Conversion of Business Entities: formula sheet

Key formulas

Conversion of companies already registered

Section 18(1): a company of any class may convert to a company of another class by altering its memorandum and articles

Applies only to companies already registered under the Act. The Registrar closes the former registration and issues a certificate of incorporation as in first registration (s 18(2)).

Effect on past liabilities

Section 18(3): conversion does not affect debts, liabilities, obligations or contracts incurred before conversion

They remain enforceable as if no conversion had taken place.

Private company to LLP

LLP Act, 2008, section 56 read with the Third Schedule

Available to a private company.

Unlisted public company to LLP

LLP Act, 2008, section 57 read with the Fourth Schedule

Available only to an unlisted public company, not a listed one.

Obligations of an entity registering as a company (section 374)

(a) secured creditors' consent or no objection; (b) newspaper notice, one English and one vernacular; (c) notarised affidavit from all members or partners on filing papers for dissolution of the earlier entity; (d) other prescribed conditions

Proviso: on registration as a company, an LLP is deemed dissolved under the LLP Act without any further act or deed.

Who can convert

Company of any class registered under the Act → company of other class under the Act

Section 18(1). Conversion is by alteration of memorandum and articles as per Chapter II.

Registrar's role

Application → Registrar satisfied → closes former registration → registers documents → issues certificate of incorporation as on first registration

Section 18(2). The Registrar acts on an application made by the company.

Effect on past obligations

Debts, liabilities, obligations, contracts before conversion remain enforceable as if no conversion

Section 18(3). Conversion does not wipe out or change what the company owed or agreed earlier.

Alteration of memorandum

Special resolution + procedure under Section 13

Section 13(1). The resolution is filed with the Registrar under Section 13(6)(a).

Name change on conversion

No Central Government approval if only "Private" is added or deleted

Proviso to Section 13(2). Any other name change needs written approval.

Effectiveness of alteration

No effect until registered

Section 13(10). Conversion is complete only on registration and the fresh certificate.

Alteration of articles (Section 14(1))

Special resolution → alter articles → private ⇄ public

Subject to the Act and any conditions in the memorandum.

Deemed ceasing to be private (Proviso to Section 14(1))

Private-company restrictions removed from articles ⇒ company ceases to be private from the date of alteration

The conversion takes effect by operation of law on that date.

Public to private approval (Second proviso to Section 14(1))

Alteration is not valid unless approved by order of the Central Government

Application is in the prescribed form and manner. Private to public needs no such approval under Section 14.

Filing with Registrar (Section 14(2))

Within 15 days: alteration + copy of Central Government order (if any) + printed copy of altered articles

The Registrar registers it. Once registered, it is valid as if originally in the articles (Section 14(3)).

Name change on conversion (Section 13(2))

Only adding or deleting "Private" ⇒ no Central Government approval needed

Any other name change needs written approval. The proviso dispenses only with the approval. Do not assert that Section 13(3) governs the conversion name change.

Alteration of memorandum (Section 13(1), (6), (10))

Special resolution → file with Registrar → effective only on registration

Filing of the special resolution is under Section 13(6)(a). No alteration has effect until registered.

Unlimited to limited, reserve capital (Section 65)

Resolution for registration as limited: increase nominal share amount and/or make part of uncalled capital callable only on winding up

Either or both. The increase or portion is callable only in the event and for the purposes of winding up.

Conversion by alteration (Section 18(1))

Conversion = alteration of memorandum + alteration of articles + Registrar's registration

A company of any class registered under the Act may convert itself into a company of another class.

Alteration of memorandum (Section 13(1))

Special resolution + compliance with Section 13 procedure

Subject to section 61. An alteration has no effect until it is registered (Section 13(10)).

Alteration of articles (Section 14(1))

Special resolution, subject to the Act and the memorandum

This includes alterations that convert a private company into a public company or the reverse.

Private to public by dropping restrictions

Articles no longer contain private company restrictions → company ceases to be private from the date of alteration

This is the first proviso to Section 14(1).

Public to private

Special resolution + Central Government order approving the alteration

Without the order, the alteration is not valid (second proviso to Section 14(1)).

Name change on conversion (Section 13(2))

No Central Government approval if the only change is deletion or addition of the word "Private" consequent on conversion of one class of company to another

Any other name change needs written approval. It takes effect only on the fresh certificate (Section 13(3)).

Filing of altered articles (Section 14(2))

Within 15 days: alteration, copy of the Central Government order (where there is one), printed altered articles

The Registrar registers them. Once registered, they are valid as if originally in the articles (Section 14(3)). The 15 days apply to this filing.

Filing for memorandum (Section 13(6))

File the special resolution; also the Central Government approval if the name changes

Saves section 64. The text of section 13(6) states no time period for this filing.

Registrar's action on conversion (Section 18(2))

On the company's application: close former registration → register documents → issue certificate of incorporation as on first registration

This is separate from the registration of altered articles under Section 14(2). The Registrar acts once satisfied that the Chapter's provisions are complied with.

