Taxmann's Business Laws | B.Com. (Hons.)/B.Com. | UGCF

ABOUT THE AUTHOR

Sushma Arora is an Associate Professor in the Department of Commerce at Daulat Ram College, University of Delhi. An alumnus of Daulat Ram College, she topped the B.Com examination at Daulat Ram College in 1975 and is a Delhi University position holder. She has been the awardee of National Merit Scholarship during her M.Com course from Delhi School of Economics, University of Delhi and thereafter joined her alma mater as a faculty member. She obtained her M.Phil in Finance from Delhi School of Economics, University of Delhi. She has 40 years of teaching experience. She has participated in number of national and international seminars/conferences. Her areas of special interest are Business, Industrial & Cyber Laws, Cost Accounting and Business Statistics. She is the author of 9 books: ‘Business and Industrial Laws’ (Annual & Semester Mode), ‘Business Laws’ (Annual & Semester Mode) for B.Com(H), ‘Business Laws’ for B.Com (Sem-1) as per CBCS Syllabus, Business Laws for B.Com(H) Course (Sem-1), for Odisha University, Co-author (First Author) of Industrial Laws B.Com(H) Course, Sem-5 & B.Com Course, Sem-5 and Co-author (First Author) of ‘Cyber Crimes and Laws’ for B.Com(H) Course, Sem-4 & B.Com Course, Sem-3 published by Taxmann. She has contributed as the author of various E-lessons in National Mission on Education and Virtual Learning Program of Institute of Lifelong Learning Centre (ILLL). She is the life member of two professional bodies such as Institute of Commerce Association and Institute of Accounting Association Delhi NCR Chapter.

I am highly grateful to the learned teachers and students for their appreciation of the tenth edition of my book on ‘Business Law’. Their warm support has encouraged me to bring out the eleventh edition of this book

I am thankful specially to Dr. D.K. Jain (SBSC Eve), Dr. Kalpana Bhola (JDM), Dr. Kiran Suchdeva (JMC), Nikita Kuhar (Satyawati Evening) and my other colleagues and students who have given me their suggestions and comments. I appeal to them to continue to extend their co-operation for further improvement in future.

My special thanks are due to my esteemed colleagues at Daulat Ram College and Prof. Savita Roy, Principal, Daulat Ram College for their inspiration, encouragement and best wishes.

This revised edition is designed to cater the needs of students pursuing B.Com (Hons.) Core Paper BCH: DSC-1.2 & B.Com Core Paper BC: DSC 1.2 based on Undergraduate Curriculum Framework (UGCF) for University of Delhi, Non-Collegiate Women’s Education Board (NCWEB) and School of Open Learning (SOL) of the University of Delhi and Various Universities throughout India.

Salient Features of the Present Edition

The Ministry of Corporate Affairs (MCA) has issued the Limited Liability Partnership (Amendment) Rules, 2023, through a noti cation No. G.S.R. 411(E) dated June 2, 2023. These rules amend the existing Limited Liability Partnership Rules, 2009. The amended rules regarding revised LLP Form No. 3 have been added in Chapter 20.

Practical Exercises as per New Education Policy have been covered in the present edition at the last before DU Question

Papers asked in different years. The objectives of these exercises is to provide practical exposure to the readers to handle daily life situations.

Content in some Chapters has been enriched to give better understanding of concepts/law terms to the readers.

I have developed youtube channel for ‘Business Laws’ @sushmaarorabusinesslaws1370 and uploaded 75 videos covering the entire syllabus and also the question papers asked in DU examination in the last few years. Readers can ask queries in the comment section which will be answered at the earliest.

I am fully con dent that the revised book would prove more useful and rewarding to the students and teachers of University of Delhi, Non-Collegiate Women’s Education Board (NCWEB) and School of Open Learning (SOL) of the University of Delhi and other Central Universities throughout India.

I owe a deep sense of gratitude to my husband, O.P. Arora, Advocate, my daughter, Raman Arora, and my son, Mannu Arora, Financial Journalist for their constructive co-operation.

I express my appreciation of the members of editorial and production team of Taxmann for bringing out this edition expeditiously.

Constructive suggestions from the readers are solicited for the improvement of the book and would be incorporated in the next edition.

Happy Reading!

SUSHMA ARORA

arorasushma85@gmail.com

9873308929

A-703, SV Apartments

Dr. Mukherjee Nagar

Delhi-110009

CHAPTER-HEADS

QUESTION PAPERS

CONVERSION INTO LLP

22.1 INTRODUCTION

LLP is a form of business model which combines the advantages of a corporate structure and a general partnership structure. The LLP Act, 2008 provides for the conversion of partnership, a private limited company and an unlisted public company into LLP (Secs. 55-58). However, a listed public company cannot be converted into LLP. Conversion of above stated forms to LLP offers number of advantages such as lesser taxation, automatic transfer of assets and liabilities, no ceiling on the maximum number of partners, no capital gain tax etc.

