Conversion of Private Company into Public Company

Convert Private Limited Company Into Public Company

What is a Private Company?
According to the Companies Act, 2013, a private limited company is a company with a minimum of two members and maximum of 200 having no right to transfer their shares and also cannot offer its shares to the general public. The minimum paid up capital of such companies are Rs 1,00,000. The liability of these companies are limited only upto the amount of shares held by them. It uses the word “private limited” after its name.

What is a Public Company?
According to the Companies Act, a public company means a company where it has a minimum of 3 members and no limit for maximum. It can invite and offer its shares and debentures to the general public. It has a minimum paid up capital of Rs 5,00,000. It does not restrict the rights of its members to transfer their shares. It uses the word “limited” after its name.

Conversion of Private Company into a Public Company - With the amendment of the Companies Act, 1956 into Companies Act,2013 the rules and provisions for the conversion have been altered.

Companies Act, 1956 Under the Companies Act, 1956 one can convert a private limited company into a public limited company either,

Voluntarily (Act of volition) A private company can voluntarily opt for conversion into a public company under Section 44 of the Companies Act, 1956.

By reason of default Under section 43 of Companies Act, 1956, where a Private limited company fails to abide by the articles prescribed in section 3 (1)(iii) which is related to the definition of a private limited company. Under these conditions the company shall be liable for conversion by default as per the Companies Act, 1956.

Companies Act, 2013 Here the provisions for such conversion are given in Section 14, Section 18 of the Companies Act 2013 and Rule 33 of the Companies (Incorporation) Rules 2014. E- form INC. 27 is required to be filled and submitted for this conversion.

A brief introduction to Rule 33 Rule 33 includes the rules for the alteration of articles. The provisions such as,

a. An application form that is form number INC. 27 (with the fee) is to be filed for conversion of a private company into a public company.

b. A copy of order from the competent authority (Central Government) approving such alteration shall be filed with the registrar in form number INC. 27 (with fee) along with the copy of the altered articles. It is to be submitted within 15 days of the order from the Central Government.

Conversion of companies already registered (Section 18) - Under Companies Act, 2013, Section 18 allows an existing company to convert itself into a public company by altering its memorandum of association (MOA) and articles of association (AOA). Section 13 allows for the conversion of memorandum of association whereas section 14 allows such alteration for articles of association.

Altering the Articles - As per the definition of a private company, it contains certain restrictions as to the number of members, directors, shares, etc. which should be redrafted in terms of a public company to remove such restrictions. New articles are required to be drafted and adopted for the conversion process.

Procedure for Conversion of a Private Limited Company into Public Limited Company

Following are the detailed procedure for such conversion:-

Conducting a Board Meeting - Conducting a board meeting in accordance with the provisions of section 173 (3) of the Companies Act, 2013 with the board of directors. The main agenda for such meeting includes:-

To pass a resolution to get the approval of the directors for search conversion.

To fix a date, time and place for holding EGM (extraordinary general meeting) to get the approval of shareholders by passing a special resolution for such conversion.

As per section 102 (1) of the Companies Act, 2013 approving the notice of EGM along with the agenda and explanatory statement.

To authorise the director to issue notice of such EGM.

2. Issue of EGM Notice - According to the provisions of section 101 of the Companies Act, 2013 issuing the notice of search EGM to all the members, directors and auditors.

3. Conducting search extraordinary general meeting Holding and conducting the EGM on the fixed date, time and place for the passing of the necessary special resolution and getting the approval of the shareholders.

4. Filing the form with the ROC (Registrar of Companies) For the alteration of the articles and necessary conversion under section 14, few forms are required to be filed with the registrar of companies such as:-

E - form MGT.

Notice of EGM along with an explanatory statement.

Certified copy of special resolution

Altered Articles of Association

Altered Memorandum of Association

E- form INC. 27

Minutes of the Board meeting are to be attached where such conversion approval was given.

Altered Articles of Association

Certified copy of Board resolution

Once all the necessary procedures are completed and filed with the ROC, the ROC will scrutinize the documents and satisfy itself if the company has complied with all the provisions. Then the ROC will issue a fresh Certificate of Incorporation to the company. In section 18 (3), it is stated that such conversion does not affect the debts, liability, obligation or contracts of the company before conversion. Once the conversion is done, the company can issue a public notice for such conversion and also give such notice to the excise, sales and income tax departments. Arranging a new PAN no and updating the company bank account details is important.

If you want to convert a Private Limited Company into Public Limited Company, get in touch with us today.