Step 1: Convene a Meeting of the Partners and Obtain Consent
- The first step is to hold a meeting of all the existing partners of the Partnership Firm.
- In this meeting, the proposal for converting the firm into a Private Limited Company should be discussed in detail, highlighting the benefits and implications of such a conversion.
- A resolution expressing the consent of all the partners to convert the Partnership Firm into a Private Limited Company must be passed unanimously.
- This resolution should also authorize one or more partners to take necessary steps and execute documents on behalf of the firm for the conversion process.
Step 2: Obtain Digital Signature Certificates (DSCs) and Director Identification Numbers (DINs)
- If any of the existing partners intend to become directors in the Private Limited Company and do not already possess a Digital Signature Certificate (DSC) and a Director Identification Number (DIN), they will need to obtain these.
- DSC: Apply for Class 3 DSCs from a government-certified Certifying Authority (CA). This involves submitting identity and address proofs and completing the verification process.
- DIN: Apply for DIN through Form DIR-3 on the MCA portal. This requires providing personal details, address proof, and identity proof. Note that DIN can also be applied for during the company incorporation process via SPICe+.
Step 3: Choose a Company Name and Obtain Name Approval
- Select a suitable and unique name for the proposed Private Limited Company. Ensure the name complies with the naming guidelines under the Companies Act, 2013.
- Apply for name approval through the RUN (Reserve Unique Name) service on the MCA portal or through Part A of the SPICe+ form. You can propose up to two names in order of preference.
- Pay the applicable fee for name reservation.
- The MCA will review the proposed names and approve one if it is unique and available. Once approved, the name is reserved for a specific period (currently 20 days).
Step 4: Prepare the Memorandum of Association (MoA) and Articles of Association (AoA)
- The Memorandum of Association (MoA) is the charter of the company and defines its objectives and scope of activities. It also states the name of the company, the state in which the registered office will be situated, the liability of the members, and the authorized share capital.
- The Articles of Association (AoA) contains the rules and regulations governing the internal management of the company, including matters such as the appointment of directors, conduct of meetings, transfer of shares, etc.
- These documents need to be drafted carefully, keeping in mind the requirements of the Companies Act, 2013, and the specific needs of the business.
Step 5: File the Incorporation Application (SPICe+ Form)
- The primary form for company incorporation is SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus), filed online through the MCA portal.
- Part B of the SPICe+ form requires detailed information about the proposed company, its registered office address, the directors and subscribers, and the capital structure.
- You will need to attach the following documents to the SPICe+ form:
- Memorandum of Association (MoA) – digitally signed by the subscribers.
- Articles of Association (AoA) – digitally signed by the subscribers.
- Declaration by the first directors and subscribers (Form INC-9) – digitally signed.
- Proof of registered office address (e.g., utility bill not older than 2 months, NOC from landlord if rented, rental agreement).
- Copies of PAN and Aadhaar cards of the directors and subscribers (self-attested). For foreign directors, a passport is usually required.
- Passport-sized photographs of the directors and subscribers.
- Consent to act as director (Form DIR-2) from each director.
- Statement of Assets and Liabilities of the Partnership Firm as on the date of conversion, duly certified by a Chartered Accountant.1
- Copy of the Partnership Deed.
- Copy of the Resolution passed by the partners for conversion.
- Any other documents as may be required by the MCA.
Step 6: Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN)
- Applications for PAN and TAN are integrated with the SPICe+ form and are processed simultaneously with the incorporation application.
- Upon successful incorporation, the PAN and TAN will be allotted to the company.
Step 7: Receive the Certificate of Incorporation
- If all the submitted documents are found to be in order, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, officially registering the Partnership Firm as a Private Limited Company.
- This certificate will contain the company’s name, Corporate Identification Number (CIN), and the date of incorporation.
Step 8: File Form INC-20A for Commencement of Business
- After incorporation, the Private Limited Company needs to file Form INC-20A with the ROC within 180 days of the date of incorporation, declaring that the company has received the subscription money and is ready to commence business.
- This form needs to be accompanied by proof of receipt of subscription money (e.g., bank statement).
Step 9: File Form FC-7 for Conversion of Partnership Firm into Company
- Specifically for the conversion of a Partnership Firm into a Company, Form FC-7 needs to be filed with the ROC.
- This form provides details about the conversion and needs to be filed within thirty days from the date of registration of the company.
- Attachments to Form FC-7 typically include:
- Copy of the Certificate of Incorporation.
- Copy of the Partnership Deed.
- Statement of Assets and Liabilities of the firm as on the date of conversion, certified by a CA.
- Copy of the resolution passed by the partners for conversion.
- Consent of all partners to the conversion.
- A declaration by the directors that all the property, movable and immovable, of the partnership firm vests in the company without any further assurance, act or deed.
- Any other documents as may be required by the ROC.
Step 10: Comply with Post-Incorporation Requirements
- Once the conversion is complete, the Private Limited Company will be subject to all the post-incorporation compliance requirements applicable to PLCs in India, such as:
- Appointment of auditors.
- Maintenance of statutory registers.
- Holding board meetings and annual general meetings (AGMs).
- Filing annual returns (Form MGT-7/MGT-7A) and financial statements (Form AOC-4) with the ROC.
- Filing income tax returns (ITR-6).
- Obtaining necessary business licenses and registrations (e.g., GST).
Important Considerations:
- Valuation: The assets and liabilities of the Partnership Firm will need to be properly valued and transferred to the Private Limited Company.
- Tax Implications: Conversion may have tax implications, and it’s advisable to consult with a tax professional to understand these.
- Stamp Duty on Asset Transfer: Depending on the state, there might be stamp duty implications on the transfer of immovable property from the firm to the company.
- Professional Assistance: It is highly recommended to seek the assistance of a qualified Company Secretary (CS) or Chartered Accountant (CA) to navigate the complexities of this conversion process and ensure compliance with all legal and regulatory requirements.
Converting your Partnership Firm into a Private Limited Company is a strategic decision with long-term benefits. By following the outlined procedure diligently and seeking professional guidance, you can successfully undertake this transformation and position your business for future growth and success.