Running a business in India can be messy if you don’t formalise it.That is why Section 366 of Companies Act, 2013 exists. It enables some of the existing entities-like partnership firms, LLPs, cooperative societies-to become companies under the Act. Not just any company. They can choose to be private, public, unlimited, or even limited by guarantee. The point? Limited liability, structured governance, and better growth opportunities.
So, what exactly is Section 366 of Companies Act 2013?
It’s a legal framework allowing eligible entities to register as companies. Eligible entities include:
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Partnership firms
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Limited Liability Partnerships (LLPs)
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Cooperative societies
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Other statutory or unregistered entities
Converting means adopting corporate governance, which makes it easier to get finance, attract investors, and operate formally under the law. Small entities or informal partnerships benefit big time.
Objectives and Benefits
Why do this? A few reasons:
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Legal pathway to become a company with limited liability.
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Business credibility — banks, investors, and clients take you more seriously.
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Facilitates growth — easier to raise capital, expand, hire professionals.
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Compliance — transparent, accountable, and legally correct.
Basically, it reduces personal liability and improves governance.
How to Register Under Section 366
The process is detailed but manageable:
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Check eligibility — partnership, LLP, cooperative, or other eligible entity.
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Meet member requirements — private companies need fewer than seven members in some cases.
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Draft a conversion scheme — type of company and structure.
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File Form URC-1 with ROC — details of entity, members, share capital, registered office.
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Publish a public notice — invite objections from creditors or stakeholders.
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ROC approval — Certificate of Incorporation is issued, formalising the conversion.
This ensures legal compliance and transparency, protecting both members and public interest.
Eligibility Criteria
Not everyone can convert. Requirements include:
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Existing legal entity like partnership firm, LLP, cooperative, etc.
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Minimum member compliance.
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Proper financial records — capital, assets, liabilities.
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No pending litigation or objections undisclosed.
Types of Companies Eligible
Entities can choose:
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Private Company — for small businesses, limited liability.
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Public Company — plan to raise capital from public.
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Unlimited Company — members bear unlimited liability.
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Company Limited by Guarantee — often for non-profits.
Choosing the right type impacts liability, compliance, and governance.
Advantages of Conversion
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Limited liability — members’ personal assets protected.
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Legal recognition — credibility with banks and regulators.
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Structured governance — board, shareholders, statutory compliance.
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Growth opportunities — easier to fund, merge, or expand.
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Tax benefits — corporate tax provisions available.
Practical Considerations
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Documentation — Form URC-1, financials, member details.
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Objection handling — creditors or stakeholders may object.
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Post-conversion compliance — filings, audits, reporting.
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Professional support — legal/accounting guidance recommended.
Stakeholder Implications
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Members — limited liability, better governance.
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Creditors — clearer assets and obligations.
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Employees — contracts aligned with new company.
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Regulatory authorities — ROC monitors compliance.
Conclusion
Section 366 of Companies Act 2013 provides a structured, legal way for partnerships, LLPs, cooperative societies, and other entities to become companies. It ensures limited liability, governance, access to finance, and growth opportunities. Follow the procedure — Form URC-1, public notices, ROC approval — and your business transitions smoothly into the formal corporate ecosystem.
For guidance on converting under Section 366, visit Callmyca.com for professional support to ensure smooth, legally compliant registration.
