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PROCEDURE FOR CONVERSION OF A SOLE PROPRIETOR CONCERN OR PARTNERSHIP FIRM INTO A LIMITED COMPANY

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked almost 3 years ago

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered over 2 years ago

The first step will be incorporation of a new company with the required provisions in the Memorandum and the Articles. A resolution to acquire the other business shall be passed at a General Meeting requesting the Board of Directors to do the needful. The Board of Directors shall enter into an agreement with the firm for its acquisition. A copy of the agreement shall be filed with the Registrar within 30 days.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 3 years ago

A proprietary business may be converted into a company or a partnership firm may be converted into a company. A company is incorporated by making the sole proprietor as one of the subscribers to the Memorandum i.e. he becomes the first member. In case of partnership firm all the partners become subscribers to the Memorandum of the new company. Or, the new company which is incorporated takes over the sole proprietorship or the partnership firm. There must be specific provision in the Memorandum of the new company for taking over other business as one of its objects and powers must be given to the Board of Directors by the Articles of the new company, to enter into agreements for acquisition of business.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered almost 3 years ago

(A) An existing business (that is sole proprietorship or partnership) can be converted into a company in any of the following ways: (a) by outright sale; (b) by making partners of the firm the only shareholders of the newly incorporated company; (c) a company becoming a partner of the firm which will be dissolved thereafter; (d) by amalgamation under Sections 391 to 394 of the Companies Act, 1956; (e) by registration of existing joint stock companies under the Companies Act (Section 567). (B) In cases of items (a), (b) and (c), following procedure should be followed: (1) The existing business should be converted into a partnership firm and the newly incorporated company be admitted as its partner. (2) At the time of forming the new company, it should be ensured that the proprietor of the existing business and any other individual are the subscribers to that company’s memorandum of association, thereupon that other individual must also be admitted as a partner of the converted firm. (3) Distribution of all assets and liabilities of the firm to one of the partners who will pay the difference to other partners must be provided in the partnership deed. (4) It must be ensured that the memorandum of association of the newly formed company includes a clause permitting the company to acquire the undertakings of an existing business. (5) It must also be ensured that the articles of association of the newly formed company gives power to its directors to enter into agreement facilitating the acquisition of business. (6) An agreement with the directors of the newly formed company for facilitating the acquisition of the partnership firm must be entered into. (7) A copy of the agreement must be filed with the Registrar within 30 days of entering into the agreement (Section 192), after paying the requisite fee as prescribed under Schedule X to the Companies Act, 1956. (8) Thereupon a Board resolution for allotment of shares to the other partners of the firm as consideration of such acquisition should be passed. (9) A return of allotment in e-form 2 along with the attachments (please refer the CD provided along with the Study Material or see the link http://www.mca.gov.in/MCA21/Download_eForm_choose.html) should be filed with the Registrar within 30 days of making the allotment (Section 75). (10) If the partnership firm being a joint stock company within the meaning of Section 566 wants to be registered as a company, it shall file e-form 1A and ascertain availability of name. Thereafter, the following documents should be delivered to the Registrar of Companies: (i) an application in e-form No. 37 (please refer the CD provided along with the Study Material or see the link http://www.mca.gov.in/MCA21/Download_eForm_choose.html); (ii) a list showing the names, addresses and occupations of all persons who on a day not more than 6 clear days before the day of registration were members of the company and the shares or stock held by each one of them respectively, distinguishing each share by its number in case the shares are numbered; (iii) a copy of the partnership deed; (iv) a statement containing the following particulars: (a) the nominal share capital of the company and the number of shares into which it is divided or the amount of stock of which it consists; (b) the number of shares taken and the amount paid on each share; (c) the name of the company and the addition of the word ‘Limited’ or ‘Private Limited’ as its last words; (d) a copy of the resolution declaring the amount of guarantee if you want to register it as a guarantee company (Section 567). Thanks

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

CONVERSION OF A PROPRIETORSHIP INTO A PRIVATE LIMITED COMPANY A proprietary business may be converted into a company or a partnership firm may be converted into a company. A company is incorporated by making the sole proprietor as one of the subscribers to the Memorandum i.e. he becomes the first member. In case of partnership firm all the partners become subscribers to the Memorandum of the new company. Or, the new company which is incorporated takes over the sole proprietorship or the partnership firm. There must be specific provision in the Memorandum of the new company for taking over other business as one of its objects and powers must be given to the Board of Directors by the Articles of the new company, to enter into agreements for acquisition of business. STEPS INVOLVED IN THE CONVERSION OF PROPRIETORSHIP OR PARTNERSHIP INTO A PRIVATE LIMITED COMPANY. 1. The first step will be incorporation of a new company with the required provisions in the Memorandum and the Articles. 2. A resolution to acquire the other business shall be passed at a General Meeting requesting the Board of Directors to do the needful. 3. The Board of Directors shall enter into an agreement with the firm for its acquisition. 4. A copy of the agreement shall be filed with the Registrar within 30 days. 5. Shares have to be allotted by the Board of Directors to the partners of the firm so acquired (if it is a partnership firm) according to the terms of agreement. 6. A return of such allotment has to be filed with the Registrar within 30 days to complete the registration.

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