Conversion of Partnership firm to a Pvt Ltd co

Partnership firm, which intends to convert the firm into a company, the minimum number of partners must be seven and in case there are less than seven partners, the number of partners must be increased to seven, if the conversion is intended to take place under Part IX of the Companies Act, 1956.

I beg to differ a bit from the above opinion since minimum nos of directors which needs to be seven applies only in the case of public company but if you are going for a pvt co you only need to have two directors.

Manish,

Sanjeev is right for purpose of conversion of a partnership into a pvt ltd company, the minimum number of subscribers must be 7 and not 2, however the company must have a minimum of 2 directors, the subscribers and the directors can be different and the directors can be outside the 7 subscribers to memorandum and articles of association, if the articles so confirm that the directors need not hold any qualification shares.

yes i agree with the above opinion but still i differ in my opinion a bit further. maintaining the requirement of members as to 7 only applies when we are converting the firm into a company under the provisions of part ix of the companies act. if we are not intending to convert the same under part ix then there is no such liability or requirement as such. we can convert the firm having two mmbers into a private com in that case.  

Dear Manish: the question is quite clear, the person wants to know the procedure for conversion of a existing partnership into a private limited company which clearly attracts part ix of the companies act.

 In the case of conversion of Partnership to a Company, does the immovable property of the firm, automatically  vest in the company without anything else? Is any stamp duty payable? If so on which document and  presumably that would require registration.

Ms Rashmi

In case of conversion of partnership to company, the assets and liabilities are taken over by the company in such a case, my opinion is that, the registration of the immoveable property is a must. Also, registration of the same is required and stamp duty at a nominal rate should be remitted. Please refer to the Registration Act of the concerned state for further details. I require some more time to answer this question with regard to different Acts viz point of view from Income Tax, Companies Act, Partnership Act & Registration Act.

Dear Mr. Visha,

its not like that if you are converting your firm into a company it shall atract part ix of the companes act. please have a thorough check on that.

its all upon us whether we are willing to make the transaction under the said part or not since there are certain benefits given to the conversio.

we are always at our descretion if we are to convert a firm into a company whether we are getting it done under part ix or not.

if we dont go under part ix, theen theres no need to have seven members. pleasse check it up and even apply your common sense that a pvt company needs only two members for getting it incorporated then hw the provisions can be done away with if we are to incorporate a pvt co. bt if we need certain benefits under part ix, we shall have to follow ceratin conditions under the same. 

Dear Ms. Rashmi,

if you follow the conditions prescribed under Prt ix ofthe companies act, then the transfer of the capital/assets shall not amount to transfer hence yu shall not be liable to pay any stamp duty.

 Manish

Your question has got the answer. The first line of your reply states that " If we don't go under Part IX, then there is no need to have seven members". Further Part IX is a special provision and has over riding effect on the general provisions. Hence for conversion 7 members are mandatory. Please go through the provisions properly. You seem to be confused a lot on the subject.

I have gone through the provisions and i am of the opinion which i have already stated above. I am firm with my opinion since Part ix is not a non obstante clause but only provides certain benfits in case we follow the procedure under the same.

PART IX

PART IX

Section 565

COMPANIES CAPABLE OF BEING REGISTERED.

(1) With the exceptions and subject to the provisions contained in this section, -

(a) any company consisting of seven or more members, which was in existence on the first day of May, 1882, including any company registered under Act No. 19 of 1857 and Act No. 9 of 1860 or either of them or under any laws or law in force in a Part B State, Corresponding to those Acts or either of them; and

(b) any company formed after the date aforesaid, whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than this Act or of any other Indian law

(including a law in force in a Part B State), or of any Act of Parliament of the United Kingdom or

Letters Patent in force in India, or being otherwise duly constituted according to law, and

consisting of seven or more members; may at any time register under this Act as an unlimited company, or as a company limited by shares, or as a company limited by guarantee; and the registration shall not be invalid by reason only that it has taken place with a view to the company's being wound up :

Provided that -

(i) a company registered under the Indian Companies Act, 1882 (6 of 1882) or under the Indian Companies Act, 1913 (7 of 1913) shall not register in pursuance of this section;

(ii) a company having the liability of its members limited by an Act of Parliament other than this Act or by any other Indian law (including a law in force in a Part B State), or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, and not being a joint-stock company as defined in section 566, shall not register in pursuance of this section;

(iii) a company having the liability of its members limited by any Act of Parliament other than this Act or by any other Indian law (including a law in force in a part B State), or any Act of Parliament of the United Kingdom or Letters Patent in force in India, shall not register in pursuance of this section as an unlimited company or as a company limited by guarantee;

(iv) a company that is not a joint-stock company as defined in section 566 shall not register inpursuance of this section as a company limited by shares;

(v) a company shall not register in pursuance of this section without the assent of a majority of such of its members as are present in person, or where proxies are allowed, by proxy, at a general meeting summoned for the purpose;

(vi) where a company not having the liability of its members limited by any Act of Parliament or any other Indian law (including a law in force in a Part B State) or by any Act of Parliament of the United Kingdom or Letters Patent in force in India, is about to register as a limited company, the majority required to assent as aforesaid shall consist of not less than three-fourths of the members present in person, or where proxies are allowed, by proxy, at the meeting;

(vii) where a company is about to register as a company limited by guarantee, the assent to its being so registered shall be accompanied by a resolution declaring that each member undertakes to contribute to the assets of the company, in the event of its being wound up while he is a member, or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, and of the costs, charges and expenses of winding up, and for the adjustment of rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

(2) In computing any majority required for the purposes of sub-section (1) when a poll is demanded, regard shall be had to the number of votes to which each member is entitled according to the regulations of the company.

(3) Nothing in this section shall be deemed to apply to any company the registered office whereof at the commencement of this Act is in Burma, Aden or Pakistan.

the highlihted words dont authenticate your statements. please apply your mind.

said provisions nowhere restrains any assocation of persons or firm etc to be incorporated as a company except from following the provisions of part ix.