How to Draft a Co-founders Agreement?

Procedure for Conversion into a Public Limited Company

Converting a private limited company into a public limited company in India is governed by the Companies Act, 2013, and involves a formalised legal process. Here’s a step-by-step guide:

1. Convene a Board Meeting

• Pass a board resolution to approve the proposal for conversion.
• Approve amendments to the Memorandum of Association (MoA) and Articles of Association (AoA).
• Schedule an Extraordinary General Meeting (EGM) for shareholder approval.

2. Issue Notice for EGM

• Send notices to all shareholders, directors, and auditors at least 21 days before the meeting.
• The notice should include the agenda, draft resolutions, and explanatory statements.

3. Hold the Extraordinary General Meeting (EGM)

• Pass a Special Resolution to approve the conversion from private to public.
• Approve necessary alterations in the MoA (removal of “Private”) and AoA (removal of restrictive clauses on share transfer and member limits).

4. Filing with Registrar of Companies (RoC)

Submit the following forms with the Ministry of Corporate Affairs (MCA) portal:

• MGT-14: Filing of special resolutions within 30 days of passing them.
• INC-27: Application for conversion, along with certified copies of resolutions, amended MoA/AoA, and EGM minutes.

5. Scrutiny and Approval by RoC

The Registrar reviews the application and, upon satisfaction, issues a Fresh Certificate of Incorporation reflecting the change in company status from private to public.

Related Read: Private Company Vs Public Company: Key Differences Explained

Post-Conversion Requirements

Once the company has been converted into a public limited company, several post-conversion formalities must be completed to align with regulatory and operational standards:

1. Update Statutory Documents

• Obtain a new PAN reflecting the updated company name.
• Revise all statutory records, financial statements, and company stationery (letterheads, invoices, website, etc.).

2. Inform Bankers and Financial Institutions

• Update your company’s status with existing banks and financial institutions.
• Amend authorised signatories if required.

3. Intimate Regulatory Authorities

• Notify relevant authorities such as tax departments, GST authorities, and regulatory bodies, if applicable.

4. Compliance with Public Company Norms

• Increase the number of directors to a minimum of 3 (as required for a public company).
• Appoint independent directors and comply with applicable listing regulations (if planning for a stock exchange listing).
• Adhere to enhanced disclosure norms, audit requirements, and corporate governance standards.

5. Prepare for Capital Raising (Optional)

• If planning an IPO, start preparing for SEBI compliance, drafting offer documents, and engaging with merchant bankers.

Frequently Asked Questions (FAQs)

What is Form 11 and How to File It? 

Form 11 is an Annual Return of LLP. Every LLP in India must file with the Registrar of Companies (RoC) under the Limited Liability Partnership Act, 2008. It serves as a comprehensive summary of the LLP's management and structure for the financial year.

Here’s what Form 11 LLP typically includes:

1. General Information:
   
   • LLP Name.
   • LLP Identification Number (LLPIN).
   • Date of Incorporation.
2. Partner Information:
   
   • Names and details of designated and other partners.
   • Changes in partnership during the financial year, such as additions, resignations, or reassignments.
3. Contribution Details:
   
   • The total contribution received by the LLP from partners.
   • Contributions made by individual partners during the year.
4. Declaration of Compliance:
   
   • A confirmation that the LLP has met its statutory obligations during the year.

Steps to File Form 11

Filing Form 11 is a straightforward process. Follow these steps to ensure compliance:

1. Download Form 11:

Visit the Ministry of Corporate Affairs (MCA) portal and download the latest version of Form 11.

2. Fill in Basic Details: 

Provide the LLP’s basic details, including:

• LLPIN.
• Date of Incorporation.
• Business activities during the financial year.

3. Enter Partner Information:
   
   • List all designated and non-designated partners.
   • Include details of any changes in partnership, such as additions or removals.
4. Attach Supporting Documents:

Upload any supporting documentation, including agreements or resolutions, if applicable.

5. Certify the Form:

Ensure the form is digitally signed by one of the designated partners using a Digital Signature Certificate (DSC).

6. Submit on MCA Portal:

Upload the completed form and pay the prescribed filing fee. Fees depend on the LLP’s total contribution as per the LLP Agreement.

Due Date for Filing Annual Return (Form 11)

The due date for filing Form 11 is May 30 every year, covering the financial year ending on March 31.

Important Note:

• Filing Form 11 is mandatory regardless of whether the LLP has started its business. Even dormant LLPs are required to submit their annual return.

