Converting a partnership firm into a company involves a specific process and compliance with legal requirements. Here is a quick guide outlining the steps for conversion:
Obtain Consensus: All partners of the partnership firm must unanimously agree to convert it into a company. This decision should be documented through a partnership deed amendment or a separate conversion agreement.
Incorporation of the Company: The next step is to incorporate a new company by registering it with the Registrar of Companies (RoC). This involves the following steps:a. Name Availability: Apply for the availability of a suitable name for the new company. The proposed name should comply with the naming guidelines and should not conflict with any existing trademarks or company names.b. Memorandum and Articles of Association (MOA and AOA): Prepare the MOA and AOA of the company, which define its objectives, capital structure, internal regulations, and other essential details.
c. Directors and Shareholders: Identify the initial directors and shareholders of the company. At least two shareholders and two directors are required for a private limited company, but one director can be designated as the nominee director on behalf of the partnership firm.
d. Digital Signature Certificates (DSC) and Director Identification Numbers (DIN): Obtain DSC and DIN for the proposed directors of the new company.
e. Filing of Incorporation Documents: File the necessary incorporation documents, including Form SPICe (Simplified Proforma for Incorporating Company Electronically), with the RoC. The documents should include details such as the company's registered office address, directors' details, share capital, and other relevant information.
Transfer of Assets and Liabilities: Once the company is incorporated, the partnership firm needs to transfer its assets and liabilities to the new company. This includes transferring contracts, licenses, permits, bank accounts, and other assets and liabilities, as per the terms agreed upon by the partners.
Dissolution of Partnership Firm: After the transfer of assets and liabilities, the partnership firm needs to be dissolved as per the provisions of the partnership agreement and applicable laws. This involves settling all outstanding dues, liabilities, and obligations of the partnership firm and finalizing the dissolution process.
Compliance and Post-Conversion Requirements: After the conversion, the new company needs to comply with various legal and regulatory requirements applicable to companies, such as maintaining proper books of accounts, filing annual financial statements, conducting board meetings, and fulfilling tax obligations.