Conversions of Business Entities-chapter-12 -Best CS Executive live Classes

CONVERSIONS OF BUSINESS ENTITIES

Conversion of company from one class to another form

Conversion of company from one class to another class leads to alteration of MOA and AOA. This is because

  • name of company
  • liability of company
  • capital of company
  • provisions of AOA of company

may get change in conversion.

Thus, while converting company from one class to another class, we must satisfy the conditions of companies laws related to such change.

For example, if we are converting private company into public company, it will lead to the

  • change of name of company from, let say, Aallu Private Limited to Aallu Limited
  • deletion of those provisions of AOA which shall be included in the AOA of a private company as per Section 2(68).

Further, in certain cases we have to take the approval of certain authorities.
For example, if we are converting public company into private company,

  • approval of central government is required.

Also, to make conversion effective, we have to register that conversion with ROC. ROC after satisfying himself close the former company and register converted company as new company in the register of companies. So, in simple language, we can say that conversion of company from one form to another means closer of existing company and registration of new company with altered provisions of MOA and AOA.

Whether conversion of company from one form to another affects any debts, liabilities, obligations or contracts of former company?
No. According to Section 18(3) of Companies Act, 2013, conversion of company from one form to another shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations and contracts may be enforced in the manner as if such registration had not been done.

Conversion of companies already registered [Section 18]

  1. A company of any class registered under this Act may convert itself as a company of other class under this Act by alteration of MOA and AOA of the company in accordance with the provisions of this Chapter (Chapter II of Companies Act, 2013 containing Section 3 to 22).
  2. Where the conversion is required to be done under this section, the Registrar shall on an application made by the company,
  • after satisfying himself that the provisions of this Chapter applicable for registration of companies have been complied with,

close the former registration of the company and after registering the documents of new company, issue a certificate of incorporation in the same manner as its first registration.

  1. The registration of a company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations and contracts may be enforced in the manner as if such registration had not been done.

Alteration of AOA|
According to Section 14(1) of Companies Act, 2013, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of—

  • a private company into a public company; or
  • a public company into a private company

Conversion of a Private Company into a Public Company

The conversion of a private company into a public company can be grouped under the following heads:

  •  By choice or
  • By default

Conversion by choice – Special Resolution Required [Section 14]
A company may, by a special resolution, alter its articles to give effect of conversion of a private company into a public company. In this no approval of any authority is required.

Procedure of conversion of a Private Company into a Public Company:

  • Increase the number of directors to 3 or more (if required)
  • Increase the number of members to 7 or more (if required)
  • Call Board Meeting and pass required resolutions
  • Call General Meeting and pass special resolutions for alteration of name of company and provisions of AOA of company.
  • Alter MOA and AOA
  • File Special Resolutions in Form No. MGT 14 with ROC (Section 117)
  • File conversion application in Form No. INC 27 with ROC [Section 14(2) read with rule 33 of Companies (Incorporation) Rules, 2014]
  • After getting satisfied, ROC will close the existing company and registered new company with altered provisions of MOA/AOA and issue a fresh Certificate of Incorporation.

Conversion by default
According to Section 2(68) of Companies Act, 2013, AOA of every private company shall have following conditions and restrictions:

  • restrictions related to transferability of shares
  • restrictions related to maximum number of members (200)
  • prohibition to invite the public to subscribe its securities

According to first proviso to Section 14(1),

  • where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company.

Conversion of a Public Company into a Private Company

Special Resolution Required [Section 14]
A company may, by a special resolution, alter its articles to give effect of conversion of a public company into a private company.

Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company.

Provided further that any alteration having the effect of conversion of a public company into a private company shall not be valid unless it is approved by an order of the Central Government (power delegated to RD) on an application made in such form and manner as may be prescribed.

According to Section 14(2), every alteration of the articles under this section and a copy of the order of the Central Government approving the alteration shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of 15 days in such manner as may be prescribed, who shall register the same.

According to Section 14(3), any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act, be valid as if it were originally in the articles.