22.2 CONVERSION FROM PARTNERSHIP FIRM INTO LLP [SEC. 55]

A partnership rm can be converted into LLP in accordance with the provisions of Chapter X of the Act and the Second Schedule.

Meaning of Conversion. The conversion of the partnership rm into LLP means the automatic transfer of the property, whether tangible or intangible, assets, interests, rights, privileges, liabilities, obligations and whole of the undertaking of the partnership rm to the LLP as a going concern. On compliance of all the formalities relating to conversion, all the partners of the converting partnership rm shall become the partners of the LLP and they shall be bound by the provisions of the Second Schedule.

Para 22.2 UNIT V - LIMITED LIABILITY PARTNERSHIP ACT, 2008 404

ELIGIBILITY FOR CONVERSION

A partnership rm may apply to ROC for its conversion into a LLP provided all the partners of the converting partnership rm become the partners of the proposed LLP. No other person is allowed to become the partner during the process of conversion.

PROCEDURE FOR CONVERSION

The following steps are required to be taken for conversion of partnership rm into LLP:

1. Procure Digital Signature

2. Reserve LLP Name

3. Preparation of documents for the incorporation of LLP

4. LLP Incorporation and DIN Application

5. Apply for PAN and TAN

6. Drafting and Filing LLP agreement

7. Filing of conversion application

8. Obtaining certi cate of registration from ROC

9. Informing the Registrar of Firms about conversion.

Note: For steps 1-6, Refer Chapter 20, Formation & Incorporation of LLP for details under the heading ‘LLP Incorporation Process’.

7. Filing of Conversion Application [Rule 38(1)]. Partners of the LLP are required to submit conversion application in e-form 17 (Part A). The conversion application must be accompanied by :

(

(

i) Incorporation document and subscription statement [Sec. 11]

ii) A statement by all of its partners in Form 17 (Part B) containing : Name and registration No. (if any) of the rm, Date of registration (if registered).

(iii) A statement in the prescribed form made by a person prescribed under the Act as to compliance of all requirements of the Act in respect of incorporation.

(iv) A statement of assets and liabilities of the partnership rm duly certi ed as true and correct by chartered accountant in practice.

Such statement must be made upto a date not preceding 30 days from the date of application.

(v) List of all creditors along with their consent to the conversion.

(vi) The clearance, approval or permission for the conversion into LLP from the concerned body/authority, if required.

(vii) Other attachments such as details of ITR(s) led, particulars of pending proceedings (if any), refusal letter by ROC (if applied earlier).

(viii) Prescribed ling and registration fees. All the required e-forms will be digitally signed by the designated partner and shall be certi ed by an advocate/CS/CA/Cost Accountant in practice engaged in the formation of LLP.

8. Obtaining Certi cate of Registration from ROC [Rule 38(2)]

(i) Issue of certi cate by ROC. On receipt and then scrutinization of the above mentioned documents if the Registrar is satis ed that all formalities and ling have been complied with, he shall register the documents and issue a certi cate in form 19 (annexed to LLP Rules, 2009) stating that the LLP is registered with the name and from the date speci ed in the certi cate. The certi cate of registration shall be the conclusive evidence of the conversion of LLP.

(ii) Power of ROC to Refuse Conversion. The Registrar has the power to refuse the conversion in case he is not satis ed with details of the information led as required by the Act.

(iii) Appeal to the Tribunal in Case of Refusal. In case the Registrar has refused the registration of conversion, the applicant rm may apply to tribunal within 60 days from the date of receipt of such intimation of refusal.

9. Informing the Registrar of Firms About Conversion [Rule 38(3)]

In case the partnership rm is registered, then the converted LLP is required to inform, within 15 days from the date of registration of conversion to the registrar of rms with whom it was registered under the provisions of the Partnership Act, 1932 about the conversion and particulars of the LLP in Form 14.

Penalty in Case of Delay Under Section 69. LLP is liable to pay fee of ` 100 per day

22.3 EFFECTS OF REGISTRATION OF CONVERSION OF PARTNERSHIP INTO LLP [SEC. 58]

On and from the date of registration of conversion the effects of registration of conversion shall be as follows :

1. Existence of LLP. A LLP shall come into existence by the name speci ed in the certi cate of registration.

2. Automatic Transfer and Vesting of Assets and Liabilities in LLP. All tangible (movable or immovable) and intangible property vested in the rm, all assets, interests rights, privileges, liabilities, obligations relating to the rm and whole of the undertaking of the rm shall be automatically transferred to and shall vest in the LLP without further assurance, act or deed.