If you don’t file before Form 11 LLP’s due date, you can be penalised, so it's crucial to adhere to the timeline.

Additional Fee (Penalty) for Belated Filing of Annual Return (Form 11)

Failure to file Form 11 on or before May 30 can lead to significant financial penalties and legal complications. 

• A penalty of LLP form 11 late fee of ₹100 per day is imposed for each day the filing is delayed.
• The penalty has no upper limit, which means prolonged delays can result in substantial fines.

Continued non-compliance may lead to the LLP being marked as inactive by the RoC. While the designated partners may face disqualification from holding similar roles in other companies or LLPs.

What Are The Prerequisites?

Before filing, ensure that you’re fulfilling certain Form 11 LLp requirements:

1. The LLP is registered and has an active status on the MCA portal.
2. A valid DPIN of the Partner.
3. A Digital Signature Certificate (DSC) is available for at least one designated partner.
4. All pending compliance forms, such as Form 3 (LLP Agreement), have been filed.

What Are the Documents to be Submitted Along with Form 11?

Depending on the changes or updates during the year, the following documents are required for Form 11 LLP submission:

1. List of Partners:

A detailed list of designated and other partners, including their roles and contributions.

2. Contribution Proof:

Evidence of the capital contributed by each partner during the financial year.

3. Supporting Agreements:

Copies of resolutions or amendments to the LLP Agreement, if applicable.

4. Additional Documents:

Any other documents as required by the MCA portal based on the LLP’s activities.

{{llp-cta}}

Important Aspects to Note While Filing Annual Return for LLP

While LLP annual filling might seem straightforward, there are key details and considerations that can make a big difference. Overlooking these aspects could lead to errors, delays, or unnecessary penalties. To help you navigate this process smoothly, here are some important points to remember while filing your LLP’s annual return.

1. Accuracy of Partner Details:

Ensure the names, roles, and contributions of all partners are correctly listed, as discrepancies can lead to rejections or penalties.

2. Difference Between Forms:

Do not confuse Form 11 for LLP with Form 8, which deals with the financial health and solvency of the LLP. Both must be filed annually.

3. Digital Signature Validity:

Verify the validity of the Digital Signature Certificate (DSC) before submission to avoid technical issues.

Certification in Annual Return (Form 11)

Certification plays a crucial role in the filing of Form 11 (Annual Return) for an LLP. It ensures that the information provided is accurate and compliant with the statutory requirements. 

While the form can be filed by the designated partner(s), certain conditions require additional certification by a practising professional, such as a Company Secretary.

When is Certification Required?

For LLPs meeting certain financial thresholds, certification of Form 11 by a professional ( Company Secretary) is mandatory:

• If the LLP’s contribution exceeds ₹50 lakhs, or
• If its turnover exceeds ₹5 crores,

Frequently Asked Questions

What is LLP?

An LLP or Limited Liability Partnership is a business structure where business partners share limited liability, meaning their personal assets are protected in case the business incurs debts or liabilities.

LLPs are commonly used by professionals like lawyers, accountants, and consultants but are increasingly popular among small and medium-sized enterprises (SMEs).

An LLP is an ideal structure for businesses seeking operational flexibility, protection for partners' personal assets, and minimal compliance requirements. It is particularly attractive for professionals and small enterprises looking for a formal and efficient business framework.

This business structure also allows businesses to make use of the benefits of economies of scale, since LLPs can pool resources, expertise, and capital from multiple partners. By sharing operational responsibilities and costs, LLPs can reduce per-unit expenses, streamline processes, and negotiate better terms with suppliers.

This collaborative approach enables businesses to grow efficiently, expand their market presence, and achieve cost advantages typically associated with larger organizations.

How an LLP (Limited Liability Partnership) Works?

1. Hybrid Business Structure

A Limited Liability Partnership (LLP) is a flexible business structure that operates with a mix of partnership and corporate elements.

2. Limited Liability Advantage

The main advantage of an LLP is that it provides limited liability to its partners. This means that, unlike a general partnership, your personal assets (such as your home or car) are typically protected in case of legal action.

3. Lawsuit and Liability Rules

In an LLP, if the business faces a lawsuit, the partnership itself becomes the primary target, not the personal property of the individual partners. However, if a partner personally engages in wrongdoing (e.g., fraud), they could still be held liable for their actions.