Application under section 14 for conversion of public company into private company [Rule 41 of Incorporation Rules]
Application to RD in e-Form No. RD-l within 60 days
An application for the conversion of a public company into a private company, shall, within 60 days from the date of passing of special resolution, be filed with Regional Director in e-Form No. RD-l and shall be accompanied by the following documents, namely:-

  1. a draft copy of MOA/AOA , with proposed alterations;
  2. a copy of the minutes of the general meeting at which the special resolution was passed together with details of votes cast in favour and or against with names of dissenters;
  3. a copy of Board resolution or Power of Attorney dated not earlier than 30 days, as the case may be, authorising to file application for such conversion;
  4. declaration by a key managerial personnel that pursuant to the provisions of sub-section (68) of section 2, the company limits the number of its members to 200 and also stating that no deposit has been accepted by the company in violation of the Act and rules made thereunder;
  5. declaration by a key managerial personnel that there has been no non-compliance of sections 73 to 76A, 177, 178, 185, 186 and 188 of the Act and rules made thereunder;
  6. declaration by a key managerial personnel that no resolution is pending to be filed with ROC and also stating that the company was never listed in any of the Regional Stock Exchanges and if was so listed, all necessary procedures were complied with in full for complete delisting of the shares in accordance with the applicable rules and regulations laid down by SEBI
    Provided that in case of such companies where no key managerial personnel is required to be appointed, the aforesaid declarations shall be filed any of the director.

Particulars of Application
Every such application shall set out the following particulars, namely:-

  • the date of the Board meeting at which the proposal for alteration of MOA/AOA was approved;
  • the date of the general meeting at which the proposed alteration was approved;
  • reason for conversion into a private company, effect of such conversion on shareholders, creditors, debenture holders, deposit holders and other related parties;
  • details of any conversion made within last 5 years and outcome thereof along with copy of order;
  • details as to whether the company is registered under section 8.

List of creditors and debenture holders
There shall be attached to the application, a list of creditors, debenture holders, drawn up to the latest practicable date preceding the date of filing of application by not more than 30 days, setting forth the following details, namely:-

  • the names and address of every creditor and debenture holder of the company;
  • the nature and respective amounts due to them in respect of debts, claims or liabilities;
  • in respect of any contingent or unascertained debt, the value, so far as can be justly estimated of such debt:

Company shall file an affidavit,

  • signed by
    • the Company Secretary of the company, if any, and
    • not less than two directors of the company, one of whom shall be managing director, where there is one,

to the effect

  • that they have made a full enquiry into affairs of the company and, having done so, have formed an opinion that the list of creditors and debenture holders is correct, and
  • that the estimated value as given in the list of the debts or claims payable on contingency or not ascertained are proper estimates of the values of such debts and claims, and
  • that there are no other debts, or claims against, the company to their knowledge.

List of creditors and debenture holders to be kept at the registered office
A duly authenticated copy of the list of creditors and debenture holders shall be kept at the registered office of the company and any person desirous of inspecting the same may, at any time during the ordinary hours of business, inspect, and take extracts from the same on payment of ten rupees per page to the company.

Advertisement in Newspaper and individual notice to debenture holders, creditors, RD, ROC and other regulators
The company shall, at least 21 days before the date of filing of the application

  • advertise in the Form No.INC.25A, in a vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper, widely circulated in the State in which the registered office of the company is situated;
  • serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company; and
  • serve, by registered post with acknowledgement due, a notice to the Regional Director and Registrar and to the regulatory body, if the company is regulated under any law for the time being in force.

Action by RD where no objection is received – Approval or Rejection

  • Where no objection has been received from any person in response to the advertisement or notice and the application is complete in all respects, the same may be put up for orders without hearing and the concerned Regional Director shall pass an order approving the application within 30 days from the date of receipt of the application.
  • Where the Regional Director on examining the application finds it necessary to call for further information or finds such application to be defective or incomplete in any respect, he shall within 30 days from the date of receipt of the application, give intimation of such information called for or defects or incompleteness, on the last intimated e-mail address of the person or the company, which has filed such application, directing the person or the company to furnish such information, to rectify defects or incompleteness and to re-submit such application within a period of 15 days in e-Form No. RD-GNL-5:
    Provided that maximum of two re-submissions shall be allowed.
  • In cases where such further information called for has not been provided or the defects or incompleteness has not been rectified to the satisfaction of the Regional Director within the period allowed, the Regional Director shall reject the application with reasons within 30 days from the date of filing application or within 30 days from the date of last re-submission made, as the case may be.

