Company's Act
Ramesh
(Querist) 10 August 2009
This query is : Resolved
What are the benefits converting a partnership firm in to a Pvt. Ltd. company
Kindly give your opinion.
Regards,
Ramesh Mande
Advocate SK Rohilla New Delhi
(Expert) 10 August 2009
Your question is altogether wrong.
Partnership firm cannot be converted into a company but it can be converted to a company in accounting sense. for which procedure is: Form a new company and calculate the purchase consideration of the firm and the ratio of the capital balances of the partners.Shares of the new company can be issued in above ratio and then the assets and liabilities will appear in the books of the company.
A V Vishal
(Expert) 10 August 2009
Sorry Rohilla,
You are mistaken a partnership company can be converted into a company, the query of Ramesh is absolutely correct.
A V Vishal
(Expert) 10 August 2009
CONVERSION OF A PARTNERSHIP FIRM INTO A COMPANY UNDER PART IX OF THE COMPANIES ACT, 1956
Section 565 to Section 581 under Part IX of the Companies Act, 1956 deals with such conversion
Eligibility
(i) Minimum seven number of members
(ii) A company should be a joint-stock company as defined in Section 566
(iii) Majority of members should give their assent for the proposed conversion.
Meaning of a ‘Joint Stock Company’ as per Section 566
For the purposes of Part IX, as far as the registration of companies as companies limited by shares is concerned, a joint-stock company means a company
- having a permanent paid up or nominal share capital of fixed amount divided into shares, also of fixed amount, or held and transferable as stock, or divided and held partly in the one way and partly in the other,
- formed on the principle of having for its members the holders of those shares or that stock, and no other persons.
Such a company, when registered with limited liability under Part IX of the Companies Act, shall be deemed to be a company limited by shares.
Advantages of converting the Partnership Firm into Private limited company:
Stamp Duty
All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
Capital Gain Tax
No Capital Gains tax shall be charged on transfer of property from Partnership firm to Company.
Other Advantages
1. Separate legal entity.
2. Perpetual succession
3. Easy transferability of shares
4. Distribution of profits by way of dividends
5. Remuneration to directors.
6. Limited liability of members
7. Raising of capital through Issue of equity/ preference shares and debentures
8. Favourable attitude of financial Institutions while granting various facilities.
Precautions
1. Interest on capital cannot be paid.
2. Deposits can be accepted only from Members, Directors and their relatives
3. All legal proceedings by and against the company remain continued even after the conversion.
CHECKLIST FOR CONVERSION OF A PARTNERSHIP FIRM INTO A PRIVATE LIMITED COMPANY
List of Documents to be submitted for proposed conversion
NO.
Particulars
1.
Form 1A – along with necessary annexure
2.
Memorandum and Articles of Association
3.
Form 32 for the appointment of directors
4.
Form 18 for The place of Registered Office of the Company
5.
Form 1 on a Stamp Paper of Rs. 100/-
(Declaration by the proposed director for compliance of provisions under the Companies Act, 1956)
6.
Form 37 on a Stamp Paper of Rs. 100/-
(Application for registration as a limited / a private limited Company)
7.
Form 39 on a Stamp Paper of Rs. 100/-
(List of members)
8.
Power of Authorisation on a Stamp Paper of Rs. 100/-
9.
Affidavit on a Stamp paper of Rs. 100/- for declaration by directors for giving list of pending suits against the Partnership Firm
10.
Certified as true copies of the Partnership Deeds entered into by the partners of the Company since formation of such Partnership Firm
11.
Certified Copy of the Partnership Registration Certificate
12.
Certified as true copy of the resolution for conversion into a limited company (On the letterhead of the firm)
13.
Certified as true copy of the Minutes of the meeting for considering the proposal of conversion into a limited company (On the letterhead of the firm)
14.
Consent of all the Partners to convert the firm into a Company
15.
Certified Copy of the Latest Income Tax Assessment Order OR
Certified True Copy of the Income Tax Return Acknowledgement
16.
Certified Copy of the latest Audited Balance Sheet of the firm
17.
Certified Copies of The Sales Tax Registration Certificates under CST & BST
Notes:
(i) Instructions for filing of e-forms 37 & 39 do not provide any instruction as to the payment of stamp duty on the same unlike it is specifically given in e-forms 1 and 5. These forms are in the nature of Declaration a
Arul Kumar
(Expert) 11 August 2009
Hi,
I agree with Mr. Vishal.
Ramesh
(Querist) 13 August 2009
Dear Vishal,
Thanks for your detailed reply. I am thrilled with your reply the pain which you took to reply in detailed. Thanks once again.
Regards,
Ramesh Mande
