Companies/Firm into LLP- Practical Aspects

• Pre- Requisites/ Conditions• Procedure• Post- Conversion activities • Taxation advantages

Conversion of Companies into LLP- Pre- Requisites/ Conditions

From Company• No-Pending of E-forms filed by Com.• No Charges should subsist at MCA site• Company should be having share capital• Section 25 Com. are not allowed • One financial year must over• Update filing of all forms and returns • Update - income tax filings

Conversion of Companies into LLP- Pre- Requisites/ Conditions

From Director/shareholders• At DIN -residential status must (For DP)• DIN –PAN integration (For DP)• PAN/ passport (partners)• PAN containing abbreviation are not allowed

Conversion of Companies into LLP- Procedure

From Company• Board Resolution• Filing of form 1 –Name availability• Filing of form 2- With subscriber sheet and

Proof of address• Filing of form 18 • Filing of form 3• Filing of form 14

Conversion of Companies into LLP- Procedure

Things to be ensured before or at time of filing of form 18

(i) Individual Consent/statement (as per Part-B of form 18) from shareholders

(ii) Disinterested Shareholders, if any, to be provided exit option, (share acquisition/ transfer) otherwise no conversion

Conversion of Companies into LLP- Procedure- Filing form 18

(iii) Only shareholders can be partners no one else(iv) Security interest in the assets, if any, to be

disclosed (may be a pledge)(v) Latest IT filing acknowledgement to be

enclosed(vi) Details of prosecution initiated against or

show cause notice u/CA on Com. (can be verified at Master Data)

Conversion of Companies into LLP- Procedure- Filing form 18

(vii) Proceedings by or against the company is pending in any Court or Tribunal or any other Authority. ( under any LAW)

(viii) Rejection of earlier application for conversion, if any –SRN of old F18 and reasons

(ix)Details of conviction, ruling, order, judgment of any Court- subsisting if any

(x) consent of all the secured creditors with list, if any,

Conversion of Companies into LLP- Procedure- Filing form 18

(x) Clearance, approval or permission from any body/ authority, if any, (SEBI_ For stock broker / Investment Advisors Com.)

(xi) Statement of Assets and Liabilities of the company duly certified as true and correct by the auditor ( Similar to FTE) & 2 Directors

Conversion of Companies into LLP Procedure

Filing Form 3 • Within 30 days of date of registration of the LLP• With signed LLP agreement- (on Stamp Paper)Filing of form 14• Within15 days of the date of registration of the

LLP with ROC• Attachment- LLP Conversion Certificate• Digitally signed by one of the directors in the

company before conversion

Conversion of Firm into LLP Pre- Requisites/ Conditions

-DINs for DPs-PAN /Passport for partners-DSCs minimum for 2 DPs-Firm must be have registered with Partnership

Act 1932 or such other Act-At least one financial year must have been

completed-All partners should be partners of LLP no one

else.

Conversion of Firm into LLP- Pre- Requisites/ Conditions

-Update Income tax filings-Liabilities and obligations of the firm prior to

the conversion- Unlimited liability-Settlement with disinterested partners and re-

constitution of Partnership deed and its registration

-Obtaining list of present partners from Registrar of Firm /other authority

Conversion of Firm into LLP- Procedure

• Partners Resolution• Filing of form 1 –Name availability• If existing name not available -Change of name of

partnership/reconstitution deed & its registration• Filing of form 2- With subscriber sheet and Proof

of address• Filing of form 17 • Filing of form 3• Filing of form 14 (Physically)

Conversion of Firm into LLP- Procedure-Filing Form 17

Things to be ensured before or at time of filing of form 17

-(i) Individual Consent/statement (as per Part-B of form 17) from partners

(ii) Only partner for firm can be partners no one else(iii) Security interest in the assets, if any, to be

disclosed (may be a pledge)(iv) Latest IT filing acknowledgement to be enclosed

Conversion of Firm into LLP- Procedure-Filing Form 17

(v) Proceedings by or against the Firm is pending in any Court or Tribunal or any other Authority. ( under any LAW)

(vi) Rejection of earlier application for conversion, if any –SRN of old 17 -

(vii)Details of conviction, ruling, order, judgment of any Court- subsisting if any

(viii) consent of all the secured creditors with list, if any,

Conversion of Firm into LLP- Procedure-Filing Form 17

(ix) Clearance, approval or permission from any body/ authority, if any, (SEBI_ For stock broker / Investment Advisors Com.)

(x) Statement of Assets and Liabilities of the company duly certified as true and correct by

Chartered Accountant in practice

Conversion of Firm into LLP- Procedure

Filing Form 3 • Within 30 days of date of registration of the LLP• With signed LLP agreement- (on Stamp Paper)Filing of form 14• Within15 days of the date of registration of the

LLP (together with Conversion Certificate) with Registrar of Firm

• Physically signed by one of the partners of firm before conversion

Conversion of Company/Firm into LLP

Other -Post Conversion IssuesIn Case of Company ConversionObtain-Fresh IT PAN/ TAN-New Bank Account-All other applicable Licences like Service Tax, VAT, Excise,

Customs, IEC etc.MaintainFormerly known as “…………Private Limited” (regd.No.08/……..)

converted and registered as LLP on 31-03-2013 vide LLPIN:……. with limited liability- for 12 months

Conversion of Company/Firm into LLP

Other -Post Conversion IssuesIn Case of Firm into LLPObtain-Alteration of IT PAN/ TAN-Change of name in existing Bank Accounts-Intimation to all other applicable Licences like

Service Tax, VAT, Excise, Customs, IEC etc and obtain the change of name effected in their records.

Conversion of Company/Firm into LLPPost Conversion EffectIn case of Company ConversionStamp duty issues (If any, immovable property involved) (Some

state Govts.not accepting)Capital Gain Taxation ( If criteria mentioned at IT Act, 1961 is not

satisfied)No DDT/ Deemed dividend/TDS etc but AMT appliesRPTs allowed/ no approval 295, 297, 314; Sch XIII etcCarry forward loss & Acc. Dep next 8 yrs.Tax Saving as per illustration.Unlimited no. of partners No audit upto Rs.40 lakhs Turnover/ Rs25 lakhs Contribution

Conversion of Company/Firm into LLPPost Conversion EffectIn case of Company ConversionCriteria as per IT-Last 3 years average turnover of Company should be less than 60

lakhs (eligibility)-No consideration to partners fr conversion-All assets of company to be assets of LLP-All shareholders to be partners of LLP-Accumulated profits on date of Conversion are not allowed for

distribution for next 3 years from date of conversion (Post)-50% of shareholders of Company should continue to hold for next

5 years (Post)

Conversion of Company/Firm into LLP

Post Conversion EffectIn case of Firm ConversionNo Stamp duty issues even if immovable properties

are involvedNo Capital gains as per IT, reason IT firm includes LLP

there same status continuesMaintainFormerly known as “…………Firm” (regd.No./……..)

converted and registered as LLP on 31-03-2013 vide LLPIN:……. with limited liability- for 12 months

Thought -Forever • “Teach yourselves, teach everyone his/her real

nature, call upon the sleeping soul and see how it awakes. Power will come, glory will come, goodness will come, purity will come, and everything that is excellent will come, when this sleeping soul is roused to self conscious activity.” —Swami Vivekananda

Further Discussions

• Thanks to one and all for providing opportunity to me to

share my experience gained accidentally