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PARTNERSHIP INTO COMPANY

Corporatization is the need of the hour. The entire world is gradually drifting towards one global market without any trade barriers between the countries. With the emergence of corporate work culture and promotional startup benefits, a great chunk of entrepreneurs are looking forward to corporatization. Ministry of Corporate Affairs allowed conversion of Partnership Firm into Company under Companies Act, 2013, for such conversion there is need to prepare a list of documents and required to file the same with ROC in forms like URC-1, INC-32, INC-33 and INC-34 etc. While conversion there is need to consider the implications of income Tax provisions also like Capital Gain.

 


STEPS FOR CONVERSION


Step 1. Hold a Meeting of Partners


Convey and Hold a meeting of the Partners to transact the following business:
To authorize one or more partners to take all steps necessary and to execute all papers, deeds, documents etc. pursuant to registration of the firm as a Company.
To execute a supplementary Partnership Deed to align it with the requirements as under:
There must be provision of converting a firm into company;

Step 2. Approval for Advertisement Draft


Approved for the draft of the advertisement to be given in the form URC 2 in the Newspaper.

Step 3. Obtain Director Identification Number (DIN)


It is important to note that every person who is to be appointed as a director must have “Director’s Identification Number (DIN)” [Section 152(3)] or any number as may be prescribed under Section 153. If the proposed director does not already have a DIN, he/she must obtain the same before incorporation of the company. This can be obtained by making an application on the MCA portal in Form DIR - 3. DIN may also be obtained through Form INC-32 (SPICe).

Step 4. Digital Signature Certificate (DSC)


Acquire DSC - A licensed Certifying Authority (CA) issues the digital signature. Certifying Authority (CA) means a person who has been granted a license to issue a digital signature certificate under Section 24 of the Indian Information Technology Act, 2000.
Register DSC - Role check for Indian companies is to be implemented in the MCA application. Role check can be performed only after the signatories have registered their Digital signature certificates (DSC) with MCA.

Step 5. Advertisement Published


Publish an advertisement in E-form URC -2 about registration in two newspaper (English daily & Vernacular) for seeking any objection within 21 days of Publish

Step 6. Drafting and Printing of Memorandum and Articles of Association


After ascertaining name availability from the Registrar of Companies steps should be taken to get the memorandum and articles of association for the proposed company drafted and printed. The memorandum of a company has to be in Tables – A, B, C, D and E in Schedule-I to the Companies Act, 2013.

Step 7. Stamping and Signing of Memorandum and Articles


The memorandum and articles should be printed and signed by subscribers. Thereafter, the memorandum and the articles should be stamped by the appropriate State Authority (Collector of Stamps) under the Indian Stamp Act,1899.

Step 8. Dating of Memorandum and Articles of Association


The memorandum and articles are then dated, but the date must be the date of stamping or later than the date of their stamping and not, in any event, a date prior to the date of their stamping .

Step 9. Registration or Approval from Sectoral Regulation


Proviso to Rule 12 of the Companies (Incorporation) Rules, 2014 provides that in case pursuing of any of the objects of a company requires registration or approval from sectoral regulators such as Reserve Bank of India, Securities and Exchange Board, registration or approval, as the case may be.

Step 10. Filing of Documents/Forms and Registration Fee


Various documents and Forms are required for respective authority along with the fees. The fee shall be as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Step 11. Scrutiny of Forms and Documents by Registrar


On receipt of the aforementioned documents and forms, the office of the Registrar of Companies will scrutinise them and if they are found complete in all respects, the Registrar will register the company and allot CIN.

Step 12. Issue of Certificate of Incorporation by Registrar:


A Certificate of Incorporation will be issued by the Registrar of Companies under his hand and seal of his office and sent electronically. One may take printout of Certificate of Incorporation which is generated online



CONVERSION OF PARTNERSHIP INTO COMPANY

Conversion Requirements:

1. Partnership firm to be registered with the registrar of firms.
2. Atleast 2 partners.
3. Alter partnership deed – add clause for conversion in deed, if required.
4. All partners of the partnership firm shall become shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion.
5. Consent of majority of members by calling a general meeting for conversion.