Business Laws and Ethics · Limited Liability Partnership Act, 2008

Conversion into LLP, Foreign LLPs and Compromise

Updated 10 October 2026 · Fact-checked

Chapter X of the LLP Act, 2008 lets a firm, private company or unlisted public company convert into an LLP under the Second, Third or Fourth Schedule. The Registrar registers it and all assets and liabilities vest in the LLP. Foreign LLPs are governed by rules. Compromise needs three-fourths in value and Tribunal sanction.

Understand Conversion into LLP, Foreign LLPs and Compromise

An LLP can come into existence in two ways: fresh incorporation, or conversion of an existing business. Conversion means the old entity ends and the LLP takes over everything, without a separate transfer of each asset.

Three entities can convert. A firm converts under section 55 and the Second Schedule. A private company converts under section 56 and the Third Schedule. An unlisted public company converts under section 57 and the Fourth Schedule. A listed public company cannot use this route.

Section 58 explains the process and effect. The Registrar checks that the relevant Schedule is complied with, registers the documents and issues a certificate of registration. The LLP is registered from the date stated in that certificate. From that date the LLP exists under the name in the certificate, all property, rights, liabilities and the whole undertaking vest in the LLP without further assurance, act or deed, and the firm or company is deemed dissolved and removed from the records of the Registrar of Firms or Registrar of Companies.

Section 59 deals with foreign LLPs. The Central Government may make rules for a foreign LLP to establish a place of business in India and carry on business, by applying or incorporating, with suitable modifications, provisions of the Companies Act, 2013, or a prescribed regulatory mechanism.

Sections 60 to 62 cover compromise, arrangement, reconstruction and amalgamation. The Tribunal can call meetings of creditors or partners. If three-fourths in value agree and the Tribunal sanctions, the arrangement binds everyone. Section 62 adds powers for reconstruction or amalgamation of LLPs. An LLP cannot be amalgamated with a company.

Key rules to remember

Who can convert, and under which Schedule: Firm: s.55 + Second Schedule | Private company: s.56 + Third Schedule | Unlisted public company: s.57 + Fourth Schedule; Match the entity to its section and Schedule. Listed companies are not covered.
Registration and effective date (s.58(1)): Registrar satisfied → registers documents → certificate of registration → LLP registered from the date specified in the certificate; The date in the certificate, not the date of application, is the effective date.
Intimation after conversion (s.58(1) proviso): LLP informs the Registrar of Firms or Registrar of Companies within 15 days of registration; Include the particulars of the LLP in the prescribed form and manner.
Effects of conversion (s.58(4)): New LLP by the name in certificate; all property, assets, rights, liabilities and the undertaking vest in the LLP; old firm or company deemed dissolved; Vesting is without further assurance, act or deed.
Foreign LLP (s.59): Central Government rules; Companies Act, 2013 provisions applied with modifications, or a prescribed regulatory mechanism; The Act itself leaves the details to rules.
Compromise majority (s.60(2)): Majority representing three-fourths in value of creditors or partners at the meeting + Tribunal sanction; The test is value, not number of persons.
Filing of Tribunal order (s.60(3) and s.62(3)): File with Registrar within 30 days of the order; Under s.60(3) the order takes effect only after it is filed. Default penalty: ₹10,000, plus ₹100 per day after the first, capped at ₹1,00,000 for the LLP and ₹50,000 for each designated partner.
Amalgamation limit (s.62 Explanation): An LLP shall not be amalgamated with a company; Amalgamation under this section is between LLPs only.
Misuse of the name (s.20): Fine of ₹50,000 to ₹5,00,000 for carrying on business with 'LLP' as the last word unless duly incorporated as an LLP; Applies to the person or each of the persons.

How to solve Conversion into LLP, Foreign LLPs and Compromise questions

Use this order for any theory or case question in this topic.

1Identify the entity or event: firm, private company, unlisted public company, foreign LLP, compromise, or reconstruction or amalgamation.
2Name the section and Schedule that apply (55, 56 or 57 for conversion; 59 for foreign LLPs; 60 to 62 for arrangements).
3Check eligibility. A listed public company cannot convert. An LLP cannot amalgamate with a company.
4Write the procedure: Registrar checks the Schedule, registers documents, issues a certificate, and the LLP is registered from the date in the certificate.
5State the effects: new LLP name, vesting of property and liabilities, dissolution of the old entity.
6State the time limits and consequences: 15 days to inform the Registrar of Firms or Companies; 30 days to file Tribunal orders; penalties for default.
7For compromise, state the three-fourths in value test and the Tribunal's sanction and powers.
8Close with a one-line conclusion that answers the exact question asked.

Quickest way: Entity, Section, Number

When to use it: For MCQs and short-answer questions where you must recall a section, a time limit or a majority.

Link the entity to the section: firm 55, private company 56, unlisted public company 57.
Remember the 15-day rule for informing the old Registrar, and the 30-day rule for filing Tribunal orders.
Remember three-fourths in value for compromise.
Remember: foreign LLP means rules under s.59; LLP and company amalgamation is not allowed.
Eliminate options that mention listed companies, a simple majority or a headcount.

