By Sachin Verma | Updated March 2026
What Is Conversion of Company Type?
Conversion of company type is the statutory process by which an existing business entity registered under Indian law changes its legal form without dissolution. A private limited company may convert into a public limited company, an OPC may become a private company, a private company or unlisted public company may convert into a limited liability partnership (LLP), or an unregistered entity such as a partnership firm may be registered as a company. The conversion preserves the entity's assets, liabilities, contracts, and ongoing compliance history while changing the governance framework, liability structure, and regulatory obligations.
Legal Basis
Multiple provisions of Indian law govern different conversion pathways:
- Section 14, Companies Act, 2013 — Governs conversion of a company from one class to another (private to public and vice versa). Requires alteration of the Articles of Association by special resolution and filing of Form INC-27 with the ROC.
- Section 18, Companies Act, 2013 — Governs conversion of an OPC to a private or public company, and of a private company to an OPC (subject to eligibility conditions under Rule 6 of the Companies (Incorporation) Rules, 2014).
- Section 366, Companies Act, 2013 — Enables registration of existing entities (partnership firms, LLPs, cooperative societies) as companies under the Companies Act. Filed via Form URC-1.
- Section 56, LLP Act, 2008 (read with Third Schedule) — Conversion of a private company into an LLP. Requires filing of Form 18 with the Registrar of LLPs.
- Section 57, LLP Act, 2008 (read with Fourth Schedule) — Conversion of an unlisted public company into an LLP. Same procedural requirements as Section 56.
- Section 47(xiiib), Income Tax Act, 1961 — Provides tax neutrality (no capital gains) on conversion of a company to an LLP, subject to turnover and asset thresholds.
Types of Conversion and Their Requirements
Each conversion pathway has distinct legal requirements, approval authorities, and compliance obligations. The table below summarises the major pathways available to foreign-invested entities operating in India.
| Conversion Pathway | Governing Section | Key Form | Approval Authority | Special Resolution Required? |
|---|---|---|---|---|
| Private to Public Company | Section 14, Companies Act | INC-27 + MGT-14 | ROC | Yes (3/4 majority) |
| Public to Private Company | Section 14, Companies Act | INC-27 + MGT-14 | Regional Director (Central Govt.) | Yes (3/4 majority) |
| OPC to Private Company | Section 18, Companies Act | INC-6 | ROC | Yes (Special Resolution + MOA/AOA alteration) |
| Private Company to OPC | Section 18, Companies Act | INC-6 | ROC | Special Resolution |
| Partnership/LLP to Company | Section 366, Companies Act | URC-1 | ROC | Consent of all partners |
| Private Company to LLP | Section 56, LLP Act | Form 18 + Form 2 | Registrar of LLPs | Consent of all shareholders |
| Unlisted Public Company to LLP | Section 57, LLP Act | Form 18 + Form 2 | Registrar of LLPs | Consent of all shareholders |
Company to LLP Conversion: Detailed Process
Conversion of a private company to an LLP under Section 56 is the most common conversion pathway for small and mid-sized foreign-invested entities. The process involves:
Step 1: Eligibility Check
The company must satisfy the following conditions for tax-neutral conversion under Section 47(xiiib) of the Income Tax Act:
- Turnover threshold: Total sales, turnover, or gross receipts must not exceed INR 60 lakh in any of the three preceding financial years
- Asset threshold: Total value of assets must not exceed INR 5 crore as per the books in any of the three preceding financial years
- All shareholders must become partners in the LLP with the same capital contribution and profit-sharing ratio as their shareholding
- No accumulated profits can be distributed to partners for three years from the date of conversion
- The partners' profit-sharing ratio must remain at least 50% of what their shareholding was for five years
Step 2: Obtain Digital Signature Certificates and DPINs
All proposed DSCs and DPINs (Designated Partner Identification Numbers) must be in place for the incoming designated partners.
Step 3: File Form 18 with Registrar of LLPs
Form 18 must be filed along with: a statement of assets and liabilities certified by the auditor, a list of secured creditors with their consent, the latest income tax return acknowledgement, and the proposed LLP agreement.
Step 4: Certificate of Registration
Upon approval, the Registrar issues a certificate of registration, and the company stands dissolved without winding up. All property, rights, and liabilities vest automatically in the LLP by operation of law.
Private to Public Conversion: Detailed Process
A private limited company converting to a public company must:
- Convene a board meeting to approve the proposal and call an Extraordinary General Meeting
- Pass a special resolution at the EGM with at least 75% majority approving the alteration of the AOA
- Amend the Memorandum of Association and Articles of Association to remove private company restrictions
- File Form MGT-14 (special resolution) within 30 days and Form INC-27 (conversion application) within 15 days of the resolution
- Ensure minimum three directors and minimum seven shareholders (including at least one-third independent directors within the required timeline)
- Obtain a fresh Certificate of Incorporation from the ROC reflecting the new status
Tax Implications of Conversion
| Conversion Type | Capital Gains Tax | Stamp Duty on Property Transfer | GST Impact | Loss Carry-Forward |
|---|---|---|---|---|
| Company to LLP (within thresholds) | Exempt under Section 47(xiiib) | Nil — vesting by operation of law | No supply — same entity continues | Losses and unabsorbed depreciation carry forward to LLP |
| Company to LLP (exceeding thresholds) | Taxable at applicable rates | Applicable at state rates on FMV | May trigger GST on asset transfer | May not be available |
| Private to Public (or vice versa) | Not applicable — same entity continues | Not applicable — no asset transfer | No impact | Fully preserved |
| Partnership to Company (Section 366) | Exempt under Section 47(xiii) if conditions met | Nil — vesting by statute | No supply | Losses carry forward if conditions met |
How This Affects Foreign Investors
Conversion of company type has direct implications for foreign investors in India:
- FEMA compliance: Any change in the entity structure of a company with FDI must comply with FEMA sectoral caps and conditions. For example, converting a private company to an LLP is permitted only if the sector allows 100% FDI under the automatic route with no FDI-linked performance conditions.
