CONVERSION OF FIRM INTO LIMITED LIABILITY PARTNERSHIP

The Limited Liability Partnership Bill, 2008 ('Bill' for short)
provides for the conversion of firm into limited liability partnership,
conversion of private company into limited liability partnership and
conversion of unlisted company into limited liability partnership in
accordance with the provisions in Chapter X and second schedule, third
schedule and fourth schedule respectively. This article will highlight the
procedure involved in the conversion of firm into limited liability
partnership.

Sec. 55 of the bill provides for the conversion of firm into limited
liability partnership. A firm may convert into a limited liability
partnership in accordance with the provisions of Chapter X and the second
schedule. The term 'convert' in relation to a firm converting into a
limited liability partnership means a transfer of the property, assets,
interests, rights, privileges, liabilities, obligations and the undertaking
of the firm to the limited liability partnership in accordance with the
second schedule.

*PROCEDURE:*

1. A firm may apply to convert into a limited liability partnership if and
only if the partners of the limited liability partnership into which the
firm is to be converted, comprise, all the partners of the firm and no one
else;

2. A statement by all of its partners in such form and manner and
accompanied by such fee as the Central Government may prescribe, containing
the following particulars, namely:

· The name and registration number, if applicable, of the firm; and

· The date on which the firm was registered under the Indian Partnership
Act, 1932 or under any other law, if applicable; and

· Incorporation document and statement required to register a limited
liability partnership

is to be filed with the Registrar.

3. The Registrar on receipt of the documents shall subject to the provisions
of the Act, register the documents and issue a certificate of registration
in such form as the Registrar may determine, stating that the limited
liability partnership is, on the date specified in the certificate,
registered under this Act.

4. The Registrar, if he is not satisfied with the particulars or other
information, may refuse to register;

5. The Registrar may require the documents to be verified in such manner, as
he considers fit;

6. If registration is refused an appeal may be made before the Tribunal;

7. The limited liability partnership shall, within fifteen days of the date
of registration, inform, the concerned Registrar of Firms with which it was
registered under the provisions of the Indian Partnership Act, 1932 about
the conversion and of the particulars of the limited liability partnership
in such form as the Central Government may prescribe.

*EFFECT OF REGISTRATION:*

1. On and from the date of registration there shall be a limited liability
partnership by the name specified in the certificate of registration
registered under this Act;

2. All tangible property as well as intangible property vested in the firm,
all assets, interests, rights, privileges, liabilities, obligations relating
to the firm and the whole of the undertaking of the firm shall be
transferred to and shall vest in the limited liability partnership without
further assurance, act or deed;

3. The firm shall be deemed to be dissolved and if earlier registered under
the Indian Partnership Act, 1932, removed from the records maintained under
that Act;

4. All proceedings by or against the firm which are pending in any court or
tribunal or before any authority on the date of registration may be
continued, completed and enforced by or against the limited liability
partnership;

5. Any conviction, ruling, order or judgment of any court, tribunal or other
authority in favor of or against the firm may be enforced by or against the
limited liability partnership;

6. Every agreement to which the firm was a party immediately before the date
of registration, whether or not of such nature that the rights and
liabilities there under could be assigned, shall have effect as from that
date as if the limited liability partnership were a party to such an
agreement instead of the firm and for any reference to the firm, there were
substituted in respect of anything to be done on or after the date of
registration a reference to the limited liability partnership;

7. All deeds, contracts, schemes, bonds, agreements, applications,
instruments and arrangements subsisting immediately before the date of
registration relating to the firm or to which the firm is a party, shall
continue in force on and after that date as if they relate to the limited
liability partnership and shall be enforceable by or against the limited
liability partnership as if the limited liability partnership were named
therein or where a party thereto instead of the firm;

8. Every contract of employment to which the agreements or contracts applies
shall continue to be in force on or after the date of registration as if the
limited liability partnership were the employer there under instead of the
firm;

9. Every appointment of the firm in any role or capacity which is in force
immediately before the date of registration shall take effect and operate
from that date as if the limited liability partnership were appointed;

10. Any authority or power conferred on the firm which is in force
immediately before the date of registration shall take effect and operate
from that date as if it were conferred on the limited liability partnership.

*OBLIGATIONS AND LIABILITIES:*

1. If any property is registered with any authority, the limited liability
partnership shall, as soon as practicable after the date of registration,
take all necessary steps as required by the relevant authority to notify the
authority of the conversion and of the particulars of the limited liability
partnership in such medium and form as the authority may specify;

2. Every partner of a firm that has converted into a limited liability
partnership shall continue to be personally liable (jointly and severally
with the limited liability partnership) for the liability and obligations of
the firm which were incurred prior to the conversion or which arose from any
contract entered into the conversion;

3. If any such partner discharges any liability or obligation he shall be
entitled, subject to any agreement with the limited liability partnership to
the contrary, to be fully indemnified by the limited liability partnership
in respect of such liability or obligation;

4. The limited liability partnership shall ensure that for a period of
twelve months commencing not later than fourteen days after the date of
registration, every official correspondence of the limited liability
partnership bears the following:

· A statement that it was, as from the date of registration, converted from
a firm into a limited liability partnership; and

· The name and registration number, if applicable, of the firm from which
it was converted

Courtesy - Taxmgmtindia

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