Common mistakes in Conversion into LLP, Foreign LLPs and Compromise

Saying a listed public company can convert into an LLP.
Students remember 'public company' and drop the word 'unlisted'.
Fix: Section 57 covers only an unlisted public company. Write the full phrase every time.
Mixing up the sections for firm, private company and unlisted public company.
The sections are consecutive and look alike.
Fix: Remember the order 55, 56, 57 and the matching Schedules: Second, Third, Fourth.
Writing 'three-fourths in number' or 'simple majority' for a compromise.
Students carry over the company-meeting idea of counting heads.
Fix: Section 60(2) requires a majority representing three-fourths in value of the creditors or partners at the meeting, plus Tribunal sanction.
Confusing the 15-day and 30-day periods.
Both are filing deadlines after an event.
Fix: 15 days: LLP informs the Registrar of Firms or Companies after conversion. 30 days: filing a Tribunal order with the Registrar.
Saying assets must be transferred by separate deeds after conversion.
Students apply ordinary sale rules.
Fix: Under s.58(4), property and liabilities vest in the LLP without further assurance, act or deed from the registration date.
Stating that an LLP can amalgamate with a company.
Students assume amalgamation is open to any entity.
Fix: The Explanation to s.62 says an LLP shall not be amalgamated with a company.

Worked examples

Example 1

Sharma & Sons, a partnership firm in Jaipur, wishes to convert into an LLP. Explain the effect of the Registrar's certificate of registration on the firm's assets, liabilities and existence.

Show the solution

Conversion of a firm is permitted by section 55 and follows the Second Schedule.
Under s.58(1), once the Registrar is satisfied that the Schedule is complied with, he registers the documents and issues a certificate of registration. The LLP is registered from the date specified in it.
Under s.58(4)(a), an LLP exists by the name in the certificate.
Under s.58(4)(b), all tangible and intangible property, assets, rights, liabilities and the whole undertaking of the firm vest in the LLP without further assurance, act or deed.
Under s.58(4)(c), the firm is deemed dissolved and removed from the records of the Registrar of Firms.
Within 15 days of registration the LLP must inform the Registrar of Firms about the conversion and its particulars.

Answer: From the date in the certificate, the LLP exists and all of the firm's property, liabilities and undertaking vest in it automatically. The firm is deemed dissolved. The LLP must inform the Registrar of Firms within 15 days.

Example 2

An LLP proposes a compromise with its creditors. At the meeting ordered by the Tribunal, creditors holding 80% of the debt by value attend and vote, and 78% of that value votes in favour. Is the compromise binding once sanctioned? What must the LLP do after the Tribunal's order?

Show the solution

Section 60(1) lets the Tribunal order a meeting of creditors on the application of the LLP or a creditor or partner.
Section 60(2) requires a majority representing three-fourths in value of the creditors at the meeting.
Three-fourths is 75%. The value voting in favour here is 78% of the value represented at the meeting, which is above 75%.
The compromise must also be sanctioned by the Tribunal. The Tribunal must be satisfied that all material facts, including the latest financial position and any pending investigation, have been disclosed.
If sanctioned, it binds all the creditors and the LLP.
Under s.60(3), the LLP must file the order with the Registrar within 30 days, and it takes effect only after it is filed.

Answer: Yes. The three-fourths in value test is met, so once the Tribunal sanctions the compromise it binds all creditors and the LLP. The LLP must file the order with the Registrar within 30 days. The order takes effect only after filing.

Exam tips

Write the section number and the Schedule together for each type of conversion. It earns quick marks in short notes.
Learn the two time limits (15 days and 30 days) and the penalty structure for default under s.60(4) and s.62(4).
For foreign LLPs, say that the Central Government makes rules under s.59. Do not invent rule details.
In written answers, use headings such as eligibility, procedure and effects. Numbered points earn step marks.
In MCQs, watch for traps: listed company, simple majority, and amalgamation with a company.

Practice questions from Limited Liability Partnership Act, 2008

Conversion into LLP, Foreign LLPs and Compromise in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Conversion into LLP, Foreign LLPs and Compromise: frequently asked questions

Which entities can convert into an LLP under the LLP Act, 2008?

A firm (section 55, Second Schedule), a private company (section 56, Third Schedule) and an unlisted public company (section 57, Fourth Schedule). Listed public companies are not covered.

What happens to the old firm or company after conversion?

From the date in the certificate of registration, it is deemed dissolved and removed from the records of the Registrar of Firms or Registrar of Companies. Its property and liabilities vest in the LLP without further assurance, act or deed.

What majority is needed for a compromise or arrangement of an LLP?

A majority representing three-fourths in value of the creditors or partners at the meeting must agree. The Tribunal must then sanction it. After sanction it binds all creditors or partners and the LLP.

Can an LLP merge with a company?

No. The Explanation to section 62(4) says an LLP shall not be amalgamated with a company. Section 62 deals with reconstruction or amalgamation of LLPs.