company property mutation francis

I have a family held Private limited company registered under ROC in Tamil Nadu state , Pvt limited company in its name is having land assets in Kerala state. 

The Private Limited company is intending to convert itself to a Limited Liability Partnership (LLP) as per the Registrar of Companies (ROC) act and Under Section 56 and the Third Schedule of the Limited Liability Partnership Act, 2008 .

Once we get approval from ROC for conversion of private limited company into Limited Liability Partnership (LLP) and receipt of Certificate of Registration on Conversion (Form 19). 

Any procedure that needs to be comply at concerned Sub Registration office to reflect the conversion from Pvt limited to LLP? to reflect in the Encumbrance certificate?

What are the procedures LLP should comply with Kerala revenue department / concerned Village office , for change of ownership

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 Dear Francis,

Here is a comprehensive legal analysis of your issue. I'll break it down step by step, covering the conversion process overview, the vesting of assets (including land in Kerala), post-conversion compliances with the Registrar of Companies (ROC), procedures at the Sub Registrar's Office for updating the Encumbrance Certificate (EC), and interactions with the Kerala Revenue Department/Village Office for mutation of ownership records. I'll reference key statutory provisions, rules, and practical steps, while highlighting potential challenges, timelines, costs, and best practices.

 1. Overview of Conversion from Private Limited Company to LLP.

Under Indian law, a Private Limited Company can convert to a Limited Liability Partnership (LLP) as per Section 56 of the LLP Act, 2008, read with the Third Schedule (for unlisted private companies). This is a streamlined process to facilitate business restructuring, offering benefits like reduced compliance, no minimum capital requirement, and tax advantages (e.g., no dividend distribution tax).

Eligibility Criteria (brief recap for context):

 The company must not be a Section 8 company (non-profit).

 All shareholders must become partners in the LLP.

  No security interest (e.g., charges) should subsist on assets unless consented to by secured creditors.

  The company should not have defaulted on statutory dues like taxes, PF, etc.

  Minimum 2 shareholders/designated partners.

- Conversion Process (as you've initiated):

  - Obtain name approval via Form LLP-1 (RUN-LLP).

  - File Form 2 (Incorporation Document) and Form 18 (Application for Conversion) with ROC.

  - Upon approval, ROC issues Form 19 (Certificate of Registration on Conversion), which confirms the LLP's incorporation and the company's dissolution.

  - The conversion is effective from the date mentioned in Form 19.

  - Post-conversion, file Form 3 (LLP Agreement) within 30 days, and update PAN, TAN, GST, etc., with respective authorities.

Your company is registered in Tamil Nadu (under ROC Chennai), but holds land in Kerala. The conversion is governed by central law (LLP Act), but property-related updates fall under state laws (Kerala Land Revenue Rules and Registration Act).

Key Legal Principle: Section 58(4) of the LLP Act states that upon conversion:

- All tangible (movable/immovable) and intangible property vested in the company automatically vests in the LLP.

- No further conveyance, assignment, or instrument is required for vesting.

- The LLP becomes the successor entity, liable for all obligations of the erstwhile company.

However, while vesting is automatic under corporate law, updating public records (e.g., land registers, EC) is a separate administrative requirement to ensure third-party notice and prevent disputes. Failure to update can lead to issues in future transactions, like selling the land or obtaining loans.

 2. Impact on Immovable Property (Land Assets in Kerala)

Since the land is in Kerala, the Kerala-specific laws apply for record updates:

Kerala Transfer of registry rules  1961  and Kerala Survey and Boundaries Act, 1961 govern land records and mutation.

Indian Registration Act, 1908(as applicable in Kerala) handles registration and encumbrance records.

 No stamp duty or registration fees are typically levied on the conversion itself, as it's not a "transfer" under the Indian Stamp Act, 1899 or Kerala Stamp Act, 1959. The MCA has clarified (via Circular No. 1/2013 dated 15.01.2013) that conversion doesn't attract stamp duty on immovable property vesting, treating it as a continuation rather than a fresh transfer. However, some states (including Kerala) may require nominal fees for record updates.

Precedents: In cases like M/s. Real Image Pvt. Ltd. vs. Registrar of Companies(Madras HC), courts have upheld automatic vesting but emphasized updating records for enforceability against third parties.

 3. Procedures at the Sub Registrar's Office (SRO) for Reflecting Conversion in the Encumbrance Certificate (EC)

The EC is a document issued by the SRO under the Registration Act, listing all registered transactions/encumbrances on a property for the past 30 years (or as requested). It doesn't automatically update upon corporate conversion; you must proactively inform the SRO to note the change.

Is Update Mandatory?

 Not statutorily mandated under LLP Act, but highly advisable. Without it, the EC may still show the Private Limited Company as owner, leading to complications in due diligence for buyers/lenders. Under Section 57 of the Registration Act, the Registrar can rectify records upon application.

