Conversion of Partnership firm into Private Limited Company

As we already know, a partnership firm has various limitations and the scope of expanding is very less as compared to a private limited company. Many partnership firms nowadays convert into Private Limited Companies for the various benefits that it offers like Limited Liability, Transferability of shares, easy access to funds, Perpetual Succession etc.

Benefits of conversion :-

 1. Goodwill: The goodwill of the Partnership firm is kept intact and continues to enjoy the same success story with the benefit of a better legal recognition.

2. Transfer of assets and liabilities:All the assets and liabilities of the firm immediately before the conversion become the assets and liabilities of the company.

3. Capital Gain Tax: No Capital Gains tax shall be charged on transfer of property from firm to Company. (uponfulfillment of certain conditions)

4. Stamp Duty: No instrument of transfer is required to be executed (since all the property of the firm will vest in the company) and hence no stamp duty is required to be paid.

5. Carry Forward and Set off Losses and Unabsorbed Depreciation: The accumulated loss and any unabsorbed depreciation of Partnership firm is deemed to be loss/ depreciation of the successor company for the previous year in which conversion was effected. Such loss can be carried for further eight years in the hands of the successor company.

Major Changes in Companies Act, 2013

A) The Concept of Joint Stock Company is Done Away.

B) Definition of Company has wider Meaning and implication. (Part I, Chapter XXI of CA, 2013). I.e. word “company” includes any partnership firm, limited liability partnership, cooperative society, society or any other business entity formed under any other law for the time being in force which applies for registration under this Part.

C) Section 565 to 581, Part IX of Companies Act, 1956 is have been omitted. The Concept was famously know as PART XI companies.


a) Registered Partnership firm with minimum 7 Partners

b) Minimum Share Capital shall be Rs. 100,000 (INR One Lac) for conversion into a Private Limited Company

c) Minimum Share Capital shall be Rs. 500,000 (INR five Lac) for conversion into a Public Limited Co.

d) If the above requirement is not fulfilled by the firm, then the Partnership deed should be altered

e) Minimum 7 Shareholders

f) Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)

g) The directors and shareholders can be same person

h) DIN (Director Identification Number) for all the Directors

i) DSC (Digital Signature Certificate) for two of the Directors

 Mandatory conditions for Conversion :-

  • The partners shall become the shareholders of the newly formed company in the same proportions as their capital accounts stood in the book of the firm as on the date of conversion.
  • The only way by which partners receive consideration is by way of allotment of shares in company and the partners share holding in the company in aggregate shall be more or equal to 50% of its total voting power and continue to be as such for 5 years from the date of conversion.

Procedure of Conversion

1. Hold a meeting of the members

 Assent of majority of its partners is required ( as are present for the purpose of registering the firm under the Companies Act, 2013). Since the liability of the members of the firm is unlimited, when a firm desires to register itself as a company as a limited company, the assent of the majority is required, not less than ¾ of the partners should be present in person (proxies are allowed).

2. Obtaining the Name Approval in INC 1 for Proposed Company

 An application in Form needs to be filed with the Registrar of Companies (ROC) in Form INC-1 with various attachments stating the fact that the partnership firm is pro­posed to be converted under the Companies Act.

3. Publishing the Advertisement in Two Newspaper (English Daily and Vernacular)

For the purpose of clause (b) of section 374 of the Act, every ‘company’ seeking registration under the provision of Part I of Chapter XXI shall publish an advertisement about registration under the said Part, seeking objections, if any within twenty one clear days from the date of publication of notice and the said advertisement shall be in Form No. URC. 2, which shall be published in a newspaper, in English and in the principal vernacular language of the district in which Limited Liability Partnership is in existence and should be circulated in that district.

4. Affidavit

File an affidavit, duly notarised, from all the ] partners to provide that in the event of registration, necessary documents or papers shall be submitted to the registering or other authority with which the company was earlier registered, for its dissolution as partnership firm, limited liability partnership, cooperative society, society or any other business entity, as the case may be.