4. Example: Meena and Shalini’s Case

• Starting Out: Consider a scenario where two professionals, Meena and Shalini, decide to start a business offering consulting services in India. They have a shared interest in providing management consulting to small and medium enterprises (SMEs). Initially, they start with a mutual agreement and an informal arrangement.
• Formalizing the Structure: However, as the business grows, they realize the need to formalize the structure to protect themselves from legal and financial risks. Meena and Shalini choose to form an LLP (Limited Liability Partnership) to safeguard their personal assets from any potential legal liabilities that may arise in the course of business. They register the LLP with the Ministry of Corporate Affairs (MCA) in India, creating an LLP agreement that outlines their responsibilities, profit-sharing ratios, and other operational details.
• Facing a Legal Dispute: A few months later, the consulting firm faces a legal dispute due to an issue with one of their clients. The client sues the LLP for professional negligence, claiming that the advice given led to a loss in business.
• Outcome of the Lawsuit: Since Meena and Shalini have formed an LLP, their personal assets—such as their homes, personal savings, or vehicles—are protected. The lawsuit can only target the assets of the LLP itself, not their personal belongings. However, if it is proven that either Meena or Shalini acted negligently or fraudulently in a personal capacity, that partner could still be held accountable for their individual actions.

LP (Limited Partnership) vs General Partnership

An LP (Limited Partnership) and a General Partnership are both business structures involving two or more partners, but they differ in terms of liability and management roles.

Limited Partnership (LP)

• In an LP, there are two types of partners: general partners and limited partners.
• General partners have full control over the management of the business and bear unlimited liability, meaning they are personally responsible for the business's debts and obligations.
• Limited partners, on the other hand, contribute capital but do not participate in day-to-day management. Their liability is limited to the amount they invest in the business, protecting their personal assets beyond that contribution.

General Partnership

• In a General Partnership, all partners share equal responsibility for managing the business and have unlimited liability.
• This means they are personally liable for the debts and obligations of the business.
• There is no distinction between the roles of partners—each partner participates in both the management and the liabilities of the business.

Key Difference

The key difference between the two is the level of liability protection and management involvement.

• An LP offers limited liability to some partners (limited partners).
• A General Partnership places full responsibility on all partners, making it a riskier option for individuals seeking protection from personal liability.

Related Read: What is the Difference Between LLP and Partnership?

LLP vs LLC

Ownership and structure

LLP refers to Limited Liability Partnership, where two or more partners collaborate to run the business. The partners can be individuals or corporate entities, and the number of partners can vary.

In an LLP, all partners share the management responsibilities and decision-making processes, unless the partnership agreement specifies otherwise. Partners have limited liability, meaning their personal assets are protected from business debts or legal claims.

LLC refers to a Limited Liability Company, which is a separate legal entity that can have one or more owners, known as members. The ownership can be divided among individual or corporate members, and the structure is more flexible than a corporation.

LLCs can be managed either by members (member-managed) or by designated managers (manager-managed). The members are not personally liable for the company’s debts or liabilities, providing them with protection similar to that of an LLP.

Liability protection

Partners in an LLP enjoy limited liability, meaning they are not personally liable for the debts or obligations of the business beyond their contribution to the partnership. However, if a partner engages in fraudulent or wrongful activities, they could still be personally liable for their actions.

LLC members also have limited liability, meaning they are generally not personally responsible for the company’s debts or liabilities. The LLC itself is a separate legal entity, so any financial obligations fall on the company, not the individual members. Similar to an LLP, members are protected unless they personally guarantee a debt or engage in illegal activities.

Decision making and management

In an LLP, all partners typically have a say in the management and operation of the business, unless otherwise specified in the LLP agreement. It is a more flexible structure in terms of decision-making since there is no requirement for a formal management team.

LLCs can be either member-managed or manager-managed. In a member-managed LLC, all members participate in managing the business, while in a manager-managed LLC, the members appoint managers to run the operations. This offers more structure compared to an LLP, especially for larger businesses.

Ownership transfer

Ownership in an LLP is typically not as easily transferable as in an LLC. Partners usually need to approve the admission of new partners or the transfer of ownership. This limits the liquidity and transferability of ownership interests.

Ownership in an LLC can be transferred more easily than in an LLP, depending on the terms of the operating agreement. LLCs can issue membership interests that can be bought or sold, making it easier to bring in new investors or transfer ownership.

LLP vs LP

An LP refers to a Limited Partnership, which is different from an LLP.

An LLP (Limited Liability Partnership) and an LP (Limited Partnership) are both business structures that involve multiple partners but differ in terms of liability and management.

