Question 4 (b)

Converting a firm into an LLP: procedure and effect

5 marks

Time to write
About 10 minutes

From an older CBCS paper

Question

Question 4 (b) · 5 marks

Explain the procedure for converting a firm into an LLP, and the effect.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

10 minfor 5 marks

Read from the question

  • procedureA process: the steps in order, one heading each.

Write it in this order

  1. Read; underline the asks; jot your points 1 min
  2. 1 Procedure 3 marks 5 min
  3. 2 Effect 2 marks 3 min
  4. Check: every ask answered, key terms underlined 1 min

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.

Try it first. About 10 minutes for 5 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Procedure (s. 55 and the Second Schedule):

Picture itConverting a firm into an LLP: procedure and effect

1All three partners of the firm sign the conversion together—and nobody else.

EligibilityThe partners of the proposed LLP comprise all the partners of the firm and no one else.

2The new LLP certificate goes up on the wall; the firm's old board lies on the floor.

Effect of registrationThere is an LLP by the name specified in the certificate; the firm is deemed to be dissolved.

3An old bill from the firm's days still reaches the partners themselves.

Partners' existing liabilitiesEach remains personally liable, jointly and severally with the LLP, for the firm's liabilities and obligations incurred before the conversion.

  1. A firm may apply to convert only if the partners of the LLP comprise all the partners of the firm and no one else.
  2. It files with the Registrar a statement by all its partners, with the firm's name and registration number (if any) and the date of its registration under the Indian Partnership Act, 1932, together with the incorporation document and statement referred to in section 11.
  3. The Registrar registers the documents and issues a certificate of registration; where the firm was registered under the Indian Partnership Act, 1932, the LLP informs the Registrar of Firms with which it was registered within fifteen days. The Registrar may refuse registration, subject to an appeal to the Tribunal.

Effect (para 7): on and from the date in the certificate there is an LLP by the name specified; all the firm's property, assets, rights, liabilities and undertaking vest in the LLP without further assurance; and the firm is deemed dissolved and, if it was registered under the Indian Partnership Act, 1932, removed from the records kept under that Act.

Where the 5 marks sit

#ComponentMarks
1Procedure3
2Effect2
Total5
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