Conversion of CA Firms into LLP: Requirements, Procedure & Forms
Learn about the process of converting CA firms into LLP, including requirements for designated partners, initial procedures for name reservation, various required forms, and provisions under Chapter 10 of the LLP Act 2008.
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CONVERSION OF CA FIRMS INTO LLP Prepared by CA K S Ravi
REQUIREMENTS FOR CONVERSION Two partners to be designated as designated partners and there can be more than two designated partners. Minimum two partners are required for converting a partnership firm into LLP. The designated partners should obtain DPIN or DIN by filing Form DIR 3 with Central Government electronically. Digital Signature Certificate (DSC) Class 2 or above from a Certification Agency (CA)
INITIAL PROCEDURE REGARDING NAME www.mca.gov.inCheck the name availability which is available on the www.mca.gov.in Name should not be similar to other LLP/Company or in violation of Trade Mark Act of 1999 or is undesirable. Apply for reservation of name in RUN-LLP (Reserve Unique Name) before making an application under FiLLiP.
VARIOUS FORMS The conversion of a CA firm into LLP is as per the provisions contained in Chapter 10 and the Second Schedule of the LLP, Act 2008 Apply in LLP Form No. 17 for conversion of a firm into LLP (Rule 38(1) of Limited Liability Partnership Rules, 2009) File Form No. 14 (See Rule 33 Form for intimating the registrar of firms about conversion of firm into limited liability partnership) Certificate of registration on conversion of a firm to new name of the LLP in Form No. 19 will be issued by Government of India, Ministry of Corporate Affairs, Central Registration Centre.
PROVISIONS UNDER CHAPTER 10 A Firm may convert into LLP in accordance with the provisions of Chapter 10 read with the Second Schedule (as per Section 55), by making an application in Form No. 17 Section 58 The registrar, on satisfying that the firm has complied with the provision of the Second schedule shall subject to the provisions of this Act and the rules made thereunder, register the documents submitted under the Second schedule and issue a certificate of registration in Form No. 19 stating that the LLP is, on and from that date specified in the certificate, registered under this Act. The LLP so registered shall, within 15 days of the date of registration, inform the concerned registrar of firms about the conversion and of the particulars of the LLP in Form no. 14 Upon such conversion, the partners of the firm and the LLP shall be bound by the provisions of the Second schedule.
Continued Notwithstanding anything contained in any other law for the time being in force, on and from registration specified in the certificate of registration issued Second schedule the date of under the All tangible (movable or immovable) and intangible property vested in the firm, all assets, privileges, liabilities, relating to the firm and the whole of the undertaking of the firm shall be transferred to and shall rest in LLP without further assurance act or deed; and interests, rights, There shall be a LLP by the name specified in the registration registered under the LLP Act, 2008; obligations The dissolved records of the registrar of firms. firm shall and be deemed to be the certificate of removed from
FIRM MEANS As per Section 4 of the Indian Partnership Act, 1932, "Partnership" is defined as "the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all". However, the Indian Partnership Act, 1932 does not define the term "Firm". In common parlance, the terms "Firm" interchangeably to refer to a business entity formed by two or more persons who agree to carry on a business together with the objective of making a profit. So, a "Firm" is essentially a partnership business as defined in Section 4 of the Indian Partnership Act, 1932 and "Partnership" are often used
CONVERT Convert means a transfer of property, assets, interest, rights, privileges, liability, obligation and the undertaking of a firm to the LLP in accordance with the second schedule. Upon conversion, the partners of the firm shall be bound by the provisions of the second schedule that are applicable to them.
ELIGIBILITY FOR CONVERSION A Firm may apply to convert into LLP in accordance with the second schedule, if and only if, the partners of LLP into which the firm is to be converted, comprise all the partners of the firm and no one else.
STATEMENT TO BE FILED A statement by all of its partners in Form No. 3 and accompanied by appropriate fee shall be filed to Central Government containing following particulars. the Incorporating documents and statement referred Section 11 (signed by advocate or company chartered accountant or cost accountant) The date on which the firm was registered Indian partnership Act, 1932 or under any applicable to in under the The name and registration number, if applicable, of the firm and secretary or law, as
REGISTRATION OF CONVERSION On receiving the documents, the registrar shall register it and issue a certificate of registration as already stated earlier. Provided that the LLP shall, within 15 days of date of registration, inform the concerned registrar of firms about the conversion and the particulars of LLP.
REGISTRAR MAY REFUSE TO REGISTER Nothing in this schedule shall be construed as to require the registrar to register any LLP if he is not satisfied with the particulars or other information furnished under the provisions of this Act. If it is so refused, the appeal shall lie before the tribunal and until the tribunal is constituted, the appeal may be made before the Company Law Board (CLB) The registrar may, in any particular case, require the documents submitted to be verified in such manner, as he considers fit.
