Question 4 (c)

Conversion of a firm into an LLP

6 marks

Time to write
About 12 minutes
Topic
Conversion into LLP
Notes
Crux notes

Question

Question 4 (c) · 6 marks

Discuss the provisions governing the conversion of a firm into an LLP, under the LLP Act, 2008.

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

12 minfor 6 marks

Read from the question

  • DiscussEach point named and explained, not just listed.

Write it in this order

  1. Read; underline the asks; jot your points 1 min
  2. 1 Rule and meaning of conversion 1 mark 2 min
  3. 2 Eligibility, statements, registration and refusal 3 marks 5 min
  4. 3 Effect of registration 2 marks 3 min
  5. Check: every ask answered, key terms underlined 1 min

Short on time? Trim steps 2 and 3 evenly rather than skip one: each is capped at its own marks.

Try it first. About 12 minutes for 6 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.

Rule. Section 55 of the LLP Act, 2008 allows a firm to convert into an LLP in accordance with the Second Schedule. "Convert" means the transfer of the firm's property, assets, interests, rights, privileges, liabilities, obligations and undertaking to the LLP; on conversion, the partners of the firm are bound by the provisions of the Schedule that apply to them (paras 1–2).

Picture itConversion of a firm into an LLP

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.

Procedure.

  1. Eligibility (para 3). A firm may apply to convert if, and only if, the partners of the proposed LLP comprise all the partners of the firm and no one else.
  2. Statements to be filed (para 4). The firm files with the Registrar (a) a statement by all its partners, in the prescribed form and with the prescribed fee, giving the firm's name and registration number (if any) and the date of its registration under the Indian Partnership Act, 1932 or any other law; and (b) the incorporation document and the statement referred to in section 11.
  3. Registration (para 5). On receiving these documents the Registrar, subject to the Act, registers them and issues a certificate of registration stating that the LLP is registered on and from the date specified in it. Within fifteen days of registration the LLP must inform the Registrar of Firms with which the firm was registered under the Indian Partnership Act, 1932 (if it was registered) of the conversion and of its particulars.
  4. Refusal (para 6). The Registrar may refuse to register if he is not satisfied with the particulars furnished, subject to an appeal to the Tribunal; he may also require the documents to be verified as he thinks fit.

Effect of registration (para 7): on and from the date in the certificate,

    1. there is an LLP by the name specified in the certificate;
    1. all the firm's property, tangible and intangible, and all its assets, interests, rights, privileges, liabilities and obligations, and the whole of its undertaking, are transferred to and vest in the LLP without further assurance, act or deed; and
    1. the firm is deemed to be dissolved and, if it was registered under the Indian Partnership Act, 1932, removed from the records kept under that Act.

Where the 6 marks sit

#ComponentMarks
1Rule and meaning of conversion1
2Eligibility, statements, registration and refusal3
3Effect of registration2
Total6
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