Action by RD where objection is received

  1. Where an objection has been received or Regional Director on examining the application has specific objection under the provisions of the Act, the same shall be recorded in writing and the Regional Director shall hold a hearing or hearings within a period of 30 days as required.
    RD shall direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Regional Director shall pass an order either approving or rejecting the application along with the reasons within 30 days from the date of hearing.
  2. In case where no consensus is received as referred in clause (i), the Regional Director may approve the conversion, if he is satisfied having regard to all the circumstances of the case, that the conversion would not be against the interests of the company or is not being made with a view to contravene or to avoid complying with the provisions of the Act, with reasons to be recorded in writing:

If any inquiry, inspection or investigation has been initiated against the company

  • The conversion shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.
  • On completion of such inquiry inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, conversion shall be allowed.

Filing of order of RD with ROC in Form INC 28 within 15 days
The order conveyed by the Regional Director shall be filed by the company with the Registrar in Form No.lNC-28 within 15 days from the date of receipt of approval along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Procedure of conversion of a Private Company into a Public Company

  • Call Board Meeting and pass required resolutions.
  • Call General Meeting and pass special resolutions for alteration of name of company and provisions of AOA of company.
  • Prepare draft copy of altered MOA and AOA.
  • Call Board Meeting and authorize company secretary or any director/s to comply with the requirements of Rule 41 of Incorporation Rules and to file application to RD in e-Form RD 1 within 60 days from the date of passing of special resolution.
  • Comply with the conditions and requirements of Rule 41.
  • File the order of RD with ROC in Form 28 within 15 days from the date of receipt of approval.
  • File Special Resolutions in Form No. MGT 14 with ROC (Section 117).
  • File conversion application in Form No. INC 27 with ROC [Section 14(2) read with rule 33 of Companies (Incorporation) Rules, 2014].
  • After getting satisfied, ROC will close the existing company and registered new company with altered provisions of MOA/AOA and issue a fresh Certificate of Incorporation.

Conversion of a Section 8 Company into a Non Section 8 Company

Under Section 8 of Companies Act, 2013, a non-profit company can be incorporated only after getting license from Central Government (powers delegated to ROC).

According to Section 8(4),

  • a company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.
  • A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.

Provisions/Conditions related to conversion of Section 8 company into company of any other kind is prescribed in Rule 21 and 22 of Companies (Incorporation) Rules, 2014

                Rule 21 of Companies (Incorporation) Rules, 2014

 

Conditions for conversion of a section 8 company into a company of any other kind

 

1.

Special Resolution: A company registered under section 8 which intends to convert itself into a company of any other kind shall pass a special resolution at a general meeting for approving such conversion.

2.

The explanatory statement annexed to the notice convening the general meeting shall set out in detail the reasons for opting for such conversion including the following, namely:-

 

 

a)      the date of incorporation of the company;

b)      the principal objects of the company as set out in the MOA;

c)       the reasons as to why the activities for achieving the objects of the company cannot be carried on in the current structure i.e. as a section 8 company;

d)      if the principal or main objects of the company are proposed to be altered, what would be the altered objects and the reasons for the alteration;

e)      what are the privileges or concessions currently enjoyed by the company, such as-

 

 

·         tax exemptions,

·         approvals for receiving donations or contributions including foreign contributions,

·         land and other immovable properties, if any, that were acquired by the company at concessional rates or prices or gratuitously , and if so,

·         the market prices prevalent at the time of acquisition and the price that was paid by the company,

·         details of any donations or bequests received by the company with conditions attached to their utilization etc.

 

 

 

f)        

details of impact of the proposed conversion on the members of the company including details of any benefits that may accrue to the members as a result of the conversion.

 

 

3.

Filing of Special Resolution with ROC: A certified true copy of the special resolution along with a copy of the Notice convening the meeting including the explanatory statement shall be filed with the Registrar in Form No.MGT.14 along with the fee.

 

4.

Approval from Regional Director: The company shall file an application in Form No.INC.18 with the Regional Director with the fee along with a certified true copy of the special resolution and a copy of the Notice convening the meeting including the explanatory statement for approval for converting itself into a company of any other kind and the company shall also attach the proof of serving of the notice served to all the authorities mentioned in sub-rule (2) of rule 22.

