Conversion of Unlimited Company into a limited liability company by shares or guarantee

Without prejudice to any other provision in the Companies Act, for effecting the conversion of an unlimited liability company with or without share capital into limited liability Company by shares or guarantee, such a company shall pass a special resolution in a general meeting and thereafter, an application shall be filed in Form No. INC.27 in the manner provided in sub-rules (2) and (3).

The company shall within seven days from the date of passing off the special resolution in a general meeting, publish a notice, in Form. No. INC-27A of such proposed conversion in two newspapers (one in English and one in vernacular language) in the district in which the registered office of company is situate and shall also place the same on the website of the Company, if any, indicating clearly the proposal of conversion of the company into a company limited by shares or guarantee, and seeking objections if any, from the persons interested in its affairs to such conversion and cause a copy of such notice to be dispatched to its creditors and debenture holders made as on the date of notice of the general meeting by registered post or by speed post or through courier with proof of dispatch. The notice shall also state that the objections, if any, may be intimated to the Registrar and to the company within twenty one days of the date of publication of the notice, duly indicating nature of interest and grounds of opposition.

The company shall within forty five days of passing of the special resolution file an application as prescribed in sub-rule (1) for its conversion into a company limited by shares or guarantee along with the fees as provided in the Companies (Registration Offices and Fees) Rules, 2014, by attaching the following documents, namely:-

• Notice of the general meeting along with explanatory statement;
• Copy of the resolution passed in the general meeting;
• Copy of the newspaper publication;
• A copy of altered Memorandum of Association as well as Articles of Association duly certified by any one of the Directions duly authorized in this behalf or Company Secretary of the company, if any;
• Declaration signed by not less than two Directors of the company, including Managing Director, if any, that such conversion shall not affect any debts, liabilities, obligations or contracts incurred or entered into by or on behalf of the company before conversion (except to the extent that the liability of the members shall become limited);

A complete list of creditors and debenture holders, to whom individual notices have been sent under sub-rule (2) setting forth the following details, namely:-

• The names and address of every creditor and debenture holder of the company;
• The nature and respective amounts due to them in respect of debts, claims or liabilities;
• Declaration by a Director of the company that notice as required under sub-rule (2) has been dispatched to all the creditors and debenture holders with proof of dispatch.

A declaration signed by not less than two Directors of the company, one of whom shall be a Managing Director where there is one, to the effect that they have made a full enquiry into the affairs of the company and, having done so, have formed an opinion that the list of creditors is correct, and that the estimated value as given in the list of the debts or claims payable on a contingency are proper estimates of the values of such debts and claims and that there are no other debts or claims against the company to their knowledge; A declaration of solvency signed by at least two directors of the company, one of whom shall be the Managing Director, where there is one to the effect that the Board of Directors of the Company have made a full enquiry into the affairs of the company, as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year from the date of declaration, through a resolution, passed in a duly convened meeting or by circulation. The company shall also obtain a certificate from the Auditors that the company is solvent and that it is a going concern as on the date of passing of resolution by the Board certifying solvency as per clause (h) above. No objection certificate from sectorial regulator, if applicable. No objection certificate from all secured creditors, if any.

Declarations signed by not less than two directors including Managing Director, where there is one, that no complaints are pending against the company from the members or investors and no inquiry, inspection or investigation is pending against the company or its Directors or officers. The Registrar shall, after considering the application and objections if any, received by the Registrar and after ensuring that the company has satisfactorily addressed the objections received by the company, suitably decide whether the approval for conversion should or should not be granted. The certificate of incorporation consequent to conversion of unlimited liability company to into a company limited by shares or guarantee is in Form INC-11 A issued to the company upon grant of approval for conversion.

Conditions to be complied with, subsequent to conversion

• Company shall not change its name for a period of one year from the date of such conversion.
• The company shall not declare or distribute any dividend without satisfying past debts, liabilities, obligations or contracts incurred or entered into before conversion. For the purpose of this clause, past debts, liabilities, obligations or a contract does not include secured debts due to banks and financial institutions.

An unlimited liability company shall not be eligible for conversion into a company limited by shares or guarantee

In case-

• Its net worth is negative, or
• An application is pending under the provisions of the Companies Act 1956 or the Companies Act, 2013 for striking off its name, or
• The company is in default of any of its annual returns or financial statements under the provisions of the Companies Act, 1956 or the Companies Act, 2013, or
• A petition for winding up is pending against the company, or
• The company has not received amount due on calls in arrears, from its directors, for a period of not less than six months from the due date; or
• An inquiry, inspection or investigation is pending against the company.

