Private Limited To Public Limited

A Private company is an organisation which limits its number of categories to 200 and cannot invite the public to contribute 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 business.

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Overview of Private Limited Company and a Public Limited Company

  • Private Limited Company

    Any Private Limited company meant to get operated for small companies. The liability of the features of a private restricted company is assigned to the number of shares personally held by them. The legacy of a private limited company can't be shared or updated.

  • Public Limited Company

    A company whose shares are purchased on a stock exchange and can be obtained and traded by anyone. It is also called a publicly held company. A public limited company, like the signature, signifies that the business offers shares to the public. A public limited company following the company's Act 2013 is a company that has limited liability and contribute shares to the general public. Anyone can acquire its stock, either privately through (IPO) 'Initial Public Offering' or trades on the stock market.

Subjects on Conversion of Private Limited to Public Limited

  • A Public Company possesses seven or more members and can invite the public to contribute to its shares. A subsidiary corporation of a Public company is meant to be a public company.
  • A Private company is an organisation which limits its number of categories to 200 and cannot invite the public to contribute 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 business.
  • The main benefit of Public Company is that it can raise resources at a large scale without addressing the banking system and reducing debt. In contrast, Private Companies which are privately controlled, all the funds are raised by existing members, shareholders and promoters. If a private company goes public, then the opportunity is also shared between the shareholders. Public companies once registered, get indirect promotions and support through stock clearinghouse websites where their stocks are recorded.
  • Earlier, the National Company Law Tribunal (NCLT) influences the conversion of Public Company into Private Company. Various amendments took place in Companies Act, 2013 and NCLT has a lot of responsibilities. Since 2013 Act came into effect, NCLT has the discretion to entertain the winding-up Petitions earlier same was given by the High Courts.

Conversion by Negligence

  • Wherever a private company performs a default in complying with the legal requirements as laid down in Sec. 3(1)(iii) of the Companies Act (i.e., if its association exceeds fifty, it allows the free transfer of shares, or invites the public to subscribe to its shares or debentures), it becomes a public company naturally.
  • The 'Company Law Board may relieve the corporation from being entertain as a public company on any terms and conditions as it thinks just and equitable only if it believes that the default was due to inadvertence or accident or some other sufficient cause.
  • It is to be remarked that a private company which displays a public company automatically under the preceding provisions need not comply with any legal ceremony. Again, notwithstanding the conversion, such a company may hold the features of a private company, i.e., it can have limitations as to transfer of shares, company and public subscription. It can proceed to have only two 'members' and 'two directors'.
  • Section 43-A sub-section (1) opines that a private company would be meant to be a public company where twenty-five per cent or more of its paid-up share capital.

Conversion by Operation to Convert Private LTD to Public Company

  • Section 43 a proposed by the Companies (Amendment) Act, 1960 attached a new class of organisations of "Considered to be Public Company".
  • Private businesses are released from the operation of several divisions of a Companies Act and enjoy exceptional opportunities, particularly on the ground that they are family businesses in which the public is not immediately entertained.
  • However, it is well known that there are many private companies with significant capital doing great business and controlling various public companies. This got made feasible because funds of other companies, public and private, are advanced in such companies.
  • The predicament of private companies has always remained somewhat tricky. On the one hand, there are individual private companies which are zero but a glorified partnership. On the other hand, there are private companies whose services, financial and industrial, are far more comprehensive than those of many public organisations.
  • The Companies (Amendment) Act, 1960 attached a new section 43-A planning to deal with those private companies which operate free money in no small amount but escape the limitations and restrictions as to disclosure as applying to public companies.
  • The Companies (Amendment) Act of 1974 and 1988 have considerably enlarged the Section 43-A by including three new sub-sections-(1A), (1B) and (1C).

Documents Needed for Conversion of Private Company to Public Company

  • PAN Card: PAN Card of shareholders and Directors
  • Foreign nationals must provide a valid passport.
  • Identity Verification: Voter ID/ Passport/ Driving License of Shareholders and Directors
  • Address Proof: Telephone Bill /Electricity Bill/ Latest Bank Account Statement of Shareholders and Directors
  • Photograph: Latest Passport size photo of Shareholders and Directors
  • Business Residence Proof: Electricity Bill/ Telephone Bill of the certified office address
  • NOC from the landlord: No Objection Certificate to be collected from the owner(s) of certified office
  • Rent Lease: Rent Agreement of the certified office should be granted if any.
  • Memo: In case of NRI or Foreign National, documents of the director(s) must be notarized
  • Incorporation certificates: Declaration of Incorporation, MoA & AoA to be presented
  • Financial Statements: Duly attested copy of latest audited Financial Statements
  • Income Tax Return: ITR filed for the previous fiscal year to be submitted

Minimum Requirements for Conversion

  • DSC for 1 Director
  • Minimum 7 Shareholders
  • DIN for all directors
  • Minimum Authorized Share Capital of Rs 5lacs
  • Minimum Paid-up Share Capital of Rs.5lacs
  • Director and shareholder can be the same person
  • Minimum 3 Directors

Procedure Concerning Conversion of Private Limited Company to Public Limited Company

  • Fulfil our Simple Form
  • For further schemes, details furnished by you will be verified by our experts.
  • After presenting your documents, we will draft/modify MOA/AOA for your Company.
  • We will organize your documents and credentials and file them with ROC.
  • Once your Corporation is incorporation, we send you all the reports and DSCs.