 

5

Copy of Application to ROC: A copy of the application with annexures as filed with the Regional Director shall also be filed with the Registrar.

 

 

Rule 22 of Companies (Incorporation) Rules, 2014
Other conditions to be complied with by section 8 Companies during conversion

  1. Publication of notice in Newspaper and Website: The company shall, within a week from the date of submitting the application to the Regional Director, publish a notice at its own expense, and a copy of the notice, as published, shall be sent forthwith to the Regional Director and the said notice shall be in Form No. INC.19 and shall be published-
    • at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district; and
    • on the website of the company, if any, and as may be notified or directed by the Central Government.
  2. Notice to Income Tax Authorities and others: The company shall send a copy of the notice, simultaneously with its publication, together with a copy of the application and all attachments by registered post or hand delivery, to the Chief Commissioner of Income Tax having jurisdiction over the company, Income Tax Officer who has jurisdiction over the company, the Charity Commissioner, the Chief Secretary of the State in which the registered office of the company is situated, any organisation or Department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating and if any of these authorities wish to make any representation to Regional Director, it shall do so within sixty (60) days of the receipt of the notice, after giving an opportunity to the Company.
  3. The copy of proof of serving such notice shall be attached to the application.
  4. Declaration by BOD: The Board of directors shall give a declaration to the effect that no portion of the income or property of the company has been or shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise to persons who are or have been members of the company or to any one or more of them or to any persons claiming through any one or more of them.
  5. No objection certificate from authorities: Where the company has obtained any special status, privilege, exemption, benefit or grant(s) from any authority such as Income Tax Department, Charity Commissioner or any organisation or Department of Central Government, State Government, Municipal Body or any recognized authority, a “No Objection Certificate” must be obtained, if required under the terms of the said special status, privilege, exemption, benefit or grant(s) from the concerned authority and filed with the Regional Director, along with the application.
  6. Filing of Annual Returns and financial Statement with RD: The company should have filed all its financial statements and Annual Returns upto the financial year preceding the submission of the application to the Regional Director and all other returns required to be filed under the Act up to the date of submitting the application to the Regional Director.
  7. Certificate from CA/CS/CMA: The company shall attach with the application a certificate from practicing Chartered Accountant or Company Secretary in practice or Cost Accountant in practice certifying that the conditions laid down in the Act and these rules relating to conversion of a company registered under section 8 into any other kind of company, have been complied with.
  8. Powers of RD to ask for approval of any other authority: The Regional Director may require the applicant to furnish the approval or concurrence of any particular authority for grant of his approval for the conversion and he may also obtain the report from the Registrar.
  9. Issuance of approving order by RD: On receipt of the application, and on being satisfied , the Regional Director shall issue an order approving the conversion of the company into a company of any other kind subject to such terms and conditions as may be imposed in the facts and circumstances of each case including the following conditions, namely;-
    • the company shall give up and shall not claim, with effect from the date its conversion takes effect, any special status, exemptions or privileges that it enjoyed by virtue of having been registered under the provisions of section 8;
    • if the company had acquired any immovable property free of cost or at a concessional cost from any government or authority, it may be required to pay the difference between the cost at which it acquired such property and the market price of such property at the time of conversion either to the government or to the authority that provided the immovable property;
    • any accumulated profit or unutilised income of the company brought forward from previous years shall be first utilized to settle all outstanding statutory dues, amounts due to lenders claims of creditors, suppliers, service providers and others including employees and lastly any loans advanced by the promoters or members or any other amounts due to them and the balance, if any, shall be transferred to the Investor Education and Protection Fund within thirty days of receiving the approval for conversion;
  10.  Before imposing the conditions or rejecting the application, the company shall be given a reasonable opportunity of being heard by the Regional Director
  11. On receipt of the approval of the Regional Director,
    • the company shall convene a general meeting of its members to pass a special resolution for amending its memorandum of association and articles of association as required under the Act consequent to the conversion of the section 8 company into a company of any other kind;
    • the Company shall thereafter file with the Registrar.-
      1. a certified copy of the approval of the Regional Director within thirty days from the date of receipt of the order in Form No.INC.20 along with the fee;
      2. amended memorandum of association and articles of association of the company.
      3. a declaration by the directors that the conditions, if any imposed by the Regional Director have been fully complied with.
  12. On receipt of the documents referred to in sub rule (10) above, the Registrar shall register the documents and issue the fresh Certificate of Incorporation.

