LLP to Private Limited Company Conversion
Complete Guide under Section 366 of Companies Act, 2013
Table of Contents
1. Legal Framework under Section 366
Section 366 – Conversion of companies already registered
Section 366 of the Companies Act, 2013 provides the legal framework for conversion of existing business entities into companies. This section, read with the Companies (Authorised to Register) Rules, 2014, governs the conversion of LLPs into Private Limited Companies.
The conversion process under Section 366 allows existing LLPs to transform into Private Limited Companies while maintaining business continuity. This provision recognizes that business entities may need to change their structure to meet evolving business requirements, access capital markets, or comply with regulatory frameworks that favor corporate structures. For more details on LLP compliance requirements, refer to our comprehensive guide on LLP Annual Compliance Checklist.
The Companies (Authorised to Register) Rules, 2014 provide detailed procedural requirements, documentation standards, and compliance obligations for entities seeking conversion under this section.
Key Provisions of Section 366
Section 366 empowers the Central Government to allow existing entities to register as companies under the Companies Act, 2013, subject to compliance with prescribed conditions and procedures. The conversion is treated as registration of a new company rather than a mere change in legal status.
2. Eligibility Criteria
Under the Companies (Authorised to Register) Rules, 2014, specific eligibility criteria must be met before an LLP can apply for conversion to a Private Limited Company.
| Criteria | Requirement | Compliance Check |
|---|---|---|
| Compliance Status | All statutory filings up to date | Forms 4, 8, 11 filed regularly |
| Financial Standing | No default in loan repayments | Bank and creditor clearances |
| Legal Proceedings | No pending winding up proceedings | Court/tribunal clearances |
| Partner Consent | Consent of all partners required | Documented partner resolution |
| Asset Status | Clear title to all assets | Property documents verification |
3. Required Forms and Applications
The conversion process involves filing specific forms as prescribed under the Companies (Authorised to Register) Rules, 2014. Each form serves a distinct purpose in the conversion workflow.
| Form | Title | Purpose | Filing Stage |
|---|---|---|---|
| SPICe+ Part A | Name Reservation | Reserve company name | Initial |
| SPICe+ Part B | Company Incorporation | Incorporate new company | Post name approval |
| URC-1 | Application for Conversion | Primary conversion application | Post incorporation |
| URC-2 | Public Advertisement Format | Creditor/stakeholder notification format | With URC-1 |
4. Step-by-Step Conversion Process
Partner Resolution and Documentation
Timeline: 3-5 days
Obtain consent from all designated partners through a formal resolution. The resolution must specifically authorize the conversion and designate persons to undertake the conversion process on behalf of the LLP.
Required Documentation:
- Partners’ meeting notice and minutes
- Partners’ consent resolution
- Authorization for conversion proceedings
Company Name Reservation (SPICe+ Part A)
Timeline: 2-3 days
File SPICe+ Part A for reserving the proposed company name. The name should not contain “LLP” or indicate partnership and must comply with company naming guidelines.
Key Requirements:
- Six alternative name options
- Main objects description
- Authorized capital details
- Name reservation fee payment
Asset Valuation and Financial Assessment
Timeline: 7-10 days
Engage a registered valuer to conduct comprehensive valuation of all LLP assets. This valuation forms the basis for determining the share capital of the new company.
Company Incorporation (SPICe+ Part B)
Timeline: 5-7 days
File SPICe+ Part B along with Memorandum and Articles of Association to incorporate the new company. This step creates the legal entity that will ultimately replace the LLP.
Essential Documents:
- Memorandum of Association
- Articles of Association
- Director consent forms (DIR-2)
- Professional declaration (INC-8)
- Registered office proof
Public Advertisement (URC-2)
Timeline: 15-30 days objection period
Publish public notice using Form URC-2 format in prescribed newspapers. The URC-1 application can be filed after 15 days of advertisement publication and must be filed within 30 days of advertisement.
File URC-1 Application for Conversion
Timeline: 5-7 days (after 15-day advertisement period)
Submit Form URC-1 to the Registrar of Companies after completing the 15-day advertisement period. This is the primary application under Section 366 for conversion from LLP to Private Limited Company.
URC-1 Requirements:
- Completed URC-1 form with digital signatures
- Asset valuation report
- Statement of accounts prepared not later than 15 days preceding the application date, duly certified by auditor
- Audited financial statements of previous year
- Partners’ consent for conversion
- Certificate of incorporation of company
- Statement of assets and liabilities
- Copy of URC-2 newspaper advertisement
Asset Transfer and Business Migration
Timeline: 15-30 days
After ROC approval of conversion, execute transfer of all assets, liabilities, and business operations from LLP to the company.
