Formation Agreement to Convert a Partnership into a Limited Company (India)
This template outlines the agreement between partners to convert an existing partnership into a public limited company. It covers the valuation of assets, the distribution of shares, the registration process, and the eventual dissolution of the original partnership.
FORMATION AGREEMENT TO CONVERT A PARTNERSHIP INTO A LIMITED COMPANY
AGREEMENT is made at________on this_____ day of____________ between Mr. L s/o_______residing at ......... of the FIRST PART and Mr.M s/o_________residing at .......... of the SECOND PART and Mr. N s/o___________ residing at .......... Of the THIRD PART as follows:
The Parties are carrying on business of dealing in electronic goods in partnership in terms of the deed of partnership ____________ entered by and between them in the name of M/s. LMN & Co. and the parties now propose to convert the said partnership into a public company limited by shares under the Companies Act 1956 on the following terms agreed upon between them.
NOW IT IS AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:
1. The Parties agree that they will form and register a public company limited by shares with a view to carry on the business carried on by them in partnership as aforesaid.
2. The name of the company will be ABC & Co. Ltd., subject to approval by the Registrar of Companies or such other name as will be approved by the parties hereto and by the said Registrar of Companies.
3. The Memorandum of Association and Articles of Association will be got prepared by the lawyer to be appointed by the parties hereto and to be approved by the parties hereto. The main object of the proposed company will be to deal in electronic goods by way of manufacture, sale and purchase thereof or acting as the agents for sale of such goods for any other Company or concern.
4. The nominal or authorized capital of the company will be Rs.__________ to be divided into equity shares of Rs.100/- each and________preference shares of Rs.100/- each.
5. The valuation of the business of the said partnership together with its assets, stock-in-trade and goodwill including book debts but subject to liabilities will be obtained from the Chartered Accountants of the said partnership firm and the amount of such valuation will be taken as paid to the parties hereto by allotting equity shares and preference shares of the face value of such valuation as fully paid up to each of the parties hereto. The valuation of the assets and the goodwill of the said partnership business will be made and shown separately. The equity and preference shares in the capital of the company will be allotted to the parties hereto in the ratio or in proportion in which shares of the parties in the capital and property of the said partnership firm are held.
6. The parties shall subscribe to the Memorandum and Articles of Association, one share each to be paid in cash and they will also secure additional at least four persons to subscribe to the Memorandum and Articles by agreeing to take one share each.
7. Besides, the minimum subscription to shares required to commence business will also be contributed by the parties hereto in cash in the same proportion as aforesaid.
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About this template
What is this template?
This document is a formal contract between the partners of an existing firm and a newly incorporated company. It facilitates the transfer of the firm's goodwill, assets, and liabilities in exchange for equity shares. It is not a Shareholders' Agreement or a simple Asset Purchase Agreement between unrelated third parties.
When should you use it?
Use this agreement when existing partners have registered a new company to take over their business to ensure continuity of operations. Use a standard Asset Purchase Agreement if the buyer is an independent third-party corporation with no prior relationship to the partners.
What's inside
| Clause | Name | What it does |
|---|---|---|
| 1 | Transfer of Business | Obliges the Partners to sell and the Company to purchase the partnership business as a going concern from the Transfer Date. |
| 2 | Consideration and Allotment of Shares | Specifies that the purchase price is satisfied by the allotment of [number] fully paid equity shares of Rs. [amount] each. |
| 4 | Assumption of Liabilities | Requires the Company to take over and discharge all debts, liabilities, and obligations of the partnership existing on the Transfer Date. |
| 5 | Completion of Sale | Defines the handover process for books of account, title deeds, and the formal execution of necessary transfer documents. |
| 12 | Governing Law and Jurisdiction | Subjects the agreement to the laws of India and grants exclusive jurisdiction to the courts at [Location]. |
Who it's for
- partners in an Indian firm seeking to limit liability by incorporating as a private limited company
- legal practitioners drafting the takeover agreement for a newly formed corporate entity in India
- chartered accountants managing the asset transfer between a partnership and a successor company
How long it runs and how it's signed
Law it's drafted under
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