Conversion of OPC into a Public company or Private company

New provisions applicable from 1st April 2021 as amended by
Companies (Incorporation) Second Amendment Rules,2021  

Conversion of One Person Company into a Public company or a Private company [Rule 6 of Incorporation Rules]

  1. The One Person company shall alter its memorandum and articles by passing a resolution in accordance with sub-section (3) of section 122 of the Act to give effect to the conversion and to make necessary changes incidental thereto.
  2. A One Person company may be converted into a Private or Public Company, other than a company registered under section 8 of the Act, after increasing the minimum number of members and directors to two or seven members and two or three directors, as the case may be, and maintaining the minimum paid-up capital as per the requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion
  3. The company shall file an application in e-Form No.INC-6 for its conversion into Private or Public Company, other than under section 8 of the Act, along with fees as provided in the Companies (Registration offices and fees) Rules, 2014 by attaching documents, namely:-
    • Altered MOA and AOA;
    • copy of resolution;
    • the list of proposed members and its directors along with consent;
    • list of creditors; and
    • the latest audited balance sheet and profit and loss account.
  4. On being satisfied that the requirements stated herein have been complied with, the Registrar shall approve the form and issue the Certificate.

Conversion of Private Company into One Person Company (Rule 7 of Incorporation Rules)

  1. A private company (other than a company registered under section 8) of the Act may convert itself into one person company by passing a special resolution in the general meeting.
  2. Before passing such resolution, the company shall obtain No Objection in writing from members and creditors.
  3. The one person company shall file copy of the special resolution with the Registrar of Companies within 30 days from the date of passing such resolution in Form No. MGT.14.
  4. The company shall file an application in Form No.INC.6for its conversion into One Person Company along with fees as provided in in the Companies (Registration offices and fees) Rules, 2014, by attaching the following documents, namely:-
    • The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion, the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be;
    • the list of members and list of creditors;
    • the latest Audited Balance Sheet and the Profit and Loss Account; and
    • the copy of No Objection letter of secured creditors.
  1. On being satisfied and complied with requirements stated herein the Registrar shall issue the Certificate.

     

    As per Rule 7A of the Companies (Incorporation) Rules, 2014, if a One Person Company (OPC) or any officer of such company contravenes the provisions with respect to conversion, the OPC or any other Officer of such company shall be punishable with fine which may extend to Rs. 5,000/- and with a further fine which may extend to Rs. 500/- per day after first offence, during which such contravention continues.

     

Conversion of a company limited by guarantee into a company limited by shares [Rule 39 of Incorporation Rules]

  • A company other than a company registered under section 25 of the Companies Act, 1956 or section 8 of the Companies Act, 2013 may convert itself into a company limited by shares.
  • The company seeking conversion shall have a share capital equivalent to the guarantee amount.
  • A special resolution is passed by its members authorising such a conversion omitting the guarantee clause in its Memorandum of Association and altering the Articles of Association to provide for the articles as are applicable for a company limited by shares.
  • A copy of the special resolution shall be filed with the Registrar of Companies in Form no. MGT-14 within thirty days from the date of passing of the same along with fee as prescribed in the Companies (Registration Offices and Fees) Rules, 2014.
  • An application in Form No. INC-27 shall be filed with the Registrar of Companies within thirty days from date of the passing of the special resolution enclosing the altered Memorandum of Association and altered Articles of Association and a list of members with the number of shares held aggregating to a minimum paid up capital which is equivalent to the amount of guarantee hither to provided by its members.
  • The Registrar of Companies shall take a decision on the application filed under these rules within thirty days from the date of receipt of application complete in all respects and upon approval of Form No. INC-27, the company shall be issued with a certificate of incorporation in Form No. INC-11B.

