CA Inter P2 · Chapter 11 · Question 11 of 11
Under section 56 read with the Third Schedule, a private company may apply to convert into an LLP only if:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) There is no security interest in its assets subsisting or in force at the time of application, and the partners of the LLP will comprise all the shareholders of the company and no one else
Explanation
The Third Schedule permits a private company to convert into an LLP only where there is no security interest in its assets subsisting or in force at the time of application. The partners of the LLP must comprise all the shareholders of the company and no one else. On conversion, the company's property, rights and liabilities vest in the LLP and the company is deemed dissolved.
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