3. Dissolution of converting entity. The partnership rm shall be deemed to be dissolved and its name will be removed from the records of the registrar of rms.

22.4 CONVERSION FROM PRIVATE COMPANY INTO LLP [SEC. 56]

A private company may convert itself into a limited liability partnership in accordance with the provisions of Chapter X of the Act and the Third Schedule.

Meaning of Conversion. The conversion of the private company into LLP means the automatic transfer of the property, whether tangible or intangible, assets, interests, rights, privileges, liabilities, obligations and whole of the undertaking of the private company to the LLP as a going concern.

Eligibility for Conversion

A private company may apply to ROC for its conversion into a LLP provided:

(

a) there is no security interest in its assets subsisting or in force at the time of application; and

(

b) the partners of limited liability partnership to which it converts comprise of all the shareholders of private company and no one else.

On compliance of all the formalities relating to conversion, the company, its shareholders, the LLP and all the partners of the LLP shall be bound by the provisions of the Third Schedule.

Procedure for Conversion

The following steps are required to be taken for conversion of private company into LLP:

1. Procure Digital Signature

2. Reserve LLP Name

3. Preparation of documents for the incorporation of LLP

4. LLP Incorporation and DIN Application

5. Apply for PAN and TAN

6. Drafting and Filing LLP agreement

7. Filing of conversion application

8. Obtaining certi cate of registration from ROC

9. Informing the Registrar of Firms about conversion

Note: For steps 1-6, Refer Chapter 20, Formation & Incorporation of LLP for details under the heading ‘LLP Incorporation Process’.

7. Filing of Conversion Application (Rule 39). After taking the above mentioned steps an application is to be made in e-form 18 (Part A) [annexed to LLP Rules, 2009] to the Registrar of Companies (ROC) of the State in which registered of ce of the proposed LLP is to be situated for the conversion of private company into LLP. The conversion application must be accompanied by :

(i) Incorporation document and subscription statement [Sec. 11]

(ii) A statement by all of its shareholders in Form 18 (Part B) containing : Name and registration number of the company; and Date of registration of the company.

(iii) A statement in the prescribed form made by a person prescribed under the Act as to compliance of all requirements of the Act in respect of incorporation.

(iv) A statement of assets and liabilities of the private company duly certi ed as true and correct by chartered accountant in practice. Such statement must be made upto a date not preceding 30 days from the date of application.

(v) List of all creditors along with their consent to the conversion.

(vi) The clearance, approval or permission for the conversion into LLP from the concerned body/authority, if required.

(vii) Other attachments such as details of ITR(s) led, particulars of pending proceedings (if any), refusal letter by ROC (if applied earlier).

(viii) Prescribed ling and registration fees.

All the required e-forms will be digitally signed by the designated partner and shall be certi ed by an advocate/CS/CA/Cost Accountant in practice engaged in the formation of LLP.

8. Obtaining Certi cate of Registration from ROC

(i) Issue of certi cate by ROC. On receipt and then scrutinization of the above mentioned documents if the Registrar is satis ed that all formalities and ling have been complied with, he shall register the documents and issue a certi cate in Form 19 (Annexed to LLP Rules, 2009) stating that the LLP is registered with the name and from the date speci ed in the certi cate. The certi cate of registration shall be the conclusion evidence of the conversion of LLP.

(ii) Power of ROC to Refuse Conversion. The Registrar has the power to refuse the conversion in case he is not satis ed with details of the information led as required by the Act.

(iii) Appeal to the Tribunal in Case of Refusal. In case the Registrar has refused the registration of conversion, the applicant rm may apply to Tribunal within 60 days from the date of receipt of such intimation of refusal.

9. Informing the Registrar of Companies about Conversion

The LLP so converted is required to inform the concerned Registrar of Companies (ROC) with which it was earlier registered under the provisions of the Companies Act,1956 within 15 days from the date of registration of LLP about the conversion and particulars of the LLP in Form 14.

Penalty in case of Delay. LLP is liable to pay fee of ` 100 for every day of such delay in informing the ROC under section 69.

EFFECTS OF REGISTRATION OF CONVERSION [SEC. 58]

On and from the date of registration of conversion the effects of registration of conversion shall be as follows :

1. Existence of LLP. A LLP shall come into existence by the name speci ed in the certi cate of registration.

2. Automatic Transfer and Vesting of Assets and Liabilities in LLP. All tangible (movable or immovable) and intangible property vested in the private company, all assets, interests rights, privileges, liabilities,

obligations relating to the private company and whole of the undertaking of the private company shall be automatically transferred to and shall vest in the LLP without further assurance, act or deed.