Conversion of Unlimited Liability Company into a Limited Liability Company by Shares or Guarantee [Rule 37 of Incorporation Rules]

  1. Without prejudice to any other provision in the Companies Act for effecting the conversion of an unlimited liability company with or without share capital into limited liability company by shares or guarantee, such a company shall pass a special resolution in a general meeting and thereafter, an application shall be filed in Form No. INC- 27 in the manner provided in sub-rules (2) and (3).
  2. The Company shall within 7 days from the date of passing of the special resolution in a general meeting,
    • publish a notice in Form No. INC-27A of such proposed conversion in two newspapers (one in English and one in vernacular language) in the district in which the registered office of the company is situate and
    • shall also place the same on the website of the Company, if any,
      indicating clearly the proposal of conversion of the company into a company limited by shares or guarantee, and seeking objections if any, from the persons interested in its affairs to such conversion and
    • cause a copy of such notice to be dispatched to its creditors and debentures holders made as on the date of notice of the general meeting by registered post or by speed post or through courier with proof of dispatch.
      The notice shall also state that the objections, if any, may be intimated to the Registrar and to the company within 21 days of the date of publication of the notice, duly indicating nature of interest and grounds of opposition.
  3. The Company shall within 45 days of passing of the special resolution file an application as prescribed in sub rule (1) for its conversion into a company limited by shares or guarantee alongwith the fees as provided in the Companies (Registration offices and Fees) Rules, 2014, by attaching the following documents, namely:-
    • notice of the general meeting along with explanatory statement.
    • copy of the resolution passed in the general meeting;
    • copy of the newspaper publication;
    • a copy of altered Memorandum of Association as well as Articles of Association duly certified by any one of the Directors duly authorised in this behalf or Company Secretary of the Company, if any.
    • declaration signed by not less two Directors of the Company, including Managing Director, if any, that such conversion shall not affect any debts, liabilities, obligations or contracts incurred or entered into by or on behalf of the Company before conversion (except to the extent that the liability of the members shall become limited).
    • a complete list of creditors and debenture holders, to whom individual notices have been sent under sub-rule (2) setting forth the following details, namely:-
      • the names and address of every creditor and debenture holder of the Company;
      • the nature and respective amounts due to them in respect of debts, claims or liabilities:
      • declaration by a Director of the Company that notice as required under sub-rule (2) has been dispatched to all the creditors and debenture holders with proof of dispatch.
    • a declaration signed by not less than two Directors of the Company, one of whom shall be a Managing Director where there is one, to the effect that they have made a full enquiry into the affairs of the Company and, having done so, have formed an opinion that the list of creditors is correct, and that the estimated value as given in the list of the debts or claims payable on a contingency are proper estimates of the values of such debts and claims and that there are no other debts or claims against the company to their knowledge.
    • a declaration of solvency signed by at least two Directors of the Company, one of whom shall be the Managing Director, where there is one to the effect that the Board of Directors of the Company have made a full inquiry into the affairs of the company, as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year from the date of declaration, through a resolution, passed in a duly convened meeting or by circulation.
    • The company shall also obtain a certificate from the Auditors that the company is solvent and that it is a going concern as on the date of passing of resolution by the Board certifying solvency as per clause (h) above.
    • No Objection Certificate from sectoral regulator, if applicable.
    • No Objection Certificate from all secured creditors, if any.
  4. Declaration signed by not less than two Directors including Managing Director, where there is one, that no complaints are pending against the company from the members or investors and no inquiry, inspection or investigation is pending against the company or its Directors or officers.
  5. The Registrar shall, after considering the application and objections if any, received by the Registrar and after ensuring that the company has satisfactorily addressed the objections received by the company, suitably decide whether the approval for conversion should or should not be granted.
  6. The certificate of incorporation consequent to conversion of unlimited liability company to into a company limited by shares or guarantee be in Form INC-11A issued to the company upon grant of approval for conversion.
  7. Conditions to be complied with, subsequent to conversion.-
    • Company shall not change its name for a period of one year from the date of such conversion.
    • The company shall not declare or distribute any dividend without satisfying past debts, liabilities, obligations or contracts incurred or entered into before conversion.
      Explanation: For the purpose of this clause, past debts, liabilities, obligations or contracts does not include secured debts due to banks and financial institutions.
  8. An Unlimited Liability Company shall not be eligible for conversion into a company limited by shares or guarantee in case-
    • its networth is negative, or
    • an application is pending under the provisions of the Companies Act 1956 or the Companies Act, 2013 for striking off its name, or
    • the company is in default of any of its Annual Returns or financial statements under the provisions of the Companies Act, 1956 or the Companies Act,2013, or
    • a petition for winding up is pending against the company, or
    • the company has not received amount due on calls in arrears, from its directors, for a period of not less than six months from the due date; or
    • an inquiry, inspection or investigation is pending against the company.
  9. The Registrar of Companies shall take a decision on the application filed under these rules within thirty days from the date of receipt of application complete in all respects.

