◆ Introduction: The conversion of a partnership firm into a private limited company is a significant step toward achieving greater scalability, credibility, and operational efficiency. Under the provisions of Section 366 of the Companies Act, 2013, a partnership firm can be converted into a private limited company, subject to meeting the requirements laid down in the Act.

Section 366 specifically allows for the registration of “existing companies” that include partnership firms, limited liability partnerships, and other entities as companies under the Companies Act, 2013. The process provides the partnership business with a distinct legal identity, limited liability for its shareholders, and enhanced opportunities for funding and growth.

This conversion is governed by the Companies (Authorized to Register) Rules, 2014, and involves compliance with statutory obligations such as preparing necessary documentation, obtaining approvals, and fulfilling filing requirements with the Registrar of Companies (RoC). The benefits of conversion include enhanced credibility, ease of obtaining funding, tax advantages, and limited liability for directors and shareholders.

◆ Essentials for Converting the Partnership Firm into a Private Limited Company: Section 366 of the Companies Act 2013 puts down the essentials for the conversion of a partnership firm into a private limited company. These include:

1. There should be at least two shareholders or directors to convert a partnership firm into a private limited company.
2. Secured creditors of a partnership firm must obtain the No Objection Certificate before conversion into a private limited company.
3. The partnership firm should also get an exclusive name while ensuring that the name ends with Pvt. Ltd.
4. A contribution of minimum capital is necessary.
5. The partnership firm looking to convert into a private limited company should also have a registered office.
6. Once the conversion procedure is complete, the private limited company should form its Articles of Association (AOA) and Memorandum of Association (MOA) for incorporation.

◆ Steps for Conversion of Partnership Firm to Private Company:

Step-I: Procedure for Conversion

1. Obtain NOC from the Registrar of Firms
   • Request the Certificate of Registration from the Registrar of Firms to initiate the process.
2. Proposed Name Approval
   • Submit the proposed name along with:
     • Trademark Certificate (if applicable)
     • NOC for using the name (if required).
   • Attachments:

1. Resolution for conversion of the partnership firm into a company (Firm must have at least 2 partners).
2. Partnership Deed.
3. Main Objects of the company.

2. Apply for the name approval and ensure timely submission for any further extensions.
3. Filing of URC Forms
   • File URC-2 as prescribed under the Companies Act, 2013.
   • After 21 days but before 30 days of the newspaper advertisement, file:

1. URC-1
2. SPICe Part B (incorporation form).

Step-II: Arrangement of Documents for Conversion/Incorporation

1. Partnership Documents
   • Chain of Registered Partnership Deeds (all versions).
   • Written consent or NOC from secured and unsecured creditors/lenders of the firm.
2. Financial Documents
   • Statement of accounts (with notes) dated not more than 15 days prior to the application, certified by a Chartered Accountant (CA).
   • Copy of the latest Income Tax Return filed by the firm.
3. Affidavits and Resolutions
   • Affidavit from all members to dissolve the firm (on stamp paper, notarized).
   • Resolution for:
     1. Conversion of the partnership into a company.
     2. Dissolution of the partnership firm.
4. Undertakings
   • Undertaking by proposed directors to comply with the Indian Stamp Act, 1899.
5. Declarations
   • Declaration by two or more directors verifying:

5. Particulars of all members/partners.
6. Details of partners/proposed members with their shareholding.
7. Forms and Certifications
   • Form DIR-2: Consent of directors along with their PAN and Aadhaar.
   • Certificate from CA/CS/CWA certifying compliance with the provisions of the Indian Stamp Act (as applicable).
   • Particulars of members with shareholding details.
   • List of First Directors.
   • Audited Balance Sheet for the previous financial year.

◆ Timeline The entire process is expected to be completed within 60 days after receiving all the required documents.

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