3. Dissolution of converting entity. The private company shall be deemed to be dissolved and its name will be removed from the register of companies maintained by the Registrar of Companies.

22.5 CONVERSION FROM UNLISTED PUBLIC COMPANY INTO LLP [SEC. 57]

An unlisted company may convert itself into a limited liability partnership in accordance with the provisions of Chapter X of the Act and the Fourth Schedule.

Meaning of Listed Company. It means a listed company as de ned in the Securities Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 issued by the SEBI under section 11 of the SEBI Act, 1992. “Unlisted Public Company” means a company which is not a listed company.

Meaning of Conversion. The conversion of an unlisted public company into LLP means the automatic transfer of the property (whether tangible or intangible), assets, interests, rights, privileges, liabilities, obligations and whole of the undertaking of the company to the LLP as a going concern.

Eligibility for Conversion

An unlisted public company may apply to ROC for its conversion into a LLP provided:

(

a) there is no security interest in its assets subsisting or in force at the time of application; and

(

b) the partners of limited liability partnership to which it converts comprise of all the shareholders of private company and no one else. On compliance of all the formalities relating to conversion, the company, its shareholders, the LLP and all the partners of the LLP shall be bound by the provisions of the Fourth Schedule.

Procedure for Conversion

The following steps are required to be taken for conversion of unlisted public company into LLP:

1. Procure Digital Signature

2. Reserve LLP Name

3. Preparation of documents for the incorporation of LLP

4. LLP Incorporation and DIN Application

5. Apply for PAN and TAN

6. Drafting and Filing LLP agreement

7. Filing of conversion application

8. Obtaining certi cate of registration from ROC

9. Informing the Registrar of Firms about conversion Note: For steps 1-6, Refer Chapter 20, Formation & Incorporation of LLP for details under the heading ‘LLP Incorporation Process’.

7. Filing of Conversion Application (Rule 40). After taking the above mentioned steps an application is to be made in e-form 18 (Part A) [annexed to LLP Rules, 2009] to the Registrar of Companies (ROC) of the State in which registered of ce of the proposed LLP is to be situated, for the conversion of company into proposed LLP. The conversion application must be accompanied by :

(i) Incorporation document and subscription statement [Sec. 11]

(ii) A statement by all of its shareholders in Form 18 (Part B) containing : Name and registration number of the company; and Date of registration of company.

(iii) A statement in the prescribed form made by a person prescribed under the Act as to compliance of all requirements of the Act in respect of incorporation.

(iv) A statement of assets and liabilities of the private company duly certi ed as true and correct by chartered accountant in practice. Such statement must be made upto a date not preceding 30 days from the date of application.

(v) List of all creditors along with their consent to the conversion.

(vi) The clearance, approval or permission for the conversion into LLP from the concerned body/authority, if required.

(vii) Other attachments such as details of ITR(s) led, particulars of pending proceedings (if any), refusal letter by ROC (if applied earlier).

(viii) Prescribed ling and registration fees.

All the required e-forms will be digitally signed by the designated partner and shall be certi ed by an advocate/CS/CA/Cost Accountant in practice engaged in the formation of LLP.

Para 22.5 UNIT V - LIMITED LIABILITY PARTNERSHIP ACT, 2008 410

8. Obtaining Certi cate of Registration from ROC

(i) Issue of certi cate by ROC. On receipt and then scrutinization of the above mentioned documents if the Registrar is satis ed that all formalities and ling have been complied with, he shall register the documents and issue a certi cate in Form 19 (annexed to LLP Rules, 2009) stating that the LLP is registered with the name and from the date speci ed in the certi cate. The certi cate of registration shall be the conclusion evidence of the conversion of LLP.

(ii) Power of ROC to Refuse Conversion. The Registrar has the power to refuse the conversion in case he is not satis ed with details of the information led as required by the Act.

(iii) Appeal to the Tribunal in case of Refusal. In case the Registrar has refused the registration of conversion, the applicant rm may apply to Tribunal within 60 days from the date of receipt of such intimation of refusal.

9. Informing the Registrar of Companies about Conversion

The LLP so converted is required to inform the concerned Registrar of Companies (ROC) with which it was earlier registered under the provisions of the Companies Act,1956 within 15 days from the date of registration of LLP about the conversion and particulars of the LLP in Form 14

Penalty in case of Delay. LLP is liable to pay fee of ` 100 for every day of such delay in informing the ROC under Sec. 69.