Registration of LLP, Partnership Firm, cooperative society, society, Trust or any other business entity as Company under Companies Act, 2013

CHAPTER XXI PART I — Companies Authorised to Register Under this Act

Companies Capable of Being Registered [Section 366]
For the purposes of this Part, the word “company” includes any partnership firm, limited liability partnership, cooperative society, society or any other business entity formed under any other law for the time being in force which applies for registration under this Part.

With the exceptions and subject to the provisions contained in this section, any company

  • formed, whether before or after the commencement of this Act, in pursuance of any Act of Parliament other than this Act or of any other law for the time being in force or being otherwise duly constituted according to law, and
  • consisting of two 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,

in such manner as may be prescribed 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—

  • a company registered under the Indian Companies Act, 1882 or under the Indian Companies Act, 1913 or the Companies Act, 1956, shall not register in pursuance of this section;
  • a company having the liability of its members limited by any Act of Parliament other than this Act or by any other law for the time being in force, shall not register in pursuance of this section as an unlimited company or as a company limited by guarantee;
  • a company shall be registered in pursuance of this section as a company limited by shares only if it has 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, and formed on the principle of having for its members the holders of those shares or that stock, and no other persons;
  • 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;
  • where a company not having the liability of its members limited by any Act of Parliament or any other law for the time being in force 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;
  • 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 the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.
  • a company with less than seven members shall register as a private company.

Rule 3 of The Companies (Authorised to Registered) Rules, 2014

  1. For the purposes of section 366(2) of the Act, the provision of Chapter II (Section 3 to Section 22) of the Act relating to incorporation of company and matters incidental thereto shall be applicable mutatis mutandis for such registration:
    Provided that there shall be 2 or more members for the purposes of registration of a company
    Provided further that a company with less than 7 members shall register as a private company.
  2. A company shall attach and provide the required documents and information to the Registrar along with Form No. URC. 1 in the following manner, namely:-
    (a)In case of an application by a Limited Liability Partnership or firm for registration as a company limited by shares
    • a list showing the names, addresses, and occupations of all persons named therein as partners with details of shares held by them respectively, showing separately shares allotted for consideration in cash and for consideration other than cash along-with the source of consideration and distinguishing, in cases where the shares are numbered, each share by its number, who on a day, not being more than 6 clear days before the day of seeking registration, were partners of the Limited Liability Partnership or firm as the case may be;
    • a list showing the particulars of persons proposed as the first directors of the company, alongwith Director Identification Number (DIN), passport number, if any, with expiry date, residential addresses and their interests in other firm or body corporate along with their consent to act as directors of the company;
    • in case of a firm, deed of partnership, bye-laws or other instrument constituting or regulating the firm and in case the deed of partnership was revised at any time in the past, copies of the principal and all subsequent deeds including the latest deed, along with the certificate of the registration issued by the Registrar of Firms, in case the firm is registered;
    • written consent or No Objection Certificate from all the secured creditors of the applicant;
    • written consent, from the majority of members whether present in person or by proxy at a general meeting, agreeing for such registration;
    • an undertaking that the proposed directors shall comply with the requirements of the Indian Stamp Act, 1899 as applicable;
    • a copy of the latest income tax return of the Limited Liability Partnership or firm, as the case may be.

(b) In case of an application by a Limited Liability Partnership or firm for registration as a company limited by guarantee or as an unlimited company-

  • a list showing the names, addresses and occupations of all persons, who on a day, not being more than 6 clear days before the day of seeking registration, were partners of the Limited Liability Partnership or firm, as the case may be with proof of membership;
  • a list showing the particulars of persons proposed as the first directors of the company, alongwith DIN, passport number, if any, with expiry date, residential addresses and their interests in other firm or body corporate along with their consent to act as directors of the company;
  • in case of a firm, deed of partnership, bye laws or other instrument constituting or regulating the company and in case the deed of partnership was revised at any time in the past, copies of the principal and all subsequent deeds including the latest deed, along with the certificate of the registration issued by the Registrar of Firms, in case the firm is registered;
  • in the case of a company intended to be registered as a company limited by guarantee, a copy of the resolution declaring the amount of guarantee;
  • written consent or No Objection Certificate from all the secured creditors of the applicant;
  • written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for such registration;
  • an undertaking that the proposed directors shall comply with the requirements of the Indian Stamp Act, 1899 (2 of 1899), as applicable;
  • a copy of the latest income tax return of the Limited Liability Partnership or firm, as the case may be.

