Formation Agreement To Convert A Partnership Into A Limited Company - Legal Draft

AGREEMENT

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:The

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.NOW

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

parties.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

canceled.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

director.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.IN

WITNESS WHEREOF the parties have put their hands the day and year first

hereinabove written.Signed

and delivered byWithin

named partnersMr.

L,Mr.MMr.

NIN

the presence of_________Witnesses1._____________2._____________