You are in: Home > Business Law

Conversion of a Partnership firm into a Company (Private/Public) (Formation of Part IX Company)

20th May 2011
By raju in Business Law
RSS Legal RSS    Views: N/A

Conversion of a Partnership firm into a Company is known as Corporatisation. Corporatisation is the need of the hour. The entire world is gradually drifting towards one global market without any trade barriers between the countries. A small unincorporated organisation led by few partners cannot think of growth on large scale without corporatising itself. Corporatisation has its own advantages such as Limited Liability, Perpetual Succession, Transferability of shares, easy access to funds etc.

Key Benefits:
Automatic transfer
All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.
No Stamp Duty
All movable and immovable properties of the firm automatically vest in the Company. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.
No Capital Gain Tax
No Capital Gains tax shall be charged on transfer of property from Partnership firm to Company.
Continuation of Brand Value

The goodwill of the Partnership firm and its brand value is kept intact and continues to enjoy the previous success story with a better legal recognition.
Carry Forward and Set off Losses and Unabsorbed Depreciation
The accumulated loss and unabsorbed depreciation of Partnership firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor company.

Key Conditions:
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.
The partners receive consideration only by way of allotment of shares in company and
The partners share holding in the company in aggregate is 50% or more of its total voting power and continue to be as such for 5 years from the date of conversion.

Key requirements:

Registered Partnership firm with minimum 7 Partners
Minimum Share Capital shall be Rs. 1,00,000 (INR One Lac) for conversion into a Private Limited Co.
Minimum Share Capital shall be Rs. 5,00,000 (INR five Lac) for conversion into a Public Limited Co.
If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered
Minimum 7 Shareholders
Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
The directors and shareholders can be same person
DIN (Director Identification Number) for all the Directors
DSC (Digital Signature Certificate) for two of the Directors
For more information on Conversion of a Partnership firm into a Company (Private/Public)(Fomation of Part IX Company) you can visit http://www.mycompanyregistration.com/
This article is free for republishing
Source: http://www.goinglegal.com/conversion-of-a-partnership-firm-into-a-company-privatepublic-formation-of-part-ix-company-2241274.html
Bookmark and Share
Republish




Ask a Question about this Article

powered by Yedda