(c) In case of an application by a society for registration as a company limited by guarantee under section 8-

  • a list showing the names, addresses and occupations of all persons, who on a day, not being more than six clear days before the day of seeking registration, were members of the society with proof of membership;
  • a list showing the particulars of persons proposed as the first directors of the company, alongwith DIN, passport number, if any, with expiry date, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;
  • a list containing the names and addresses of the members of the governing body of the society;
  • a certified copy of the certificate of registration of the society;
  • written consent or No Objection Certificate from all the secured creditors of the applicant;
  • written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for such registration, and the resolution shall also provide for declaration of the amount of guarantee;
  • an undertaking that the proposed directors shall comply with the requirements of the Indian Stamp Act, 1899 (2 of 1899) as applicable;
  • a copy of the latest income tax return of the society;
  • details of the objects of the company alongwith a declaration from all the members that the restrictions and prohibitions as mentioned in clause (b) and clause (c) of sub-section (1) of section 8 of the Act shall be complied.

(d) In case of an application by a trust for registration as a company limited by guarantee under section 8-

  • a list showing the names, addresses and occupations of all persons, who on a day, not being more than six clear days before the day of seeking registration, were trustees of the trust with proof thereof;
  • a list showing the particulars of persons proposed as the first directors of the company, alongwith DIN, passport number, if any, with expiry date, residential addresses and their interests in other firm or body corporate along with their consent to act as directors of the company;
  • a certified copy of the certificate of registration of the trust and the trust deed;
  • written consent or No Objection Certificate from all the secured creditors of the applicant;
  • written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for such registration, and the resolution shall also provide for declaration of the amount of guarantee;
  • an undertaking that the proposed directors shall comply with the requirements of the Indian Stamp Act, 1899 (2 of 1899) as applicable;
  • a copy of the latest income tax return of the trust;
  • details of the objects of the company alongwith a declaration from all the members that the restrictions and prohibitions as mentioned in clause (b) and clause (c) of sub-section (1) of section 8 of the Act shall be complied.

3. Where an application is made by a society or trust for registration as a company limited by guarantee and it has been proved to the satisfaction of the Registrar that the proposed company has its objects in accordance with clause (a) of subsection (1) of section 8 of the Act and it intends to comply with the restrictions and prohibitions as mentioned respectively in clause (b) and clause (c) of that sub-section, the Registrar shall issue a license in Form No. INC. 16 to allow such society or trust to be registered as a limited company without the addition to its name of the word “Limited”, or as the case may be, the words “Private Limited” and thereupon issue a certificate of incorporation on an application submitted under Chapter II of the Act for incorporation of a company:
Provided further that a society which has not filed the annual or other returns, statutorily required to be filed with the Registrar of Societies, shall not be eligible to apply for registration under section 366 of the Act.

4. An undertaking from all the members or partners or trustees providing that in the event of registration as a company under Part I of Chapter XXI of the Act, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution:
Provided that no such undertaking shall be required to be submitted in case the application for registration under Part I of Chapter XXI of the Act has been made by a Limited Liability Partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009).

5.The list of members and directors and any other particulars relating to the company which are required to be delivered to the Registrar shall be duly verified by the declaration of any two or more proposed directors.

Memorandum of Association & Articles of Association
Memorandum of Association (MOA) & Articles of Association (AOA) is to be formulated and then filed with ROC after getting the name approval and sanction of form no. URC-1 – from the registrar.

E-form INC-32 (SPICe+)
Company required to file e-form INC-32 (SPICe+) along with URC-1 as linked form with all the attachment as required in normal Incorporation of Company like:

  • MOA & AOA
  • INC-9
  • DIR-2 etc.

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