Conversion of Private limited to Public Limited Company

Introduction

As per companies act 2013, a private limited company is a company incorporated under this act or previous act having a restriction in articles for not transferring its shares to the public and the maximum number of members is not more than 200. Were as a public company is a company which is not a private company.

As per section 14 of the company’s act 2013, a company should alter its article for having the effect of conversion private to a public limited company. So private companies need t to alter its article and need to remove its restriction form article for being a public company along with fulfilling the criteria for being a public company.

For conversion of the company private to a public company need to follow provision led down under section 18 and 14 followed with rule 33 (incorporation) rules 2014

A prerequisite condition for being a public company

1. Minimum number of the member should be 7
2. Minimum number of director should be 3
3. Minimum number of paid-up capital should be 5 Lakh

Procedure for conversion

• Commence board meeting: call a board meeting and pass the resolution

1. For approving the conversion
2. For the increasing board of director from 2 to 3
3. For the increasing number of the member from 2 to a minimum 7
4. For fixing date, time and place for EGM
5. Approving the notice and agenda for EGM

• Hold EGM: hold EGM and pass the necessary resolution for :

1. Alteration of article
2. Alteration Memorandum (name clause) and to increase capital if required
3. Approval for conversion

• The Article should be amended in such manner that they would-

1. no longer contain the provisions which, under clause (68) of Section 2 of the Act, are required to be included in its articles in order to constitute it a private company;
2.  include all the provisions, which are required to be contained in the articles of a public company; and
3. remove all the provisions which are inconsistent with the requirements of a public company

• File Form MGT-14: File form MGT-14 within 30 days from the date of passing the resolution to concerned ROC
• Increase number member to 7 if required
• Increase the number of director to 3 if required
• A copy of the order approving the alteration shall be filed with the Registrar in Form INC – 27, together with a printed copy of the altered articles, within fifteen days of receipt by the Central Government of the order.
• Obtain a fresh Certificate of Incorporation from the Registrar of Companies after the conversion of a private company into a public company
• Inform all concerned persons/authorities of the conversion of the company from a private company to a public company and of the change of its name, in particular to Central Excise Authorities, Income Tax Authorities, Sales Tax Authorities of different States, Customs Authorities, Chief Factory Inspector, National Provident Fund Commissioner, other regulatory authorities, suppliers of raw materials
• To have printed stationery with the new name and/or affix rubber stamp of the new name on all current stationery items including blanks of share certificates.

Benefits of conversion

1. The Company can transfer its share easily
2. The company can have a member more than 200
3. The company can issue shares publically
4. The company can list its share on any stock exchange
5. The Company ca raise capital form public