Conversion – Private Company to Public Company: As every organization wants to explore new markets, opportunities and expand their businesses, they wish to have a form of corporate organization structure that supports their demand for capital and scale of operations together with sustainable governance and superintendence.
If you have started your business as a Private Limited Company and wish to expand your business and explore new opportunities, then converting your private company into a public company is the best option.
Let’s begin with understanding about ‘public limited Company’ and the procedure for conversion of your existing Private Limited Company into a Public Limited Company.
Meaning of Public Company:
“Public Company” means a company which—
(a) is not a private company; or
(b) a company that is a subsidiary of a Public Company.
Advantages of Public Limited Companies
(a) Unrestricted transfer of Shares: Shares of Public Companies are freely transferable subject to Companies, Act 2013 and SEBI Regulations.
(b) Greater Brand Recognition: Public Companies attract public attention and create a brand identity.
(c) Raising Capital from Public: Public Companies can raise huge capital from the Public, in India, and globally by listing themselves in Stock exchanges.
(d) Limited Liability: Even after conversion from a Private Limited Company to a Public Limited Company, the limited liability concept remains.
(e) Deposits: Public Companies can accept deposits from the public subject to the provisions of the Companies Act, 2013 and the rules made thereunder.
(f) No Limit on Number of members: there is no limit on the number of members in the public limited company.
AT GLANCE: Statutory requirements for the conversion of a private company into a public company;
- Amendment in the Name clause of the Memorandum of Association is to be made to exclude the word ‘Private’.
- Alteration in the Articles of Association is to be done in such a manner that they no longer include the restrictions of a private limited company.
- The number of members needs to be increased to at least seven.
- The number of directors needs to be increased to at least three.
- All the annual returns or financial statements due for filing with the Registrar must be filed.
- The Company must have paid or repaid all the matured deposits or debentures or interest thereon.
STEP-WISE PROCEDURE: TO BE FOLLOWED FOR CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY:
1. Conduct a Meeting of Board of Directors to pass the Board Resolution for:
- Alteration in the Memorandum and Articles of Association of the Company.
- Conversion of Private Company into a Public Company
- Fixing the date, time, and venue of the General Meeting for shareholder’s approval.
2. Conduct and Convene General Meeting to pass a Special Resolution for:
- The conversion of Private Company into Public Company and altering the Memorandum and Articles of Association for such conversion.
3. Filing of e-Form MGT-14 with the ROC:
- An e-Form MGT-14 shall be filed with the Registrar of Companies within 30 days of passing a Special resolution in the General Meeting.
4. Application in e- Form INC-27 with the ROC:
- An application in e-Form INC-27 has to be filed with the Registrar along with prescribed fees within fifteen days of passing of Special Resolution along with the necessary attachments.
5. Application in e- Form INC-27 with the ROC:
- An application in e-Form INC-27 has to be filed with the Registrar along with prescribed fees within fifteen days of passing of Special Resolution along with the necessary attachments.
Post Compliances: Conversion of Private Company into Public Company:
- Necessary alterations have to be made on every copy of the memorandum or articles as the case may be.
- The Company has to paint or affix its new name and Corporate Identity Number outside of every office or place in which its business is carried on, also in all its business letters, billheads, letter papers, and in all its notices and other official publications.
- The name has to be engraved in legible characters on the seal of the Company if any.
- The new name shall be intimated to all the Banks, authorities, and other Basic Utility Service providers as applicable.
- Intimation of the amendment in the form of organization is to be made under other Acts like GST, Shop & Establishment Act, Factories Act, EPFO, ESIC, Income Tax, etc; wherever the company is registered.