- Press Note 3 implications: If the beneficial owner is from a land-bordering country, any conversion that changes control or ownership structure requires prior government approval under Press Note 3 (2020).
- Downstream investment: A wholly-owned subsidiary converting to an LLP must ensure the foreign parent's downstream investment complies with the Non-Debt Instrument Rules.
- FC-GPR reporting: Conversion does not extinguish FDI reporting obligations. The new entity must continue filing annual compliance certificates with the RBI.
- LLP restriction: An LLP with foreign investment cannot raise external commercial borrowings (ECBs), issue debentures, or access certain debt instruments available to companies.
Common Mistakes
- Converting to LLP without checking the turnover and asset thresholds. If your company's turnover exceeded INR 60 lakh or assets exceeded INR 5 crore in any of the last three years, the conversion will trigger full capital gains tax on the fair market value of all assets transferred — potentially a multi-crore tax bill.
- Distributing accumulated profits within three years of company-to-LLP conversion. Any payment to partners out of the company's pre-conversion accumulated profits within three years triggers deemed dividend taxation and may retroactively disqualify the tax-neutral conversion.
- Ignoring FEMA sector restrictions before converting a foreign-invested company to an LLP. LLP conversion is only available for sectors with 100% automatic route FDI. If your sector has a sectoral cap (e.g., insurance at 100% (with conditions), defence at 74%), the LLP route is not available.
- Failing to obtain creditor consent for company-to-LLP conversion. All secured creditors must provide written consent. Missing even one creditor's approval will result in rejection of Form 18 by the Registrar.
- Not updating PAN, TAN, GST, and other registrations post-conversion. The new entity has a different legal identity (in the case of company-to-LLP). Failing to update within prescribed timelines attracts penalties and may disrupt banking, invoicing, and compliance filings.
Practical Example
Tomoko Hayashi, a Japanese national, holds 70% equity in IndoTech Solutions Pvt Ltd, a software consulting firm registered in Bengaluru. The company has three shareholders and two directors. In FY 2025-26, IndoTech's turnover was INR 48 lakh and total assets were INR 3.2 crore — both within the tax-neutral thresholds.
Tomoko decides to convert IndoTech from a private limited company to an LLP to reduce compliance costs (no mandatory audit if turnover is below INR 40 lakh and contribution below INR 25 lakh, and fewer ROC filings). The software sector permits 100% FDI under the automatic route, so FEMA clearance is not a hurdle.
The conversion process takes approximately 45-60 days. Government fees for Form 18 filing are INR 5,000, professional charges for the conversion range from INR 15,000 to INR 30,000, and stamp duty on the LLP agreement in Karnataka is approximately INR 500. Because the thresholds under Section 47(xiiib) are met, there is zero capital gains tax on the transfer of IndoTech's assets (including a commercial office valued at INR 1.8 crore) to the new LLP. The company's carried-forward business loss of INR 6 lakh also transfers to the LLP and remains available for set-off for the remaining carry-forward period.
Post-conversion, Tomoko obtains a DPIN, and the LLP files Form 8 (annual statement of accounts) and Form 11 (annual return) each year — significantly lighter than the statutory audit, AGM, and multiple MCA filings required of a private company.
Key Takeaways
- Indian law provides multiple conversion pathways — private to public, OPC to private, company to LLP, and partnership to company — each governed by distinct statutory provisions
- Company-to-LLP conversion is tax-neutral only if turnover does not exceed INR 60 lakh and assets do not exceed INR 5 crore in any of the three preceding financial years
- Private-to-public conversion requires a special resolution (75% majority), alteration of MOA and AOA, and filing of Forms MGT-14 and INC-27
- All assets, liabilities, and contracts transfer automatically to the converted entity by operation of law — no separate transfer deeds are required
- Foreign-invested companies must verify FEMA sectoral restrictions before converting to an LLP — only sectors with 100% automatic route FDI qualify
- Post-conversion compliance updates (PAN, TAN, GST, bank accounts, FEMA filings) must be completed within prescribed timelines to avoid penalties
- Professional costs for most conversions range from INR 15,000 to INR 50,000, making structural changes accessible for small and mid-sized entities
Planning to restructure your Indian entity? Beacon Filing handles end-to-end company conversion — from eligibility assessment and FEMA compliance to ROC filings and post-conversion registrations.