The Registrar of Companies shall take a decision on the application filed under these rules within thirty days from the date of receipt of application complete in all respects.

Simplified Proforma for incorporating company electronically

The application for incorporation of a company under this rule shall be in Form No. INC-32 along with e-Memorandum of Association (e-MOA) in Form No. INC. 33 and e-Articles of Association (e-AOA) in Form No. INC.34. Provided that in case of incorporation of a company falling under section 8 of the Act, Form No. INC-32 shall be filed along with Form No. INC-13 (Memorandum of Association) and Form No. INC-31 (Articles of Association) as attachments. For the purposes of sub-rule (1), the application for allotment of Director Identification number upto three directors, reservation of a name, incorporation of company and appointment of directors of the proposed for One Person Company, Private company, Public Company and a company falling under section 8 of the Act, shall be filed in Form  No. INC-32 with the Registrar, within whose jurisdiction the registered office of the company is proposed to be situated along with the fee of rupees five hundred in addition to the registration fee as specified in the Companies (Registration Offices and Fees) Rules, 2014. Provided that where an applicant has applied for reservation of a name under Rule 9 and which has been approved therein, ha may fill the reserved name under Rule 9 and which has been approved therein, he may fill the reserved name as proposed name of the company. Provided further that in case of companies incorporated, with effect from the 26^th day of January, 2018, with a nominal capital of less than or equal to rupees ten lakhs or in a respect of companies not having a share capital whose number of members as stated in the articles of association does not exceed twenty, fee on INC-32 (SPICe) shall not be applicable.                                

For the purposes of filing SPICe Form, the particulars of maximum of three directors shall be allowed to be filed in Form No. INC-32 (SPICe), and allotment of Director Identification Number of maximum of three proposed directors shall be permitted in Form No. INC. 32 (SPICe) in case of proposed directors not having approved Director Identification Number. The promoter or applicant of the proposed company shall propose only one name in Form No. INC-32 (SPICe). The promoter or applicant of the proposed company shall prepare Memorandum of Association (e-MoA) in Form No. INC-33 and Articles of Association (e-AOA) in Form No. INC-34, in accordance with rule 13. Provided that the subscribers and witness or witnesses shall affix their digital signatures to the e-MOA and e-AOA.

For incorporation using application as provided in this rule, provisions of the sub-clause (1) of sub-section (5) of the section 4 of the Act, rule 9, and clause (a) of sub-rule (1) of rule 16 to the extent of affixing recent photograph shall not apply. A company using the provisions of this rule may furnish verification of its registered office under sub-section (2) of section 12 of the Act by filing Form No. INC. 32 (SPICe) in which case the company shall attach along with such Form No. INC-32 (SPICe), any of the documents referred to in sub-rule (2) of rule 25. Form No. INC. 22 shall not be required to be filed in case the proposed company maintains its registered office at the given correspondence address. Where the Registrar, on examining Form No. INC. 32 (SPICe), finds that it is necessary to call for further information or finds such application or document to be defective or incomplete in any respect, be shall give intimation to the applicant to remove the defects and re-submit the e-form within fifteen days from the date of such intimation given by the Registrar. After the resubmission of the document, if the regular still finds that the document is defective or incomplete in any respect, he shall give one more opportunity of fifteen days to remove such defects or deficiencies. The certificate of incorporation of company shall be issued by the Registrar in Form No. INC.11.

Conversion of a company limited by guarantee into a company limited by shares

A company other than a company registered under section 25 of the Companies Act, 1956 or section 8 of the Companies Act, 2013 may convert itself into a company limited by shares. The company seeking conversion shall have a share capital equivalent to the guarantee amount. A special resolution is passed by its members authorizing such a convention omitting the guarantee clause in its Memorandum of Association and altering the Articles of Association to provide for the articles as are applicable for a company limited by shares. A copy of the special resolution shall be filed with the Registrar of Companies in Form. No. MGT.14 within thirty days from the date of passing of the same along with fee as prescribed in the Companies (Registration Offices and Fees) Rules, 2014.

An application in Form No. INC-27 shall be filed with the Registrar of Companies within thirty days from date of the passing of the special resolution enclosing the altered Memorandum of Association and altered Articles of Association and a list of members with the number of shares held aggregating to a minimum paid up capital which is equivalent to the amount of guarantee higher to provide by its members. The Registrar of Companies shall take a decision on the application filed under these rules within thirty days from the date of receipt of application complete in all respects and upon approval of Form No. INC.27, the company shall be issued with a certificate of incorporation in Form No. INC. 11B.

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