Step-by-Step Procedure:

  1. Gather Documents:

     - Copy of Form 19 (Certificate of Registration on Conversion) from ROC.

     - Original title deeds of the land (showing the Private Limited Company as owner).

     - LLP Agreement (Form 3).

     - Board resolution from the erstwhile company approving conversion.

     - PAN/TAN of LLP.

     - Proof of land details: Survey number, village, taluk, district, extent (from Village Office records).

     - Affidavit from designated partners confirming the conversion and no change in beneficial ownership.

  2. File an Application for Notation/Rectification:

     - Approach the concerned SRO where the land is registered (based on property location in Kerala).

     - Submit a formal application (no prescribed form; use a stamped application under Kerala Stamp Rules) requesting "notation of conversion" or "rectification of records" under Section 57/89 of the Registration Act.

     - Attach documents and pay nominal fees (approx. ₹100-500 for search/notation; varies by district).

     - The SRO will verify and note the conversion in the index registers (Book 1 for deeds).

  3. Timeline: 15-30 days for processing. If delayed, escalate to District Registrar.

  4. Fees and Costs:

     - Search fee for EC: ₹60 per year searched.

     - Notation fee: Nominal (₹100-300).

     - No stamp duty, as confirmed by Kerala Registration Department guidelines.

  5. Outcome:Once noted, future ECs will reflect the LLP as the current owner/successor. If the original deed was registered, the notation acts as a "memorandum" under Section 89.

Potential Challenges: If the land has encumbrances (e.g., mortgages), obtain NOC from lenders. In rare cases, if the SRO disputes automatic vesting, you may need a court order (declaratory suit under Specific Relief Act, 1963).

 4. Procedures with Kerala Revenue Department / Village Office for Change of Ownership (Mutation)

Land ownership records in Kerala are maintained digitally via the Revenue Land Information System (ReLIS) under the Kerala Land Revenue Department. The Village Office handles "mutation" (Pokkuvaravu) to update the Thandaper Register (Basic Tax Register) and issue Possession Certificates.

- Legal Basis: Under Rule 16 of the Kerala trabsfer of registry Rules, 1968, mutation is required for any change in title/possession, including by operation of law (e.g., succession via conversion). It's not a title-conferring process but evidentiary.

- Is It Mandatory? Yes, for practical purposes: Updated records are needed for paying land tax (Thandaper), obtaining building permits, or transferring property. Non-compliance can attract penalties under the Land Revenue Act.

Step-by-Step Procedure:

  1. Gather Documents (similar to SRO):

     - Form 19, LLP Agreement, title deeds.

     - Latest EC from SRO.

     - Land tax receipts (showing payment under company's name).

     - Sketch/map of property (from Survey Department if needed).

     - Application form (Form No. 1 for mutation under Kerala rules).

     - Affidavit affirming no disputes.

  2. File Mutation (pokkuvatavu) Application:

     - Submit at the concerned Village Office (based on village where land is situated).

     

     - Request "mutation due to conversion of entity" – specify it's not a sale/transfer but succession under LLP Act.

     - Pay fees online/offline.

  3. Verification Process:

     - Village Officer (VO) inspects the site if needed.

     - Public notice may be issued (30 days for objections).

     - Approval by Tahsildar if complex.

  4. Timeline: 30-90 days (faster if online). Track via ReLIS portal.

  5. Fees and Costs:

     - Mutation fee: ₹500 per acre (minimal).

     - Survey fee if re-survey needed: ₹4000+.

     - No transfer duty, as it's not a conveyance.

  6. Outcome: Updated Thandaper in LLP's name; new Possession Certificate issued. Land tax will now be in LLP's name.

Potential Challenges: Delays due to backlog; if land is agricultural, check Kerala Land Reforms Act compliance. If disputes arise, appeal to Revenue Divisional Officer (RDO).

5. Additional Compliances and Recommendations.

- Tax Implications: Inform Income Tax Dept. via PAN update; no capital gains tax on vesting (ITAT rulings like ACIT vs. Celerity Power LLP). GST migration if applicable.

- Other Authorities: Update with banks, utilities, and any licenses (e.g., if land has factories).

- Timelines Post-Form 19: Complete updates within 3-6 months to avoid issues.

- Costs Estimate: ₹15000 to 20000 total (fees, professional help), excluding any legal fees.

- Best Practices:

  - Engage a consultant in Kerala  for filings.

  - Keep records digitized.

  - If multi-properties, batch applications.

  

In summary, while the conversion automatically vests the land in the LLP, proactive updates at SRO and Village Office are essential for clean records. This ensures smooth future dealings. 

If you provide more specifics (e.g., district, land details), I can refine this further. 

Best regards,  

James Joseph Adhikarathil.