LLP to Company Conversion: Post-Conversion Compliances Explained

PayHes, Insider Tech, Tech Insider

Introduction: Converting a Limited Liability Partnership (LLP) to a company is a significant step in the growth and evolution of a business. It offers new opportunities and benefits, but it also comes with a set of compliance requirements that need to be addressed. Here, we will explore the key post-conversion compliances involved in transitioning from an LLP to a company, providing you with a general understanding of what to expect during this process.

  1.  Post Incorporation Compliances: The Company shall ensure that the post incorporation compliances such as filing of Registered office, filing of Commencement of business (after bringing in the subscription money into the newly opened bank account in the Company name) within the prescribed time frame.
  2. Statutory Registers: Creating and maintaining statutory registers is an ongoing compliance requirement for a company. These registers include the register of members, directors, and charges, among others. Ensure that these registers are accurately maintained and updated with relevant information as required by the company law.
  3. Compliance with Company Law: Compliance with various provisions of the company law is essential for the smooth functioning of the newly converted company. This includes holding annual general meetings, filing annual financial statements, maintaining proper accounting records, and adhering to other legal obligations prescribed by the company law of your jurisdiction.
  4. Business Licenses and Permits: Review the licenses and permits held by the LLP and assess whether they need to be transferred or re-applied for under the new company structure. Ensure that all necessary approvals and permissions required to conduct business activities are obtained and updated accordingly.
  5. Taxation: Inform the tax authorities about the conversion from an LLP to a company. Comply with the tax-related requirements, such as obtaining a new tax identification number, filing tax returns, and fulfilling any other tax obligations applicable to the newly converted company.
  6. Contracts and Agreements: Review and assess the existing contracts, agreements, and arrangements of the LLP. Identify provisions that may require modification or assignment to the new company. Make necessary amendments or enter into new contracts as required to ensure a seamless transition and continuity of business operations.
  7. Intellectual Property Rights: Transfer any intellectual property rights, trademarks, copyrights, patents, or other relevant assets owned by the LLP to the new company. Update registrations, licenses, and other documentation to reflect the new entity’s name and details.
  8. Inform Stakeholders: Inform key stakeholders, such as customers, suppliers, employees, and banks, about the conversion. Modify relevant documents, contracts, and records to reflect the new entity’s name and details to ensure a smooth transition.

Conclusion: Converting an LLP to a company opens up new horizons for business growth, but it also brings along a series of post-conversion compliances that must be diligently addressed.. By ensuring compliance with these requirements, you can successfully navigate the conversion process and set your company on a path of continued success.

FAQ (Frequently Asked Questions)

  1. What approvals are required for converting an LLP to a Company? 

You will need approval from all partners/members of the LLP for the conversion. Additionally, you may require approval from sector-specific regulatory authorities, if applicable (e.g., RBI, SEBI, etc.).

  1.  What are the key regulatory authorities involved in the conversion process? 

The main regulatory authority involved in the conversion process is the Ministry of Corporate Affairs (MCA) and its designated Registrar of Companies (ROC). However, depending on the sector and nature of the business, other regulatory authorities may also be involved.

  1. Is there a minimum capital requirement for the converted Company? 

No, there is no minimum capital requirement for a Company. The LLP must ensure that the capital after conversion meets the minimum capital requirements as per the Companies Act, 2013.

  1. What are the major compliance requirements after the conversion?

After the conversion, the newly converted Company will have to comply with the provisions of the Companies Act, 2013. This includes holding regular board meetings, filing annual financial statements, conducting annual general meetings (AGMs), maintaining statutory registers, and adhering to various other legal and regulatory requirements.

  1. Will the PAN and GSTIN of the LLP remain the same after conversion?

No, the PAN and GSTIN of the converted Company will be different from that of the LLP. The new Company will have to apply for a fresh PAN and GSTIN. 

  1. What happens to the assets and liabilities of the LLP during the conversion? 

All the assets and liabilities of the LLP become the assets and liabilities of the newly converted Company. The rights, duties, and obligations of the LLP will be transferred to the Company. 

  1. What are the tax implications of converting an LLP to a Company? 

The conversion may have certain tax implications, including the capital gains tax on the transfer of assets and liabilities from the LLP to the Company. It is advisable to consult with a tax expert or CA to understand the tax implications specific to your case.