5. Filing of E form URC 1 with ROC with Following Attachments:- (For Companies limited by Shares)

a) A list showing the names, addresses, and occupations of all persons named therein as members with details of shares held by them respectively

b) A list showing the particulars of persons proposed as the first directors of the company, their names, including surnames or family names, the DIN , passport number(if any) with expiry date, residential addresses and their interests in other firms or bodies corporate along with their consent to act as directors of the company;

c) An affidavit from each of the persons proposed as the first directors, that he is not disqualified to be a director under sub section (1) of section 164 and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;

d) A copy of the Act of Parliament or other Indian law, deed of partnership, bye laws or other instrument constituting or regulating the company and duly verified in the manner provided in sub-rule(4)

e) A statement specifying the following particulars:—

(i) the nominal share capital of the company and the number of shares into which it is divided;

(ii) the number of shares taken and the amount paid on each share;

(iii) the name of the company, with the addition of the word “Limited” or “Private Limited” as the case may require, as the last word or words thereof;

g) Written consent or No Objection Certificate from all the secured creditors of the applicant.

h) Written consent from the majority of members whether present in person or by proxy at a general meeting agreeing for registration under this part.

6. Certificate of Incorporation

If the Registrar in fully satisfied on the basis of documents and information filed by the applicants and decides that the applicant should be registered, he shall issue a certificate of incorporation in Form No. INC.11


*Where a firm has obtained a certificate of registration under section 367, an intimation to this effect shall be given within fifteen days of such registration to the concerned Registrar of firms under which it was originally registered, along with papers for its dissolution as a firm.

 Thus, with the need of the hour, more and more partnerships are expanding and turning into private limited companies for the purpose of corporisation for the various benefits that it offers.

 For help and assistance, visit us at or call us at +919599444639.


The Companies Act 2013 defines that “Authorized capital” or “nominal capital” means such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company.

The Companies Act 2013 allows the companies to alter its authorized share capital with certain procedures which are governed by Section 61-64 of the Act along with Section 13 and 14 of the act which governs the alterations to the Chartered Documents being the Memorandum Of Association and Articles Of Association of the company.


  • Check whether the company prima-facie authorized by the Articles of association to increase the share capital. If it does not authorize, the proceedings are to be completed with the objective of altering them.
  • To convene the board meeting for enabling the board to call for extraordinary general meeting (if not passed at Annual General Meeting) and to get approval from the shareholders for increasing the authorized share capital.
  • Call for an extraordinary general meeting of the shareholders of the company by sending a notice with clear agenda, explanatory statements and the resolutions to be passed to alter the Memorandum of Association and Articles of Association, which are to be altered for the purpose of increasing the authorized share capital.
  • Pass the resolutions for increasing the authorized share capital of the company and corresponding alterations in Memorandum of association and Articles of Association by special resolution.
  • Authorize the board to file necessary forms and resolutions with ROC having jurisdiction.
  • Filing the e- form SH7 with ROC by paying the requisite fee.


Altering the Memorandum of association and Articles of Association.

  • Section 61 of the Companies Act, 2013 states about Power of limited company to alter its share capital, sub-clause further states that a limited company having a share capital may, if so authorized by its articles, alter its memorandum in its general meeting to increase its authorized share capital by such amount as it thinks expedient.
  • A company can increase its authorized share capital by altering the Memorandum of association. Section 13 of the Companies Act deals with altering the memorandum of association and section 14 of the above-said act deals with altering the Articles of association.
  • Section 13 of the Act states that as provided in Section 61, a company may, by a special resolution and after complying with the procedure specified in this section, alter the provisions of its memorandum.
  • A company can alter its articles by passing a special resolution and every alteration of the articles under Section 14 and a copy of the order approving such alteration has to be filed with the registrar with a printed copy of altered articles within a period of fifteen days in a manner prescribed. Alteration of articles will be valid only if it’s originally in the articles.

List Of Documents Required As Attachments  For Filing SH-7

  • Certified true copy of the resolution for alteration of capital is mandatory in case of increase in share capital independently by company.
  • Copy of order of central government is mandatory in case of increase in share capital with central Government order.
  • Copy of the order of the tribunal is mandatory in case of increase in share capital with Central Government.
  • Certified true copy of board resolution authorizing redemption of redeemable preference shares is displayed and mandatory in case of redemption of redeemable preference shares.
  • Altered Memorandum of association is mandatory in case of increase in share capital independently or by order of Central Government or increase in number of members.
  • Altered Articles of association are mandatory in case the same are altered.
  • Working for calculations of ratios (in case of conversions) is mandatory in case of increase in share capital with central government order.

For more information about Increase in Authorized Share Capital of Private Limited Company , feel free to reach us on, or call +91-9599444639/+91-9599444630