Conversion of Private Limited to Public Limited
A Public Company has seven or more members and can invite public to subscribe to its shares. A subsidiary company of a Public company is deemed to be a Public company.
A Private company is an organization which limits its number of members to 200 and cannot invite public to subscribe to its shares. The Companies Act, 2013 provides for converting a Public Company to a Private Company by altering the MOA and AOA of the company.
The main advantage of Public Company is that it can raise reserves at a large scale without approaching banking system and reducing debt whereas Private Companies which are privately owned, all the reserves are raised by existing members, shareholders and promoters. If a Private company goes public then the risk is also shared among the shareholders. Public companies once recorded, get indirect promotions and support through stock exchange websites where their stocks are recorded.
PROCEDURE/STEPS FOR CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY
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S. No. | STEPS | ACTION |
| A. | BOARD MEETING | ISSUE NOTICE in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors. Main agenda for this Board meeting would be: |
| (Process of Appointment of Director given in my separate Article)
(Process of increase in authorized capital given in my separate Article) | AGENDA:Pass Board resolution for increase in No. of Directors. (Minimum 3 Directors) Pass a board resolution to get in principal approval of Directors for increase in authorized capital of the Company. Fix date, time and place for holding Extraordinary General meeting (EGM) to get approval of shareholders, by way of Special/ Ordinary Resolution, for increase in authorized capital of the Company. To approve notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013; To authorize the Director or Company Secretary to issue Notice of the Extra-ordinary General meeting (EGM) as approved by the board. | |
| B. | NOTICE OF GENERAL MEETING: | Provisions of the Section 101 of the Companies Act 2013 provides for issue of notice of EGM in writing to below mentions at least 21 days before the actual date of the EGM: Ø All the Directors. Ø Members Ø Auditors of Company |
| C. | CONVENE A GENERAL MEETING: | Check the Quorum. Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146). Pass Special Resolution.[Section-114(2)] to get shareholders approval for increase in authorized capital of Company. Approval of Alteration in MOA. |
| D. | ROC FORM FILING | For alteration in Article of Association for conversion of private company in public Company under section 14, few E-forms will be filed with concerned Registrar of Companies at different stages as per the details given below |
| E- Form MGT.14 | As per Section 117(3)Copy of this special resolution is required to be filed with concerned ROC through filing of form MGT.14 within 30 days of passing special resolution in the EGM | |
| ATTACHMENT:i. Notice of EGM along with copy of explanatory statement under section 102; ii. Certified True copy of Special Resolution; iii. Altered memorandum of association; iv. Altered Articles of association v. Certified True copy of Board Resolution may be attached as an optional attachment. | ||
| It is relevant to note that First you have to file form MGT 14 as SRN No. of form MGT 14 will be used in form INC 27 | ||
| E- Form INC.27 | Accordingly an Application for conversion of a private company into a public company is required to be filed in e-Form INC 27 to the ROC concerned, with all the necessary annexure and with prescribed fee. | |
| ATTACHMENT:i. It is mandatory to attach Minutes of the member s meeting where approval was given for conversion and altered articles of association. ii. No need to attach copy of order of Competent Authority. iii. Altered Articles of Association. iv. Other information if any can be provided as an optional attachment | ||
| Note: Some ROC require following further documents in INC-27. i. Affidavit from Director or MD or WTD stating following: Letter of no objection have been obtained from all creditors /Debentures holders. No demand from Sales Tax or Income Tax or Excise is pending ii. Certified list of Creditors of the Company as on date of EGM. iii. Certified list of Members of the Company as on date of EGM. iv. Proof of filing of statutory report with ROC. v. List of cases pending before any court of Law where company is a party. | ||
| If ROC satisfied then ROC shall close the former registration and issue fresh certificate of incorporation, after registering the documents submitted for change in class of company. | ||
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POST CONVERSION REQUIREMENTS |
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A. |
Arrange new PAN No. of the company |
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B. |
Arrange new stationary with new name of the Company |
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C. |
Update company bank account details |
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D. |
Intimate all the concerned authorities like Excise and sales tax etc about the status change |
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E. |
Printed copy of new MOA & AOA. |
SAMPLE SPECIAL RESOLUTION:
Sample Special Resolution for conversion of a Private Company into a Public Company
The common differences between a private and public limited company are as follows
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Features |
Public limited company |
Private limited company |
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Minimum members |
7 |
2 |
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Minimum directors |
3 |
2 |
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Maximum members |
Unlimited |
200 |
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Minimum capital |
500000 |
100000 |
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Invitation to public |
Yes |
No |
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Issue of prospectus |
Yes |
No |
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Quorum at AGM |
5 Members |
2 Members |
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Certificate for commencement of Business ( Mandatory) |
Yes |
No |
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Term used at the end of name |
Limited |
Private Limited |
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Managerial remuneration |
No restriction |
Can not exceed more than 11% of Net Profits |
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Statutory meeting (Mandatory) |
Yes |
No |