EFFECT OF REGISTRATION On and from the date of registration All tangible (movable or immovable) and intangible property vested in the firm, all assets, interests, rights, privileges, liabilities, relating to the firm and the whole of the undertaking of the firm shall be transferred to and shall rest in LLP without further assurance act or deed; and There shall be a LLP by the name specified in the registration. The firm shall be deemed to be dissolved and removed form the records of the registrar of firms. obligations certificate of
REGISTRATION RELATING TO PROPERTY If any property is being transferred, the LLP 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 conversion and of the particulars of the LLP in such medium and form as the authority may specify.
PENDING PROCEEDINGS All proceedings by or against the firm which are pending in any court or tribunal or before any authority, on conversion may be continued, completed and enforced by or against the LLP.
CONTINUANCE OF CONVICTION, RULING OR ORDER OR JUDGEMENT Any judgement of any court, tribunal or other authority in favour of or against the firm may be enforced by or against the LLP. conviction, ruling, order or
EXISTING ARRANGEMENTS Every agreement to which the firm was immediately before the date of registration shall have the effect, as from that date, as if a party For any reference to the firm, in respect of anything to be done, on or after that date of registration, is a reference to LLP. The LLP were a party of such an agreement instead of the firm; and
EXISTING CONTRACTS All Bonds, Instruments subsisting immediately before the date of registration relating to the firm or to which the firm is a party, shall continue on and after that date as if it relates to LLP. Deeds, Contracts, Agreements, Schemes, Applications, Arrangements and
CONTINUANCE OF EMPLOYMENT Every contract of employ- ment shall continue to be in force on and after the date of registration as if LLP was the employer
EXISTING APPOINTMENT, AUTHORITY AND POWER Every appointment of the firm in any role or capacity shall take effect and operate from the registration, as if LLP was appointed (including audit). date of Any authority or power conferred on the firm shall assume as if it is conferred on the LLP
APPROVALS AND LICENSE All Approvals and Licenses shall now stand applicable to LLP after the date of registration, as if it was issued in its favour.
PARTNERS LIABILITY Every partner of a firm that has converted into LLP shall continue to be personally liable (jointly and severally with the LLP) for the liabilities and obligations of the firm, which were incurred prior to conversion or which arose from any contract entered into prior to conversion. If any partner discharges any liability/obligation on behalf of LLP, he shall be entitled(subject to limitations of LLP agreement to the contrary) to be fully indemnified by LLP
NOTICE OF CONVERSION IN CORRESPONDENCE The LLP shall ensure that for a period of commencing not later than 14 days after registration, correspondence bears the following 12 months A statement that it was, as from the date of registration converted from a firm into LLP; and The name and registration number, if applicable, of the firm from which it was converted. the every of date of official the LLP LLP which contravenes the said provision shall be punishable with a fine which shall not be less than Rs. 10,000/- but which may extent to Rs. 1,00,000/-. And if it is a continuing default with a further fine, which shall not be less than Rs. 50 but which may extend to Rs. 500 for every day the default continues. Contravention
Council Guidelines for conversion of CA firms into LLPs dated 14-11-2011 vide Guidelines No.1-CA (7)/03/2011
Provision for Chartered Accountants in particular All existing CA firms to follow the provisions of LLP Act, 2008 read with the second schedule and as amended from time to time. In terms of rule 18(2)(xvi), if the proposed name of the LLP includes the name of Chartered Accountant/s as part of the proposed name, the same shall be referred to ICAI by the registrar of LLP and it shall be allowed by the registrar only if the Secretary of ICAI approves it. If the name resembles with any other non CA entity as per the naming guidelines under LLP Act and its rules, the proposed name of LLP of CA firms may include the word Chartered Accountant/s in the name of LLP itself and the registrar may allow the same, subject to the compliance of other provisions (rule 18(2)(xvi) as referred above).
CA Regulations 1988 For the purpose of registration of LLP with ICAI under regulation 190 of Chartered Accountants Regulation, 1988, the partners of the firm shall apply in ICAI Form No. 117 and ICAI Form No. 18 along with copy of name registration received from registrar of LLP and submit the same to the concerned regional office of ICAI. These Forms shall contain all details of the officers and the other particulars as called for together, with signatures of all partners or authorized partner of the proposed LLP. The names of CA firms registered with ICAI shall remain reserved for the partners and one of the options for LLP names, subject to the provisions of LLP Act, Rules and Regulations framed thereunder.