In an LLP, all partners share equal responsibility for managing the business and enjoy limited liability, meaning their personal assets are protected from business debts. However, all partners are involved in decision-making unless specified otherwise in the agreement.

In contrast, an LPconsists of general partners and limited partners. General partners manage the business and have unlimited liability, while limited partners are only liable up to the amount of their investment and do not participate in the day-to-day operations.

The key difference lies in the roles and liabilities of the partners. In an LLP, all partners have equal liability protection and management control, whereas, in an LP, the general partners hold the management responsibility and are personally liable, while limited partners have liability protection but no management involvement.

The choice between the two structures depends on the desired level of involvement in business operations and the type of liability protection needed.

What are the advantages of LLP?

Wondering why you should choose LLP over other business registrations? Have a look:

• Easy & quick to build: Building an LLP is a simple process. It does not have complicated steps and requirements and neither does it take months of waiting time. The minimum amount of fees for incorporating an LLP is INR 500 and the maximum that can be spent is INR 5,600
• Continuity in succession: The life of the LLP is not affected by the death or retirement of any of the partners. If one of the partners withdraws because of any reasons, it does not mean that the LLP gets wound up. An LLP can only be shut down on the basis of the provisions of the Limited Liability Protection Act  of 2008
• Limited liability: All the partners of the LLP have limited liability, which means that the partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner’s misbehaviour or misconduct
• Streamlines management: All the major decisions and management activities in an LLP are taken care of by the board of directors hence the shareholders receive very less power in making decisions
• Hassle-free transfers: There are no restrictions on joining and leaving an LLP. One can easily admit as a partner and transfer the ownership to others
• Taxation benefits: An LLP is exempt from various taxes such as dividend distribution tax and minimum alternative tax. Also, the rate of tax is less when compared to other business types
• No compulsory audit requirements: There is no mandatory audit requirement for an LLP until the company exceeds the annual turnover of INR 40 lakhs

What are the disadvantages of LLP?

• Not covered in all States: In India, there are certain variations in tax benefits from State to State. There are also cases when States restrict the formation of LLP. This is one of the major disadvantages of an LLP
• Less credibility: An LLP has many benefits but the fact is that people do not consider LLPs to be a credible business. People still trust companies or partnerships over LLPs
• Differences amongst partners: Since each partner is responsible for their own part, there are cases when partners do not consult each other before proceeding with a decision or agreement
• Transfer of interest: Though interest and ownership can be transferred, it usually is a long procedure. Various formalities are required to comply with the provisions of the Limited Liability Partnership Act

Related Read: LLP Advantages and Disadvantages

Documentation requirements for registering an LLP (2025)

Before you start with the procedure of registering an LLP or make changes in an existing LLP, have a look at the list of documents you might need:

• Form 7 is required to obtain a Designated Partner Identification Number (DIN) while registering your LLP. It may be sought from the MCA website. Along with the duly completed form, a registration fee of INR 100 must also be paid
• Form 1/ RUN-LLP is required to register a name for the LLP and reserve it. It may be used to christen an LLP or to alter the present name. The fee for submitting this form is Rs 10,000
• A request must also be filed by the partners for their DSC to be registered if it hasn’t already been done before
• Form 2/FiLLiP is required for incorporating a registered LLP. This form must be sent to and acknowledged by the concerned State’s Registrar
• An LLP agreement must be made, which outlines the duties of each partner involved. This requires the filling and submitting of Form 3
• In the case of changing, altering, adding or removing partners, the partners must submit Form 4
• Form 11 must be used to file the IT returns of the LLP
• If the office address of the LLP is to be changed, then Form 15 must be filed

How to form a Limited Liability Proprietorship

As mentioned earlier, forming an LLP is easy and quick. Before you get started, obtain a DSC or Digital Signature Certificate as the following steps will require it. File for one if you don’t already have one. Further, here are the steps involved in forming an LLP. You can visit mca.gov.in and follow the steps listed below:

1. Issue a Designated Partner Identification Number for yourself, which serves as an ID card
2. File Form 7 and pay the required fees
3. Register a name for your LLP using Form 1 and pay Rs 200
4. Incorporate the LLP via Form 2. The LLP agreement must also be made at this stage
5. File the LLP Agreement as per Section 2(o) of the LLP Act, 2008 using Form 3

With the above-mentioned steps, you are all set to start an LLP of your own.

Frequently Asked Questions