5. Document Checklist
LLP Documents
Essential LLP Documentation
- Certificate of incorporation of LLP
- LLP Agreement and all amendments
- Form 8 filing acknowledgment
- Annual returns (Form 11) for last 2 years
- Statement of accounts (Form 4) for last 2 years
- Audited financial statements
- Partners’ resolution for conversion
- PAN and GST certificates
Valuation and Financial Documents
Asset Valuation Requirements
- Registered valuer’s report
- Asset register with detailed descriptions
- Property title documents
- Investment certificates
- Bank statements and financial records
- Statement of assets and liabilities
- Debt schedule with creditor details
Company Formation Documents
New Company Documentation
- SPICe+ Part A and Part B forms
- Memorandum of Association
- Articles of Association
- Director consent forms (DIR-2)
- Professional declaration (INC-8)
- Registered office documents
- Director identity and address proofs
Conversion Application Documents
URC-1 and Supporting Documents
- Form URC-1 (conversion application)
- Statement of accounts prepared not later than 15 days preceding application date
- Published advertisement copies (as per URC-2 format)
- Affidavit of publication
- Objection responses (if any)
- Asset transfer agreements
- Clearance certificates from authorities
6. Timeline and Fee Structure
| Stage | Duration | Government Fees | Professional Fees |
|---|---|---|---|
| Name Reservation | 2-3 days | ₹1,000 | ₹2,000-3,000 |
| Asset Valuation | 7-10 days | – | ₹15,000-50,000 |
| Company Incorporation | 5-7 days | ₹4,000-8,000* | ₹5,000-10,000 |
| URC-1 Filing | 5-20 days | ₹10,000-15,000 | ₹15,000-25,000 |
| Asset Transfer | 15-30 days | ₹2,000-5,000 | ₹20,000-40,000 |
| Total | 60-90 days | ₹17,000-29,000 | ₹57,000-128,000 |
*Incorporation fees based on authorized capital. Additional stamp duty and registration charges may apply based on state regulations.
7. Post-Conversion Compliance
After successful conversion, the new company must comply with all provisions of the Companies Act, 2013, including regular board meetings, statutory filings, and annual compliance requirements.
| Compliance Requirement | Frequency | Due Date | Form/Document |
|---|---|---|---|
| Board Meetings | Quarterly | Max 120 days gap | Board Resolution |
| Annual Return | Annual | Within 60 days of AGM | Form MGT-7 |
| Financial Statements | Annual | Within 30 days of AGM | Form AOC-4 |
| Annual General Meeting | Annual | Within 6 months of FY end | AGM Notice & Minutes |
| Audit Appointment | Annual | Within 30 days of incorporation | Form ADT-1 |
8. Benefits and Key Considerations
Benefits of Conversion
- Enhanced Credibility: Private limited companies enjoy higher credibility with financial institutions and business partners
- Access to Capital: Easier access to equity funding, venture capital, and angel investors
- Ownership Transfer: Simplified ownership transfer through share transactions
- Employee Benefits: Ability to implement Employee Stock Option Plans (ESOPs)
- Business Expansion: Better structure for international expansion and joint ventures
- Exit Opportunities: Clear exit mechanisms for investors through share sales or IPO
Key Considerations
- Increased Compliance: Mandatory board meetings, audit requirements, and extensive filing obligations
- Higher Costs: Increased administrative and compliance costs compared to LLP structure
- Taxation Changes: Different tax implications including dividend distribution tax considerations
- Governance Requirements: Formal board structure and corporate governance compliance
- Regulatory Oversight: Enhanced regulatory scrutiny and reporting requirements
Tax Implications
Important Tax Considerations
The conversion may have significant tax implications including capital gains on asset transfer, stamp duty on asset transfer agreements, and changes in tax rates applicable to companies versus LLPs. It is advisable to consult a tax professional to understand the complete tax impact.
9. Conclusion
The conversion of an LLP to a Private Limited Company under Section 366 of the Companies Act, 2013, is a strategic decision that can unlock significant growth opportunities for businesses. The process, while comprehensive, provides a clear legal framework for entities seeking to transition to a corporate structure.
Success in this conversion depends on careful planning, thorough documentation, and strict adherence to the procedural requirements outlined in the Companies (Authorised to Register) Rules, 2014. The mandatory public notice period and asset valuation requirements ensure transparency and protect stakeholder interests throughout the conversion process.
Businesses considering this conversion should evaluate their long-term objectives, funding requirements, and capacity to handle increased compliance obligations. Professional guidance from qualified Company Secretaries, Chartered Accountants, and legal advisors is essential to navigate the complexities and ensure full compliance with regulatory requirements.
The converted entity will benefit from enhanced credibility, better access to capital markets, and improved corporate governance structures, making it well-positioned for future growth and expansion opportunities.
For comprehensive insights on related corporate compliance topics, explore our detailed guides on Corporate Governance Framework for Private Companies and Annual Compliance Requirements under Companies Act 2013.
Disclaimer
The information provided in this blog post is for educational and informational purposes only and should not be construed as professional legal, financial, or tax advice. The content is based on Section 366 of the Companies Act, 2013, and the Companies (Authorised to Register) Rules, 2014, as applicable in January 2025.
Laws and regulations are subject to change, and specific circumstances may require different approaches. Readers must consult with qualified professionals including Company Secretaries, Chartered Accountants, and legal advisors before making any decisions related to LLP to Private Limited Company conversion.
The author and ComplianceGyan.in disclaim any liability for actions taken based on the information provided. This content does not constitute professional advice and should not be relied upon for making business or legal decisions. Always verify current regulations with the Ministry of Corporate Affairs and other relevant authorities.
Tax Disclaimer: The tax implications mentioned are general in nature. Specific tax consequences may vary based on individual circumstances and applicable tax laws. Professional tax advice is essential before proceeding with conversion.