Over the recent years compliances for public Companies has been increased like transfer of shares into demat forms, allotment of new shares into demat form, etc. and therefore, many closely held companies are getting themselves converted into a private limited. Private limited company is easier to operate, enjoys a set of exemptions and most easy form of business in terms of compliances as well.
Recently, with effect from 02.11.2018 vide the Companies (Amendment) Second Ordinance, 2019, the power to pass order for conversion of public Companies into private Companies has been delegated to Regional Director (RD) whereas earlier it was with National Company Law Tribunal (NCLT) making conversion more speedy and less cumbersome.
Accordingly, in this article, we shall study about the applicable sections and rules, procedure, timeline, documents to be filed and other frequently asked questions on topic under discussion.
APPLICABLE SECTION: Section 14 of the Companies Act, 2013
APPLICABLE RULE: Rule 41 of the Companies (Incorporation) Rules, 2014
It is important to note that earlier when the power of conversion was with NCLT, then rule 33 of the Companies (Incorporation) Rules, 2014 was also required to be complied with as order passed by the Tribunal was required to be filed by ROC. But now, the same has been dispensed and accordingly, the rule 33 is not required to be complied with.
I. PROCEDURE OF CONVERSION:
| S. No. | Particulars |
| 1. | Give notice to Directors along with the agenda and notes on agenda to convene the Board Meeting at least seven days before the date of the meeting in compliance with the Secretarial Standards I to consider the conversion. |
| 2. | Convene the Board Meeting to decide upon the conversion into a private limited Company and accordingly, send notice to convene a meeting of the Board of Directors for the following:
|
| 3. | Send notice to members to convene EOGM of least 21 clear days in compliance with the Secretarial Standards II. |
| 4. | Convene EOGM to pass special resolution to take shareholders approval w.r.t. conversion into a private limited. |
| 5. | File MGT-14 within 30 days of passing the special resolution.
Attachments:
|
| 6. |
At least 21 days before the date of filing the application in Form RD-1 (i.e. the gap between the filing of application and newspaper advertisement and other things mentioned below should be minimum of 21 days), do the following:
|
| 7. | Meanwhile, draft the application to be filed with RD and get the same signed. |
| 8. | File the application with RD in Form RD-1 after expiry of 21 days as mentioned in point no. 6 but within 60 days of passing of special resolution. |
| 9. | Where no objection has been received by ROC and creditors, then the matter can be put up without hearing and the concerned RD can pass the order or otherwise can call for further information as it may seem necessary or expedient. |
| 10. | The order as received from RD shall be filed with ROC within 15 days from the date of receipt of order in Form INC-28. |
II. TIMELINE FOR CONVERSION IN SHORT
| S. No. | Events | Timelines |
| 1. | Convene of Board Meeting | X |
| 2. | Convene Extra Ordinary General Meeting to approve conversion and send notice | X+25 |
| 3. | Filing of Form MGT-14 | X+25+30 |
| 4. | Advertisement in INC-25A | 21 days prior to filing of RD-1 |
| 5. | Notice to creditors | 21 days prior to filing of RD-1 |
| 6. | Notice to RD and ROC | 21 days prior to filing of RD-1 |
| 7. | Filing of Form RD-1 | X+21+60 |
| 8. | RD may call for any other information or may pass order | X+21+60+30 |
| 9. | Filing of Form INC-28 | Within 15 days of order of RD |
III. DOCUMENTS TO BE FILED TO REGIONAL DIRECTOR WITH APPLICATION
1.List of dates and events, setting out the date of board meeting and extra ordinary general meeting in which resolution for conversion was passed.
2. Altered MOA and AOA.
3. Certified copy of minutes of extra ordinary general meeting.
4. Power of Attorney or Board Resolution authorizing to file application.
5. Separate Declaration with respect to the following by KMP or any of the Director:
- That total number of members are not more than 200;
- No deposit has been accepted by the Company till date;
- That there has been no non-compliance of section 73 to 76A, 177, 178, 185, 186 and 188 of the Act and rules made there under;
- That the Company was never listed on any Stock Exchange and if was so listed, all necessary procedures of delisting has been complied with.
- Compliance with all necessary laws.
- That no enquiry, investigation or inspection is going on against the Company.
6. List of creditors, not more than 30 days, setting forth the details such as names, address, nature of amount due and total amount due. Further, an affidavit verifying the list of creditors shall also be attached.
7. Copy of newspaper advertisement.
FREQUENTLY ASKED QUESTIONS:
1. How the Company should send notice to creditors, ROC, RD, etc?
It is always recommended to send notice via registered post and not through courier, as sending through registered post is a more authenticated medium in the eyes of law.
2. In case any inquiry, investigation or inspection is going on against the Company, then can we apply for conversion?
No, in case any inquiry, investigation or inspection is going on against the Company then the Company cannot apply for conversion.
3. What are the post conversion compliances?
The following are the post conversion compliances:
- Applying of revised PAN/TAN.
- Updating bank account details of the Company.
- Updating the stationery of the Company.
- Alteration of MOA and AOA.
- Intimation to the concerned authorities like GST, TDS, etc.
{The author is a Company Secretary in Practice at Kajal Goyal and Associates, Delhi and can be reached at (M) 9999952595 and (E) cskajalgoyal@gmail.com}
Author Bio
sir , is there need to file RUN FORM?