Company Conversion
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Company Conversion
Company Conversion
Business entities, at times, require or prefer to convert themselves into a different form of entities. This need may arise on account of reasons like protecting family business, reducing legal compliances, need of public funds, better recognition from customers etc. However, there are restrictions pertaining to conversions. Not every entity can be converted into a desired form. Following conversion combinations are possible:
1. Private Limited Company To Public Limited Company
2. Private Limited Company To Limited Liability Partnership
3. Private Limited Company To One Person Company
4. Public Limited Company to Private Limited Company
5. Unlisted Public Limited Company to Limited Liability Partnership
6. One Person Company to Private Limited Company
7. One Person Company to Public Limited Company
8. Limited Liability Partnership to Private Limited Company
9. Limited Liability Partnership to Public Limited Company
10. Limited Liability Partnership to One Person Company
11. Partnership Firm to Private Limited Company
12.Partnership Firm to Public Limited Company
13. Partnership Firm to Limited Liability Partnership
Let’s understand in detail, the procedures associated with 7 major conversion combinations:
A Private Limited Company can voluntarily convert into a Public Limited company. However, if a Private Company makes a default in complying with basic conditions related to its definition, all the privileges and exemptions available to it shall cease and the former will be deemed a Public Limited Company.
Private Limited Companies are entitled to many relaxations and exemptions. Public Limited Companies are converted into Private Limited Companies chiefly to avail these relaxations or exemptions provided by Ministry of Corporate Affairs.
Ease of management and comparatively lesser compliances to be followed are the main advantages of a One Person Company. Conversion of Private Limited Companies into One Person Companies is often motivated by these very reasons.
This conversion combination is voluntary. After introduction of companies Amendment Act, 2021 it is not obligatory for the One Person Company to convert itself into Private Limited Company.
There are many reasons why Partnership firms go for LLP conversion. Limited Liability Partnerships hold prospect for more flexibility and unlimited partners. Also, since Limited Liability Partnership is a hybrid business entity that combines the aspects of both partnership and private limited company, liability on the personal assets of the partner will be limited. Limited Liability Partnership is best suited for small and medium-sized businesses.
Conversion of Limited Liability Partnership into Private Limited Company opens prospect for more growth. Once a Non Objection Certificate (NOC) is obtained from the ROC where the Limited Liability Partnership is registered, incorporation of the Private Limited Company can be undertaken.
A private limited company can be converted into an LLP if the company has no security interest in its assets at the time of application. The conversion is also possible if the partners of the Limited Liability Partnership will be the shareholders of the company.
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