The business of the partnership firm can be taken over by Private limited company or by another partnership firm, the assets and liabilities of the firm can be transfer on payment of consideration & on payment of stamp duty.

The directors and shareholders of the private company are not personally liable for the liabilities of the company. Shareholders have limited liability and are responsible only to the extent of their share in the company.

A private limited company can acquire the existing partnership firm with the assets and liabilities.

It is to be done carefully in view of the rights of the creditors of the existing partnership firm.

Check either MOA of the company empowered it or not.

Consent of all partners obtained or not.

All statutory due of the partnership firm have been disbursed or not.

Proper valuation of the partnership firm done or not.

Appropriate resolution for the sake has been passed or not

Consent of the creditors has been taken or not.

Requirements:

a) Registered Partnership firm with minimum 2 or more Partners

b) Minimum Share Capital shall be Rs. 100,000 (INR One Lac) for conversion into a Private Limited Company

c) There must be provision in the Partnership deed for converting the firm into Company

d) There must be an agreement between the partners to convert the firm into Company.

d) If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered

e) Minimum 2 Shareholders and Directors. However, Directors and shareholders can be same person.

Filing of necessary forms with ROC for the approval of conversion and for registration of firm into the Private Limited Company along with all the necessary attachments which specifies the fact of conversion and also all the other basis charter documents like MOA, AOA, etc which are required in case of registration of company under the Companies Act, 2013

Ministry of Corporate Affairs allowed conversion of Partnership Firm into Company under Companies Act, 2013, for such conversion there is need to prepare a list of documents and required to file the same with ROC in forms like URC-1, INC-32, INC-33 and INC-34 etc. While conversion there is need to consider the implications of income Tax provisions also like Capital Gain.

The Gujarat High Court (HC) had held in the taxpayer’s case that conversion of a firm into a company was not a transfer (even before section 47(xiii) was introduced) and would not be subject to capital gains tax.

No Capital Gains tax or stamp duty shall be charged on transfer of property from Partnership firm to a Private Limited Company.

Stamp duty not required. 

• Partnership Deed must be registered with ROC.
• Should have 2 or more partners.
• NOC from all secured creditors.
• Further, all partners of the partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.
• Amend Partnership deed – Add clause for conversion in deed, if required
• In addition, consent of the majority of members by calling a general meeting for conversion.

1. 
   Convene a meeting for the Conversion of Partnership Firm Into Private Limited Company

   – To take assent of majority of its partners, not less than three-forth of the partners should be present in person.
   – To authorize two or more partners to take all steps necessary and to execute all papers, deeds, documents etc.

2. 
   Apply for DSC and DIN for all directors and shareholders of the company.

   Obtain DSC of all directors and shareholders. In addition to that obtain written consent or No Objection Certificate from the secured creditors of the firm, if any.

3. 
   Obtain name Approval in RUN

   File an application in RUN on the MCA website to obtain the name for the proposed company after conversion. Along with various attachments. Further also stating the proposal for conversion of the partnership firm.

4. 
   File Form URC-1 along with the necessary attachments with ROC

   File Form URC-1 within 30 days of name approval.

5. 
   Publish an advertisement in Two Newspaper

   – As per section 374(b) of Companies Act, 2013 firm seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration.
   – Seeking objections, if any within 21 clear days from the date of publication of the notice.
   – The said advertisement shall be in Form No. URC-2.
   – Further, these shall be published in 2 newspapers one in English and other in the principal vernacular language of the district.

6. 
   Draft MOA and AOA

   Therefore, after obtaining name approval, and approval of E-FORM URC-1 from the Registrar, the applicant is required to draft the Memorandum and Articles of Association and other relevant documents necessary for incorporation.

7. 
   File necessary forms with ROC

   File INC-32, INC-33, INC-34 and AGILE along with the earlier mentioned forms on MCA Website.

8. 
   Once the Registrar in satisfied on the basis of documents and information filed by the applicants,

   He shall issue a certificate of incorporation in Form No. INC.11.

9. 
   Intimate ROC under which it was previously registered.

   Along with documents for its dissolution as a firm. 

10. With Form URC-1

    • A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them.
    • Also, a list of persons proposed as the first directors of the company.
    • An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under section 164(1). Further that all the documents filed with the Registrar for registration of the company contain correct, complete, and true information to the best of his knowledge and belief.
    • Partnership deed, along with the revised deeds, in case the firm is regd.
    • A statement of assets and liabilities of the partnership firm duly certified by a chartered accountant.
    • Further, a copy of the latest income tax return of the Partnership Firm.
    • A statement specifying the following particulars:
    • The nominal share capital of the company and the division of shares.
    • The number of shares taken and the amount paid on each share.

    With Form_INC-32, INC-33, INC-34

    • DIR-2 Consent to Act as Director.
    • INC-9 Declaration by subscriber/first director.
    • KYC document of Directors and shareholders of the proposed converted company.
    • Utility Bill (not older than two months).
    • Lease deed/ title deed for the regd. office address of the company.
    • Detail of main and other objects of the company.