Formation Agreement to Convert a Partnership into a Limited Company (India) by OLL
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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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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.
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About this template
What is this template?
This is a pre-incorporation agreement between partners to establish a public limited company and transfer partnership assets to it. It is not a standard Shareholders' Agreement or a simple Business Purchase Agreement, as it specifically mandates the dissolution of the existing firm under the Indian partnership framework.
When should you use it?
Use this when partners in an existing firm decide to incorporate as a public company to raise capital or limit liability. Use a Business Transfer Agreement instead if the partnership will continue to exist after selling a specific division to a company.
What's inside
| Clause | Name | What it does |
|---|---|---|
| 1-3 | Company Formation and Objects | The Partners agree to register ABC & Co. Ltd. to manufacture and sell electronic goods as a public company limited by shares. |
| 4-5 | Capital Structure and Valuation | Authorised capital is divided into equity and preference shares of Rs.100/- each based on a valuation by Chartered Accountants. |
| 6 | Memorandum and Articles Subscription | The three Partners and four additional persons must subscribe to the Memorandum and Articles of Association to meet legal requirements. |
| 10 | Transfer of Business | Partners must execute a Deed of Assignment to transfer the business, goodwill, and subsisting contracts to the new company. |
| 14 | Dissolution of Partnership | The partnership dissolves upon business assignment; partners remain liable for debts to creditors who do not accept the company as debtor. |
| 15-16 | Non-Compete and Director Stability | Partners are prohibited from starting similar businesses and agree not to vote for the removal of any existing director. |
Who it's for
- Indian partnership firm partners converting their business into a public limited company under the Companies Act
- partners transferring electronic goods business assets to a new corporate entity in exchange for shares
- business owners requiring a formal framework for valuation and dissolution of a partnership during incorporation
How long it runs and how it's signed
Law it's drafted under
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