FORMATION AGREEMENT TO CONVERT A PARTNERSHIP INTO A LIMITED COMPANY
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:
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.
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.
8. The initial expenses
required for registration of the company will be contributed by the parties in
equal shares and the same will be reimbursed to them by the company after
registration of the company.
9. The parties hereto
will be the first Directors of the Company and the Board of Director will be
constituted after the registration of the company in terms of the Articles of
Association. The total number of Directors shall not be more than five.
10. On the registration
of the company the parties agree to transfer the business of their said
partnership together with all assets and liabilities and together with its
goodwill and the benefit of subsisting contracts entered into by the
partnership, by executing a Deed of Assignment of the business as a going
concern in terms of the draft that will be prepared by the legal adviser of the
11. No invitation to the
public to apply for allotment of shares of the issued capital to be fixed by
the Director will be made until the shares to be allotted to the parties in
cash as well as fully paid are allotted to the parties hereto and other
subscribers to the Memorandum of Association.
12. This agreement is
provisional only and shall not be binding on the company until the date on
which company is entitled to commence business under S. 149 of the Companies
Act and on that date it shall become binding on the company formally adopting
the same. In case that event shall not happen this agreement will be treated as
13. On the registration
of the company and the company becoming entitled to commence business, the
Board of Director to be constituted as aforesaid will adopt this agreement so
as to be binding on the company. A formal agreement will be entered into
between the company and the parties for adopting and confirming this agreement.
14. After the business of
the said partnership is assigned to the company as aforesaid, the said
partnership will be treated as dissolved and no party will be liable to pay any
amount to the other in respect of such partnership. It is, however agreed that
if any of the creditors does not accept the company as debtor for the amount,
due to him on any account, the amount due to such creditor or creditors will be
payable and paid by the parties hereto in proportion of their respective shares
in the partnership and the valuation of the said business will be increased to
that extent. The consent of the creditors to the transfer of the liability of
the partnership to the company will be obtained before the transfer of the
business to the company. A formal Deed of Dissolution will be executed by the
parties and intimation of dissolution will be filed with the Registrar of Firms
and advertised as required by law.
15. The parties agree
that so long as they will be directors and share holders of the company, none
of them will start a similar business or be directly or indirectly interested
in a similar business as that of the company.
16. The parties agree
that none of them will exercise any vote for removal of any of them as
17. The costs of and
incidental to the execution of the Deed of Assignment of the business by the
parties hereto will be borne by the company.
18. The liability to pay
capital gains tax on transfer of the said business will be that of the parties
in proportion to their shares in the partnership and the parties will indemnify
the company against such liability.
WITNESS WHEREOF the parties have put their hands the day and year first
and delivered by
the presence of_________