Conversion of Partnership to Limited Company

The Companies Act, provides two options for converting a partnership business into a limited company as discussed below.

Part IX Conversion

A partnership with seven or more partners, registered under the Partnership Act, can be converted into a company by the following procedures under Part IX of the Companies Act; generally known as Part IX Conversion.

By converting a firm into a company, the partnership can avail the benefits of a company. This method is preferable if the partnership firm has immovable assets in the name of the firm. Through Part IX conversion, such immovable assets are automatically transferred to the new company and no stamp duty is payable for such transfer of assets.

Takeover of Assets by Company

The second method of conversion involves the takeover of business of the existing firm by a new company, after relevant provisions for a takeover are included in the ‘object’ clause of the company’s constitution documents. Once incorporation of the new company is complete, all assets and liabilities of the partnership firm are transferred to the company by way of an agreement; and shares of the new company are issued to the partners of the firm as consideration for the takeover.