sbbau (Software) 18 November 2008

Firm into Pvt Ltd Company

Hi, I am running a sole proprietor ship successfully. Now I need more money to for future business and new projects. So I wud like to start a pvt limited company by holding atleast 60% of paid up shares with me and my wife to keep the control of the business with me. My question is

1) How can I convert this firm to a Pvt Ltd Company with other members. What is the real method of conversion, do I sell this firm to the new company or can we consider our share amount as the existing firm and let others to bring the additional money.

2) Since I need to keep the business control with me, can I issue preference shares since it has no voting power ?

3) Another important thing is, Suppose, the authorised capital is Rs.25Lakhs, and paid up capital from all share holders is Rs.15 Lakhs. Here our contribution is 60% of 15Lakhs and the second party holding 40% of 15Lakh, can he ask for the additional shares since the authorised capital is Rs.25Lakhs. How can I prevent this ? Do we need to make all the authorised capital to paid up ?

Thanks in advance for your kind help

Regards

Sbabu

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3 Replies

sbbau (Software) 18 November 2008

Hi Thanks a lot for your kind help.

Can you please provide some more details about take over of firm by Pvt Ltd Co.

After formation of the company, the company (including me as one of the directors) to pay me (or buy from me) for the existing firm. So I need an extra amount as my share capital for formation of the company and the company will pay the amount to me to take over the firm. Is my understanding is correct ?

Is Law defining something about the valuation of the firm ? Is it the value is only for the asset minus liabilities. Becuase I am running a software development firm and we have several source codes for many kind of software. Can I value the same and its Good will (according to the existing clients).

Thanks in advance

Regards

Sbabu

Manish Singh (Advocate) 19 November 2008

look there are two ways to do this.

1. you can incorporate a pvt compoany and then transfer all assets /liabilities to the com.

2. incorporate a co and then make it as a partner of ur firm.

make sure that the moa of the co specifies that the business of the partnetship shall be taken over by the co and AoA provides the power of directors to enter into agreements relating to acquisistion of business and liabilities etc of the firm.

and other thing mention in ur AoA that th shares ahll be issued to all the members of the firm in lieu of thier sahres in the partnership firm.