CA Regulations and the LLP Act for name approval Where two similar or identical or nearly similar firm names (whether the partners of such firms are same or not) have been registered by ICAI, under the proposed LLP only one such firm name shall be approved and remaining firm registered with ICAI, either desires to convert into LLP or not, a change in the firm name shall be required. The name of the LLP may be like `X & Co. LLP or `X & Associates LLP and no other suffix shall be approved and registered by ICAI. The newly converted CA LLPs registered with ICAI shall be allowed to work only in terms of Section 2(2) of the Chartered Accountants Act, 1949 and the objects of the LLP to be incorporated in FiLLiP and Form17 of the LLP Rules, 2009 or in LLP agreement, shall be in the nature of Professional Services allowed under Section 2(2) of the Chartered Accountants Act, 1949. LLP shall be subject to the same regulations, as if they were in partnership firm. Mere conversion into LLP does not give any privileges, which were not earlier with the CA firms.
Continued Inter-se seniority among the firms shall be given to LLP as per existing policy of ICAI. In other words, LLPs shall carry the same seniority, as the firm shall otherwise have under the existing policy of ICAI. In case of merger of 2 LLPs, same rules as applicable to firms merging shall apply. The non converted firms shall also remain on the same position of seniority in relation to converted LLPs as the converted LLPs shall have the same inter-se seniority as the firms had earlier to conversion.
CONVERSION OF SOLE PRACTIONERS INTO LLP These guidelines of conversion of CA firms into LLP shall also be applicable proprietary firm into LLP subject to the provisions of LLP Act, Rules and Regulations framed there under. The conversion of proprietary firm shall be by way of incorporation of new LLPs to the conversion of
FIRM NUMBER The registration number (with minimum 6 numbers) of LLP with ICAI, shall remain the same, Firm Registration Number (FRN), allotted to the firm before the conversion by ICAI with the Regional Code like `W for Western, `E for Eastern, `S for Southern, `N for Northern and `C for Central Region
SENIORITY AND CODE OF ETHICS In case, there is a merger of a firm and conversion with LLP and vice- versa, seniority may be provided to the surviving entity as per policy The provisions of CA Act, 1949, Chartered Accountants Regulations, 1988 and Code of Ethics issued by ICAI shall be applicable to all partners of the converted CA firms into LLP jointly and severally.
SUBJECT TO CLARIFICATIONS Wherever the existing partnership firm have been appointed as a statutory auditor of any company after following the due procedure under the Companies Act, 2013 and the said firm with the same partners is converted/formed into LLP, then the same FRN will continue and the Board of Directors of the Company may take on record the conversion/formation of the CA firms into LLP and the new LLP shall be deemed to be an Auditor of the said company for the said financial year in terms of Section 58(4) of the LLP Act,2008. Clause 14 of the Second Schedule. Wherever more than one partnership firms with all the partners desire to convert/ form only one LLP, in that case the name and FRN may be selected of only one of such firms for the purpose of registration with ICAI and; Clause 14 of the Second Schedule.
OTHER GUIDELINES The other such firms shall stand dissolved. Seniority shall be decided as per applicable rules of ICAI. The Board of Directors of all the Companies who have appointed all the erstwhile firms as auditors, may take a declaration from the said LLP with all the partners of all the erstwhile firms on record and the appointment of auditors of all the erstwhile firms made under the Companies Act, 2013, shall be deemed to be in the name of the said LLP.
CONSTITUTION OF SEPARATE LLPS All members of ICAI in practice who want to constitute separate LLPs are required to follow the provisions of the Limited Liability Partnership Act, 2008 read with the Rules framed there under. In terms of Rule 18(2) (xvi) of LLP Rules- 2009, if the proposed name of LLP includes the words `Chartered Accountant or chartered Accountants, as the case may be, as part of the proposed name, the same shall be referred to the ICAI by Registrar of LLP and it shall be allowed by the Registrar only if the Secretary, ICAI approves it. For the purpose of registration of LLP with ICAI under regulation 190 of the Chartered Accountants Regulations, 1988, the partners of the firm shall apply in ICAI Form No. 117 and the ICAI Form No. 18 along with copy of name registration received from the Registrar of LLP and submit the same with the concerned Regional office of the ICAI. These Forms shall contain all details of the officers and other particulars as called for together with the signatures of all partners or authorized partner of the proposed LLP.
