Wednesday, October 13, 2021
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Conversion of a Private Company into a Public Company

Conversion of the status of the company from private limited to public limited would become effective form the date of receipt of the approval of the ROC through the change of name would become effective on the issue of fresh Certificate of Incorporation.

Regulatory Requirement: 

Legal Provisions related to Conversion of Private Company into Public Company are given in Section 18 and 14 of the Companies Act, 2013 read with Rule 33 of Companies (Incorporation) Rules, 2014.

Section 14 of Companies Act, 2013 plays an important role during the conversion of a private company into a public company. Conversion of a Private company into a Public company involves alteration of the article of association of Private Company u/s 14 which cannot be done without passing a special resolution of Shareholders in the General Meeting.

 

Step 1. Calling of Board Meeting: 

Issue notice under the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors. The main agenda for this Board meeting would be: 

  • Pass a board resolution to get in-principal approval of Directors for the conversion of a private company into a public company by altering the AOA. 
  • Fix date, time and place for holding Extra-ordinary General meeting (EGM) to get an approval of shareholders, by way of Special Resolution, for the conversion of a private company into a public company. 
  • To approve the 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 under clause 1(c) mentioned above. 
  • Pass Board Resolution for the increase in No. of Directors up to 3, if the director is less than 3.

Step 2. Issue of EGM Notice: 

Issue Notice of the Extra-ordinary General meeting (EGM) to all Members, Directors and the Auditors of the company under the provisions of Section 101 of the Companies Act, 2013

Step 3. Holding of Extra-Ordinary General Meeting: 

Hold the Extra-ordinary General meeting (EGM) on the due date and pass the necessary Special Resolution, to get shareholders’ approval for Conversion of Private Company into a Public company along with alteration in articles of association under section 14 for such conversion.

ROC Form filing: For alteration in Article of Association for the conversion of Private Company into a 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:

Step 4. E-form MGT-14:

For filing special resolution with ROC, passed for conversion of Private Company into a Public company.

In case of alteration in Article of Association for the conversion of Private Company into a Public Company Special

resolution is required to be passed under section 14. Accordingly, as per section 117(3)(a), a copy of this special resolution is required to be filed with concerned ROC through the filing of form MGT-14 within 30 days of passing a special resolution in the EGM. 

Attachments of E-form MGT-14: 

i. Notice of EGM along with a copy of the 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.

Step 5. E-form INC-27:

 Application for conversion of a private company into a public company

As per Rule 33 of Companies (Incorporation) Rules, 2014, for effecting the conversion of a private company into a public company or vice versa, the application shall be filed in Form No. INC-27 with a fee. 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 annexures and with the prescribed fee.

Attachments of E-form INC. 27: 

i. It is mandatory to attach Minutes of the member’s meeting where approval was given for conversion and altered articles of association. 

ii. Altered Articles of Association

iii. Certified True Copy of Board Resolution may be attached as an optional attachment. 

iv. Other information if any can be provided as an optional attachment(s)

Step 6. New Certificate of Incorporation by ROC

After receiving the documents for the conversion of a Private Company into a Public Company, ROC shall satisfy itself that the Company has complied with the requisite provisions for registration of the company. If so satisfied, ROC shall close the former registration and issue a fresh certificate of incorporation, after registering the documents submitted for change in class of company.

Post Conversion Requirements

  • A. Arrange new PAN No. of the company.
  • B. Arrange new stationery with the new name of the Company.
  • C. Update the company bank account details.
  • D. Intimate all the concerned authorities like GST and Income Tax etc. about the status change
  • E. A printed copy of the new MOA & AOA.
  • F. If the number of members is less than seven, it must be raised to at least seven.
  • G. If the number of directors is less than three, it must be raised to at least three.
  • H. The word ‘private’ shall be deleted before the word ‘limited’ in its name.

“DRAFT SPECIAL RESOLUTION”

Draft Special Resolution for the conversion of a Private Company into a Public Company

SPECIAL BUSINESS

ITEM NO.-1

Conversion of Company into Private Limited Company

To consider and if thought fit, to pass with or without modification(s), the following Resolution as a Special Resolution:

RESOLVED THAT pursuant to provisions of Section 18 read with the provisions of Section 13 and 14 of the Companies Act, 2013 and subject to the approval of the Central Government and members by way of special resolution at the general meeting of the company be converted into the private limited company and the name of the company be changed from _______________________________ LIMITED to _______________________________ PRIVATE LIMITED by addition of the word “PRIVATE” before the word “LIMITED.

FURTHER RESOLVED THAT a new set of Articles of Association as applicable to Private Company as placed before this meeting be approved and adopted a new set of Articles of Association of the company

FURTHER RESOLVED THAT Mr. __________________ (DIN: ______________), director of the company, be and is hereby authorized to make an application to the Registrar of Companies, NCT of Delhi and Haryana, in the prescribed form and file the requisite e-forms and to do all such acts, deeds and things as may be required to give effect to the above-said resolution.

FURTHER RESOLVED THAT ___________________, ACS-_______________ CP-___________, be and is hereby authorized to certify all the e-forms filed in the course of giving effect to the above said resolution.

ITEM NO.-2

To modify the Memorandum of Association as per Companies Act, 2013

To consider and if thought fit, to pass with or without modification(s), the following Resolution as a Special Resolution:

RESOLVED THAT according to the provisions of Section 13(1) and (9) and all other applicable provisions, if applicable, of the Companies Act, 2013 read with the rules framed, the existing clause III(B) and III(C) of Memorandum of Association and are hereby deleted and new clause III(B) of Memorandum of Association be and is hereby inserted as per new Companies Act, 2013 as MATTERS WHICH ARE NECESSARY FOR FURTHERANCE OF THE OBJECTS SPECIFIED IN CLAUSE III(A) of the Memorandum of Association of the company. The new clause III(B) will be read as follows:

EXPLANATORY STATEMENT UNDER SECTION 102 OF THE COMPANIES ACT, 2013

ITEM NO. 1

The Company is being converted into a private company now. The company was incorporated as Private Limited Company but by Section 43(a) of the Companies Act, 1956 it was converted into a Limited Company. Since Company has very small numbers of shareholders and company is in no need of more funding from the capital and the interest of shareholders and stakeholders, it would be better to convert the company into a Private Company and company can work effectively as a Private Limited Company so it is being proposed to convert into a Private Limited Company since it has not many shareholders and its funds’ requirements are low.

Moreover, conversion into a Private Company shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations, and contracts may be enforced in the manner as if such conversion had not been done.

The company is being converted into a Private Limited Company now and a new set of Articles of Association as applicable to a Private Company is being adopted.

The Directors recommend the Resolution for Member’s approval as a Special Resolution

None of the directors or KMP and their relatives is concerned or interested financially or otherwise in the passing of this resolution.

ITEM NO. 2

The ancillary objects in Clause III(B) of the Memorandum of Association are being changed with the requirements of Companies Act, 2013 and a new set of MATTERS WHICH ARE NECESSARY FOR FURTHERANCE OF THE OBJECTS SPECIFIED IN CLAUSE III(A) are being adopted.

The Directors recommend the Resolution for Member’s approval as a Special Resolution

None of the Directors or key managerial personnel or any relative of any of the Directors of the Company or the relatives of any key managerial personnel is, in any way, concerned or interested in the above resolution.

TaxClue Teamhttp://taxclue.in
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

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