Effects of registration of conversion [Sec. 58]

On and from the date of registration of conversion the effects of registration of conversion shall be as follows :

1. Existence of LLP. A LLP shall come into existence by the name speci ed in the certi cate of registration.

2. Automatic Transfer and Vesting of Assets and Liabilities in LLP. All tangible (movable or immovable) and intangible property vested in the unlisted public company, all assets, interests, rights, privileges, liabilities, obligations relating to the unlisted public company and whole of the undertaking of the company shall be automatically transferred to and shall vest in the LLP without further assurance, act or deed.

3. Dissolution of converting entity. The unlisted public company shall be deemed to be dissolved and its name will be removed from the register of companies maintained by the Registrar of Companies.

UNIT V - LIMITED LIABILITY PARTNERSHIP ACT, 2008 412

TEST QUESTIONS

1. Explain the procedure and effect of conversion of a partnership into LLP. (Sem. I, 2011) (Ref. Paras 22.2, 22.3)

2. State the procedure of conversion of partnership into LLP. (Sem. I, 2012) (Ref. Para 22.2)

3. Discuss the provisions of third schedule (annexed to the LLP Act, 2008) for conversion from private company into limited liability partnership. (Ref. Para 22.4)

4. Discuss the provisions of fourth schedule (annexed to the LLP Act, 2008) for conversion from unlisted public company into limited liability partnership. (Ref. Para 22.5)

TRUE OR FALSE STATEMENTS

State with reasons whether the following statements are true or false :

(i) A listing public company can be converted into LLP

(ii) If the Registrar refuses the registration of conversion, the applicant rm may apply to Tribunal within 60 days from the date of receipt of such intimation of refusal.

(iii) On and from the date of registration of conversion, a LLP comes into existence by the name speci ed in the certi cate of registration.

(iv) When the partnership rm applies for its conversion to LLP, any person can become the partner during the process of conversion.

(v) Only registered partnership can be converted into LLP

Hints to True or False Statements

True Statements : (ii) and (iii)

False Statements :

(i) Partnership, a private limited company and an unlisted public company can be converted into LLP. But, a listed public company cannot be converted into LLP.

(iv) No other person is allowed to become the partner of LLP during the process of conversion.

(v) Registered as well as unregistered partnership can be converted into LLP

BUSINESS LAWS B.COM. (HONS.)/B.COM. UGCF

AUTHOR : SUSHMA ARORA

PUBLISHER : TAXMANN

DATE OF PUBLICATION : AUGUST 2023

EDITION : 11th Edition

ISBN NO : 9789357781886

NO. OF PAGES : 544

BINDING TYPE : PAPERBACK

DESCRIPTION

This book is a comprehensive & authentic book on the following Business Laws:

• Indian Contract Act, 1872

• Sale of Goods Act, 1930

• Limited Liability Partnership Act, 2008

Rs. 625 USD 38

This book aims to impart the basic working knowledge of important business laws relevant to general business activities in physical & virtual spaces, along with relevant Case Laws.

This book aims to fulfil the requirement of students of undergraduate courses in commerce and management, particularly the following:

• B.Com. (Hons.) Core Paper BCH: DSC – 1.2 based on Undergraduate Curriculum Framework (UGCF) for Delhi University

• B.Com. (Prog.) Core Paper BC: DSC 1.2 based on Undergraduate Curriculum Framework (UGCF) for Delhi University

• Non-Collegiate Women's Education Board

• School of Open Learning of the University of Delhi

• Various Central Universities throughout India

• BBA, MBA, CA-Intermediate (IPC), Company Secretaries courses

The Present Publication is the 11th Edition, authored by Sushma Arora, with the following noteworthy features:

• [Simple & Systematic Presentation] The subject matter is presented in a systematic & straightforward method, along with a comprehensive explanation

• [Examples & Case Studies from Landmark Ruling] This book offers comprehensive coverage of business laws with interesting examples/case studies derived from landmark rulings. It also covers Case Laws recommended by the Department of Commerce, Delhi University

• [Test Questions, Practical Problems & True/False Statements with Hints] are given at the end of each chapter to provide students with thorough practice in solving examination question

• [Previous Exam Question Papers] for the last few years are covered at the end of the book. This will help the students to have a clear idea of the questions usually asked.

• [Student-Oriented Book] This book has been developed keeping in mind the following factors:

o Interaction of the author/teacher with their students in the classroom

o Shaped by the author/teachers' experience of teaching the subject matter at different levels

o Reactions and responses of students have also been incorporated at different places in the book

• [Amended & Updated] Recent amendments have been included in this book

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