SENIORITY GUIDELINES ON CONVERSION The following guidelines relating to seniority and other criteria shall be followed for registration of LLP with ICAI. Inter-se seniority among the firms shall be given to LLP as per existing policy of ICAI. In other words, LLPs shall carry the same seniority, as the firms shall otherwise have under the existing policy of ICAI. In case of merger of two LLPs, same rules, as applicable to firms merging, shall apply. The name of the LLP may be like `X & Co. LLP or `X & Associates LLP and no other suffix shall be approved and registered by ICAI. The newly constituted CA LLPs registered with ICAI shall be allowed to work only in terms of Section2(2) of the Chartered Accountants Act, 1949 and the object of LLP to be incorporated in Form- 2 and Form17 of the LLP rules, 2009 or in LLP agreement, shall be in the nature of Professional Services allowed under Section 2(2) of the Chartered Accountants Act, 1949. LLP shall be subject to the same regulation, like the partnership firms. Mere conversion into LLP does not give any privileges, which were not earlier with the CA firms.
CONTINUED These guidelines of conversion of CA firms into LLP shall also be applicable to the conversion of proprietary firm into LLP subject to the provisions of LLP Act, Rules and Regulations framed there under. The conversion of proprietary firm shall be by way of incorporation of new LLPs. The registration number (with minimum 6 numbers) of LLP with ICAI, shall be like the Firm Registration Number being allotted to the firms by ICAI with the Regional Code like `W for Western, `E for Eastern, `S for Southern, `N for Northern and `C for Central Region . Introduction of LLP, shall not affect the existing regulations in force as regards Name allotment to chartered accountants firms. The provisions of CA Act, 1949, Chartered Accountants Regulations, 1988 and Code of Ethics (Revised 2019) issued by ICAI shall be applicable to all partners of the LLP jointly and severally.
Continued In case of any dispute in respect of these guidelines, the same shall be referred to the committee of the Institute and the decision of that committee shall be final and binding on the members of the Institute. For the purpose of any clarification regarding the approval and registration of proposed LLP with the ICAI, the requests can be sent at the following address:- The Secretary The Institute of Chartered Accountants of India P.B No: 7100, ICAI Bhavan , Indraprastha Marg New Delhi 110002 These Guidelines shall come into force w.e.f. 4th November, 2011.
Fees to be paid for incorporation/conversion The amount shall be paid into the Public Account of India through Credit Card, Internet Banking, Remittance at Bank Counter or any other mode approved by CG Every LLP shall specify LLP identification number (LLPIN) in all the forms used. Fees to be paid for registration LLP Contribution Less than Rs. 1,00,000 Between Rs. 1 lakh to Rs. 5 Lakh Between Rs. 5 Lakh to Rs. 10 Lakh Between Rs. 10 Lakh to Rs. 25 Lakh Between Rs. 25 Lakh to Rs. 1 Crore Above Rs. 1 Crore Fees Rs. 500 Rs. 2,000 Rs. 4,000 Rs. 5,000 Rs. 10,000 Rs. 25,000
Forms for various issues Prior consent to act as a designated partner to the LLP has to be given in Form 9 and the particulars of the individual who has given his consent to act as designated partner shall be filed in Form 4 along with fees (part of Annexure A) In the case of incorporation, such details are given in Form FiLLiP along with fee.
Designated Partner Identification Number To get either DPIN or DIN Form DIR 3 has to be filed electronically. If a person holds both DIN and DPIN, his DPIN shall stand cancelled and DIN shall be sufficient for being appointed as designated partner. Any change in particulars in DPIN or DIN shall be filed in Form DIR 6 The concerned designated partner shall file the relevant changes to the LLP on which he is a designated partner within 30 days of such change.
Incorporation of LLP The incorporation document shall be filed in FiLLiP with the registrar having jurisdiction over the state where the registered office is located along with a fee. In case of conversion Form 17 shall be used. Application for allotment of DPIN or DIN shall not be made by more than 5 individuals in Form FiLLiP. If the Form is resubmitted for rectifying the defect, total period of re-submission shall not exceed 30 days. Certificate of Incorporation shall be issued by the registrar in Form 16, which shall mention PAN and TANN issued by IT Department.
Address of LLPs The intimation of other address for service of documents other than the registered office shall be given to the registrar in Form 12, which will be as per LLP agreement or by way of a consent of all the partners. Notice of change of place of registered office shall be given to the registrar in Form 15 within 30 days of complying with the requirements. It can be changed within the state or from one state to another. Requisite fee shall be paid for intimating any such change.
Form of Contribution The contribution of each partner shall be accounted for and disclosed in the accounts of the LLP along with nature of contribution and amount, which shall be valued by a practising chartered accountant or by a practising cost accountant or by approved valuer from the panel maintained by the Central Government.
SMALL LLP Small LLP means a LLP The turnover of which, as per statements of solvency for the preceding financial year does not exceed Rs. 40 Lakh or such higher amount, not exceeding Rs. 50 crore as may be prescribed; or accounts immediately and The contribution of which, does not exceed Rs. 25 Lakh or such higher amount not exceeding Rs. 5 crore, as may be prescribed; and Which meets such other require- ments as may be prescribed.