Effect on past liabilities (Section 18(3))

Debts, liabilities, obligations and contracts are unaffected

They are enforced as if no conversion had occurred.

Who can register under Section 366

Partnership firm, LLP, cooperative society, society or other business entity with two or more members may register as unlimited, limited by shares or limited by guarantee company

Section 366(2). Cannot be used by a company already registered under the Companies Acts of 1882, 1913 or 1956.

Minimum members rule

Company with less than seven members shall register as a private company

Section 366(2)(vii).

Majority for assent

Majority of members present in person or by proxy at a general meeting summoned for the purpose

Section 366(2)(iv). Proxy counts only where proxies are allowed.

Majority for limited company

At least three-fourths of members present, if members' liability was not limited by any law and it registers as a limited company

Section 366(2)(v). Poll votes count by each member's entitlement under the regulations (Section 366(3)).

Guarantee company condition

Assent plus a resolution that each member undertakes to contribute a specified amount on winding up

Section 366(2)(vi). Contribution applies while a member or within one year after ceasing.

Obligations before registration

Secured creditor consent or no objection; newspaper notice (English and vernacular); notarised affidavit from all members or partners; other prescribed conditions

Section 374(a) to (d).

Effect of registration

Earlier instrument treated as memorandum and articles; Act applies as if formed under it

Section 371(2) and (3). Table F applies only if adopted by special resolution.

Quick revision

• Section 18 lets a company of one class convert into another class by altering its memorandum and articles.
• Under Section 18, the Registrar closes the former registration and issues a certificate of incorporation as on first registration.
• Conversion under Section 18 does not affect earlier debts, liabilities, obligations or contracts, which remain enforceable.
• Section 14 allows a private-public conversion by special resolution altering the articles.
• A private company that drops the required restrictions from its articles ceases to be private from the date of alteration.
• Converting a public company into a private company is not valid unless approved by an order of the Central Government.
• Every alteration of articles, with a printed copy of the altered articles, must be filed with the Registrar within fifteen days. Where the alteration converts a public company into a private one, a copy of the Central Government order is filed too.
• Under Section 366, a firm, LLP, society or other business entity can register as a company, but one registered under earlier Companies Acts cannot use that route.
• A company with fewer than seven members must register under Section 366 as a private company.
• Section 374 requires secured creditors' consent or no-objection, a newspaper notice in English and a vernacular language, and a notarised affidavit from all members or partners.
• Only a private company or an unlisted public company can convert into an LLP (Sections 56 and 57 of the LLP Act).
• On LLP conversion, property and liabilities vest in the LLP without further act or deed, and the company is deemed dissolved.

Common mistakes

• Saying a listed public company can convert into an LLP. Fix: Write 'unlisted public company' every time you cite section 57 and the Fourth Schedule.
• Treating conversion under section 18 as the same as registering a partnership firm as a company. Fix: Section 18 is for companies already registered under the Act. A firm or LLP becoming a company falls under the registration provisions, including section 374.
• Saying conversion creates a new company and the old one ends with its liabilities. Fix: Remember Section 18(3): only the registration is closed. Past debts, liabilities and contracts remain enforceable as if no conversion had occurred.
• Claiming Central Government approval is always needed for the name change on conversion. Fix: State the rule and the proviso. No approval is needed where the only change is adding or deleting the word "Private".
• Saying private to public needs Central Government approval under Section 14. Fix: Remember the second proviso applies only to public into private. Private to public needs only the special resolution and filing.
• Writing that the Tribunal approves public to private conversion. Fix: Write Central Government, as the current text of Section 14 states.
• Saying conversion needs only a board resolution. Fix: Write that the board approves and recommends, but the alteration of the memorandum and articles needs a special resolution of members.
• Claiming Central Government approval is needed for every conversion. Fix: Say approval is mandatory for public to private under Section 14. For private to public, only the usual alterations and filings apply, subject to the name rules.
• Saying a sole proprietor can register under Section 366 like a firm. Fix: Section 366(2) needs two or more members. A proprietor forms a new company under Chapter II and transfers the business to it.
• Writing that a three-fourths majority is always needed, or that a simple majority is enough for every type of company. Fix: The base rule under proviso (iv) is a majority of members present. If the firm registers as a limited company (by shares or by guarantee), proviso (v) raises it to at least three-fourths of members present, because the partners' liability is not limited by any law. For an unlimited company, the proviso (iv) majority applies.

Exam tips

• Always name the section and the Act with the route. Marks are given for the provision first, then application.
• For a 'listed or unlisted' fact pattern, check the status of the public company before choosing section 57.
• In case-study answers, end with a one-line conclusion such as 'the conversion is permissible' or 'the company cannot convert'.
• Learn the three routes as a list. Short notes on 'types of conversion' are easiest to score with this structure.
• Do not copy long text of the Act. Paraphrase the conditions in short points.
• Write the answer in ICSI style: provision first (Section 18), then facts, then a one-line conclusion.
• Always quote sub-section (3) when the question mentions creditors, contracts or pending liabilities.
• Link Section 18 with Section 13 in your answer. Examiners like the special resolution and the name proviso mentioned together.