There are businesses in India that begin their journey as a Limited Liability Partnership (LLP) but now are keen on converting into a private limited company for more growth and prosperity in business. The Limited Liability Partnership Act, 2008 has no provision related to the conversion of an LLP into a Private Limited Company, but Section 366 of the Companies Act, 2013 states that an LLP can be converted into a Private Limited Company. LLP is good for small businesses with an annual sales turnover of fewer than Rs.40 lakhs and a capital contribution of fewer than Rs.25 lakhs. LLPs that satisfy these conditions do not have to go through an audit every year but on the other hand, a private limited company must conduct an audit of its financial statement each year. Though in case LLP has an annual turnover of Rs.40 lakhs or a capital contribution of more than 25 lakhs, the need for compliance becomes almost similar for both the private limited Company and LLP, making the owners of LLP think about converting into a Private Limited Company.

The shift from traditional partnerships to Limited Liability Partnerships (LLPs) has increased in recent years. The reason behind this is that LLPs offer more flexibility, unlimited partners and the like. But the real driving force behind the shift is due to the fact that LLPs offer a major advantage in terms of limited liability. The strain on the personal assets of the partner is put to rest when it comes to LLPs since they are a hybrid of both a partnership and a private limited company. Small and medium-sized businesses find this type of organisation structure to suit their needs very well.

The conversion of an OPC- One Person Company into Private Limited Company as per Section 18 of the Companies Act, 2013 and the provisions of Companies (Incorporation) Rules of 2014 should be discharged by a newly formed Private Limited Company. These rules will not affect the existing debts, liabilities, obligations or contracts of the OPC. There are two ways of converting an OPC into a private limited company either voluntarily or mandatorily. Under both these type of conversions, the requirements are necessary alterations in the MOA and AOA of the OPC (As per the provisions provided in section 18 of the Companies Act, 2013, along with section 122 of the Act). The section says to obtain no objection in written form, from the concerned members and creditors; passing a resolution in support of conversion; and it should also satisfy the requirements of the minimum paid-up capital, along with the minimum number of members and directors.

The conversion of PLC (Private limited company) into an OPC (One Person Company) is provided as per the Companies Act, 2013, which implements a mechanism to convert one class of company into another. Section 18 of the Act, explicitly grants the conversion of an already registered private limited company starting from 1 April 2014. The conversion of PLC to OPC would not affect the responsibilities and contractual obligations of the company before conversion, and such claims, liabilities, obligations shall be enforceable by law, and the resulting OPC shall be liable for them. One Person Company (OPC) can be formed with only 1 owner, who acts as both the director as well as a shareholder of the company. There can be more than 1 director, but not more than 1 shareholder. For converting a Private Limited Company to an OPC, your paid-up capital and annual turnover should be less than Rs.50lakh and Rs.2Crore respectively.

Converting a private limited company to a public limited company is quite a straightforward process. All that needs to be done is to pass the resolution in the board meeting and the general meeting for the same. A special resolution is required for this process. A special resolution would include more than three quarters or majority of vote of the members. There are many benefits of converting a private limited company to a public limited company. The company would be more reputed in the eyes of law. Apart from this, the company can also register its shares in a recognized stock exchange. The process of converting a private limited company to a public limited company is governed by the Companies Act, 2013 and the Companies (Incorporation) Amendment Rules, 2020.

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