#corporate evolution

Section 18 of the Companies Act of 2013 allows a registered company to change its type by amending the Memorandum of Association (MOA) and Articles of Association (AOA).

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How can a business undergo conversion?

By amending the Memorandum of Association and Articles of Association, a company can transform into another type following the regulations of the Companies Act 2013. Subsequently, apply to the Registrar of Companies (ROC) and close the previous registration upon approval.

After completing all necessary paperwork, the company will receive a certificate of incorporation. Here, the Registrar will give the business a new certificate of incorporation, which states its converted or new form.

Additionally, note that such conversion will not impact liabilities, debts, or other obligations incurred before the conversion. The company retains its debts, liabilities, obligations, contracts, etc., even after adopting a new legal structure consistent with the 2013 Companies Act. This lawful provision pertains to company conversions, reflecting the contemporary trend of rapid expansion and evolving company statuses. To accommodate the requirements and overcome the limitations of existing ones. Therefore, we will learn about the various conversion options currently available or possible under Indian taxation and government regulations.

Partnership Firm to LLP Conversion

Since introducing the LLP Act in 2008, many partnership firms have chosen to convert their structure to Limited Liability Partnerships (LLPs).

The advantages of conversion are evident and understandable, encompassing the ability to welcome unlimited partners, establish various legal entities, enjoy limited liability, and facilitate swift ownership transfer through a simplified form. Owing to these advantages, Limited Liability Partnerships (LLPs) have gained popularity among small and medium-sized firms in a growing economy like India.

Retaining all partners from the original firm is crucial when converting a Partnership Firm to an LLP. Kanakkupillai recommends retiring non-consenting partners and adding new ones after LLP incorporation.

Explore Further: Conversion from Partnership Firm to LLP

Given its minimal compliance and documentation requirements, small and medium-sized entities, as well as Indian entrepreneurs, widely favour Sole Proprietorship. As the business and incomes expand, entrepreneurs need to comply with the sole requirement of opening a trade with current accounts and furnishing the PAN details of the proprietor for income tax filings.

As the business thrives and another peak awaits, entrepreneurs can transition their Sole Proprietorship into a Private Limited Company. It involves drafting an agreement between the Proprietorship and the newly incorporated Private Limited Company to sell the firm. The transformation process is complete when the newly formed Private Limited Company assumes control of the Sole Proprietorship Concern, as outlined in its Memorandum of Association.

Step-by-Step Procedure for Conversion of Company:

1. Evaluate Eligibility: Confirm if the company is eligible for conversion based on legal criteria.

2. Board Resolution: Pass a board resolution approving the conversion and convene a meeting.

3. Member Approval: Seek approval from shareholders through a special resolution in a general meeting.

4. Application Filing: Apply conversion with the appropriate regulatory authority.

5. Registrar Approval: Seek approval from the Registrar of Companies (RoC) for the conversion.

6. Drafting New Documents: Prepare new Memorandum and Articles of Association compliant with the converted structure.

7. Issue New Shares: If required, issue new shares to the shareholders per the conversion terms.

8. Approval from Other Authorities: Obtain necessary approvals from other regulatory bodies if applicable.

9.NO Objection Certificates (NOCs): Obtain NOCs from existing creditors and authorities.

10. Publication of Notice: Publish a notice about the conversion in newspapers as mandated.

11. Issuance of Certificate: Once you meet all requirements, you will receive a fresh certificate of incorporation.

12. Update Pan and Tan: PAN and TAN details with the tax authorities.

13. Update Other Registrations: If applicable, update other registrations like GST.

14. Transfer of Assets and Liabilities: Transfer assets and liabilities under the conversion terms.

15. Compliance with Post-Conversion Requirements: Ensure ongoing compliance with regulations applicable to the new entity.

Documents Required for Conversion:

Memorandum and Articles of Association (updated)

Board and Shareholders Resolutions

Application for Conversion

NOCs from Creditors

Copy of Newspaper Publication

Updated PAN and TAN

Updated GST Registration (if applicable)

Benefits of Company Conversion:

1. Structural Flexibility: Choose a structure that aligns better with business goals.

2. Enhanced Credibility: Conversion to a higher structure may enhance business credibility.

3. Tax Benefits: Potential tax benefits based on the new structure.

4. Greater Access to Capital: Improved ability to raise capital based on the new structure.

5. Operational Efficiency: Streamlined operations based on the selected structure.

Why Choose Kanakkupillai for Company Conversion

Today, transform your business with Kanakkupillai's effortless and trouble-free company conversion services. Our team of experts will guide you through the entire process, ensuring a seamless transition from start to finish. Don't let complicated paperwork and legal requirements hinder your progress. Call us today at +91 7305 345 345 to get started!

Latest 15 Questions and Answers:

1. Why should I consider converting my company?

Conversion provides flexibility, tax benefits, and potential for enhanced business operations.

2. How long does the conversion process take?

Timelines vary, but it generally takes a few weeks to a few months.

3. What are the essential eligibility criteria for conversion?

Criteria include compliance with legal requirements and approval from shareholders.

4. Can any company be converted?

Eligibility depends on the existing and desired structures; not all conversions are possible.

5. What documents are needed for conversion?

Key documents include updated Memorandum, Articles of Association, resolutions, and NOCs.

6. Are there tax implications of conversion?

Yes, there can be tax implications, and it is advisable to seek professional advice.

7. How does conversion impact existing contracts?

Contracts generally continue, but reviewing and informing parties about the conversion is essential.

8. Can foreign companies be converted in the same way?

It is advisable to seek legal counsel, as conversion rules for foreign companies may vary.

9. What is the role of the Registrar of Companies (RoC) in the process?

RoC approves the conversion and issues a new certificate of incorporation.

 10. Is shareholder approval necessary for conversion?

Yes, shareholder approval through a special resolution is typically required.

11. How are assets and liabilities transferred during conversion?

The terms outlined in the conversion plan govern the transfer.

12. Are there ongoing compliance requirements post-conversion?

Yes, ongoing compliance with the regulations applicable to the new structure is necessary.

13. Can a company convert to a different business type?

Yes, conversion allows changing the business type based on legal provisions.

 14. What role do NOCs play in the conversion process?

NOCs from creditors and authorities affirm their consent for the conversion.

15. How does conversion impact existing employees?

Employment contracts generally continue, but HR policies may need adjustments.

Note: The information provided is general and may vary based on specific legal requirements and jurisdictions.

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