Converting a firm into an LLP

Conversion of a partnership firm (s. 55 and the Second Schedule):

1. A firm may convert by complying with the Schedule (para 2), if and only if the partners of the LLP comprise all the partners of the firm and no one else (para 3).
2. It files with the Registrar a statement by all its partners, in the form and manner and with the fee the Central Government prescribes, giving the firm's name and its registration number, if any, and the date of its registration under the Indian Partnership Act, 1932 or any other law, if applicable, with the incorporation document and the section 11 statement (para 4).
3. The Registrar registers the documents and issues a certificate of registration; where the firm was registered, the LLP informs the Registrar of Firms with which it was registered within fifteen days (para 5); the Registrar may refuse, subject to an appeal to the Tribunal, and may require the para 4 documents to be verified in the manner he considers fit (para 6).

Consequences of conversion (para 7): there is an LLP by the name in the certificate; all the firm's property, assets, rights, liabilities, obligations and undertaking vest in the LLP without further assurance; and the firm is deemed dissolved and, if it was registered, removed from the records of the Registrar of Firms. Further consequences follow from paragraphs 8 to 17:

• Registered property (para 8): where such property is registered with an authority, the LLP must notify that authority of the conversion as soon as practicable.
• Pending proceedings (para 9) by or against the firm may be continued, completed and enforced by or against the LLP; and any conviction, ruling, order or judgment for or against the firm may be enforced by or against it (para 10).
• Agreements, contracts and employment (paras 11 to 13): agreements to which the firm was a party, and its deeds, contracts, schemes, bonds, instruments and arrangements, continue as if the LLP were the party instead of the firm; and contracts of employment continue with the LLP as employer.
• Appointments, authority and powers (para 14): every appointment of the firm in any role or capacity, and any authority or power conferred on the firm, in force before registration, operates as if the LLP had been appointed or had received it; and paras 7 to 14 apply to approvals, permits and licences issued to the firm under other Acts, subject to those Acts (para 15).
• Partners' liability for the past (para 16): despite paras 7 to 14, every partner of the converted firm remains personally liable, jointly and severally with the LLP, for the firm's liabilities and obligations incurred before the conversion or arising from contracts made before it; a partner who discharges such a liability is entitled to be fully indemnified by the LLP, unless he has agreed otherwise with it.
• Notice in correspondence (para 17): for twelve months, beginning not later than fourteen days after registration, every official correspondence of the LLP must state that it was converted from a firm, with the firm's name and its registration number, if any; a contravention is punishable with a fine of ₹10,000 to ₹1 lakh, and a further fine of ₹50 to ₹500 for every day the default continues after the first.