Process to Convert Registered Partnership firm to Private Limited Company

[falguni shah]

Dear Members,

Can any one share Process for Converting Registered Partnership firm to Private Limited Company?

how will the assets & Liabilities will get transferred to Pvt Co?

Whether we need to take valuation Report for such conversion?

Also wanted to know whether business transfer agreement will be executed for this?

[CS Kabir Khan]

Following Documents would required during conversation:

1. Form URC-1
2. Partnership deed/ Firm Registration.
3. A Copy of latest Income Tax Return of the firm
4. Affidavit from all members/partners for dissolution of the entity.
5. Certification from CA/CS/CMA Certifying the compliance with all the provisions of stamp act.
6. Consent of Majority of members.
7. Copy of Newspaper Advertisement for Conversation.
8. Declaration of two or more directors verifying the particular of all members/ partners.
9. NO OBJECTION CERTIFICATE from the Concerned Registrar of Firms.
10. Particulars of Members/ Partners along with the details of shares held by them.
11. Latest Statement of accounts of the company (Not more than 1 Week Old).
12. Undertaking by the proposed directors for compliance with the requirement of Indian Stamp Act.

Your CA would prepare a Balance Sheet mentioning the Capital share in the partnership firm and you should take this capital as an authorized capital of the company.

A separate Valuation report is not required as all the details would be already covered in the latest financial statement you would submit.

No Separate Business Transfer Agreement is required so far as the Partner of the firm subscribes to the capital of the newly formed company.

Note- Partnership Conversion is time taking and lengthy process to start with a process chart and then move step by step to get the job done.

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[falguni shah]

Thank you, Kabir, for detailed explanation.

As you have mentioned NO OBJECTION CERTIFICATE from the Concerned Registrar of Firms is required, is this mandatorily required? 

Also wanted to know how to record the Main Objects at the time of Conversion? should we mention details of main object as recorded in Partnership Firm or we should mention like this To take over by devolution of law the business carried under the name and style of M/s. _____________________ with all its assets, rights, trademarks, patents, obligations and liabilities and to carry the same into effect with or without modification.

Any source of getting drafts documents? 

[CS Kabir Khan]

1- You're Most Welcome.

2- NOC is not a mandatory attachment of URC-1 but it's a good practice to obtain NOC.

3- Don't we always use this clause in every single company we incorporate?

"Matters which are necessary for furtherance of the objects specified in clause"
To take over the whole or any part of the business, goodwill, trade-marks properties, and liabilities of any person or persons, firm, companies, or undertakings either existing or new, engaged in or carrying on or proposing to carry on business this Company is authorized to carry on, possession of any property or rights suitable for the purpose of the Company and to pay for the same either in cash or in shares or partly in cash and partly in shares or otherwise.

As the Partnership Agreement doesn't contain any particular section as objects but clauses defining the purpose of the agreement.

So you can draft Main Objects just like any other new company.

4- To get the Documents first search Google by typing a query like "Form URC 2" and clicking on the images section.

Now you can see some advertisements published by firms that were converted into a company.
Try to Find any Latest Advertisement or anything that's closely related to the business in your concerned partnership.

Then, Just search the MCA Master data to check whether it's active and compliant.
In the final step just pay the fee to check the public documents and download all incorporated related documents.

Now you have everything you need.

Not attaching it in the draft because my client is engaged in online business and he doesn't allow his docs to be made public but you can follow the steps I've mentioned and you'll surely find some good documents to start with.

CS Kabir Khan | LinkedIn