Prospectus - Conversion of a Private Company into a Public Company

  • Statutory Requirements related to Conversion of Private Company into Public Company are stated in 'Section 18 and 14' of the Companies Act, 2013 showed with 'Rule 33' of Companies (Association) Rules, 2014.
  • 'Section 14 of Companies Act, 2013' plays an indispensable role during the Conversion of Private Limited Company into Public Limited Company.
  • The Conversion of Private Limited Company into Public Limited Company requires alteration of the article of association (AOA) of Private Company 'u/s 14' which cannot be done externally passing a special resolution of Stockholders in the General Meeting.

Legal Provisions - Sections and Rules of Companies Act, 2013 Essentially Applicable for Conversion

  • Section 2(68) and 2(71): Description Of Private And Public Company 
  • Section 3: Establishment of Company
  • Section 13 held with Rule 29 of Companies (Incorporation) Rules 2014: Modification of Memorandum of Association(MOA)
  • Section 14 read with Rule 33 of Companies (Incorporation) Rules 2014: Exchange/Remodelling of Articles of Association
  • Section 18: Conversion of Companies Previously Registered
  • Section 149: Company to have a Board of Directors

Plans and Schemes: Step-By-Step

  • Section 13 of the Act articulates about the alteration of memorandum Company can change memorandum in terms of 'S. 61 of the Act'. This Section disclosed about any changes in the capacity of protocol for that determination prior permission of the central authority is needed. This Section additional provisions that no such consent is required on account of exchange if addition/ deletion concerning the word "Private" determines if the entire name is changed in that circumstances, prior approval is needed as envision in said Section.
  • Section 14 of the Act articulates about the modification of memorandum and conversion in Public Company into Private Company, and it is also mentioned that prior permission is required. Also, we need to understand this Section with Companies Incorporation (Fourth Amendment) Rules 2018, wherein the circumstances scheme for the conversion of Public Company into Private Company has been discussed and elaborated.
  • Section 18 of the Act speaks about the conversion of Companies which are already registered under the provisions of the Act. Section 18 states that a Company of any class may convert itself a Company of another category under the provisions of the Act by alteration of memorandum and articles of the Company in terms of the relevant chapter relating to the Section 18 of the Act. Absolute compliance is required to be done, and the registrar should satisfy with the said compliances. This Section further states that registration of the Company under this Section shall not affect any debts, liabilities obligations or contracts means assumed liabilities cannot carve out the mere conversion of Public Company into Private Company.
  • As discussed earlier 14 of the Act, a Public Company may transform into a Private Company with prior permission from the Central Government. The conversion of Public Company into Private Company has been explained in the Companies Incorporation (Fourth Amendment) Rules, 2018. The Central government has vide power to change said rules. These rules are revised from time to time. Because of this, we require to update recent announcements that are updated on time to time at the website of MCA.

Customary Rules: Procedure for Secretarial Tests

The Committee meeting shall be commended for the conversion arrangements. All customs as per secretarial tests shall adhere to the said meetings because it's a crucial part in courses of the conversion procedure. The Board supports the conversion procedure, and the minutes of the meeting should be drafted carefully.

  • The Company shall approve any delegate to act on behalf of the Company for further conversion method. One Certified True Copy of recommendation may be claimed on behalf of the Company in favour of an expert to serve the Company before the Regional Director.
  • The General Meeting of the Company shall be called.
  • The General Meeting shall vote for the conversion of the Company.
  • The following E form should be filed on the decision of conversion of the Company. S. 117 of the Companies Act, the commission to file specific certificates at the time of said filling. The said records should be carefully offered.
  • The necessary request for conversion shall be drafted and presented before the Regional Director.
  • The said letter has to file within 60 days from the passing of the said determination/resolution. The documents /declarations, as specified in the said Rule 41, requires to be submitted before Regional Director forward with the appeal.
  • Also, particulars, as mention in Rule 41 (2) shall be provided before the RD.
  • A list of lenders and debenture holders needs to be annexed with said statement. Due amounts, claims and liabilities, contingent and unpredictable debt details required to be added.
  • Moreover, the duly confirmed copy of the list of creditors and debenture holders shall be kept at the registered office the same can be verified and inspected during the ordinary hours of business.
  • The Company has to file Form NO INC 25 A in vernacular and English language.
  • After submission of said details RD may seek additional information, details the same need to be submitted in 15 days in E Form No. RD GNL -5. The applicant cannot file more than two resubmissions. RD may reject the application within 30 days after the submission of the application.
  • If no order of approval or rejection or resubmission has been passed by the RD then said the use is deemed to allow and automatically law would be given.
  • If any objection has been received, the same shall be recorded in writing RD shall conduct hearing within 30 days upon the receipt of the said objection. If any consensus reaches the Company can apply to the agreement. The RD shall pass an order within 30 days.
  • In the case where no consensus is received then, RD can reject the palliation within 60 days.
  • Conversion shall not pass if any prosecution is pending against the Company.
  • No trial is pending or envisaged then RD should allow conversion.
  • The Conversion order has to file in Form No. INC 28. Within 15 days upon receipt of the law.
  • The procedure described above has been prescribed in the said rules. 


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