Formation of a private limited Company has its own sets of advantages and disadvantages. It is seemingly the best form of business when Directors and shareholders are closely held and where the Directors have enough funds to arrange it between themselves or their relatives or acquaintances. However, when the brand has to go really big then later after some point of time, it is preferred to convert your private limited Company into a public limited. In this article, we shall study about the benefits, process and time for conversion of a private Company into a public Company.
Benefits of Conversion of Private Limited Into A Public Limited Company:
Raising of capital through public issue of shares
This is the primary and the major benefit of a public Company that it can raise funds through IPO, Secondary Listing, Debentures by listing the same on exchanges and raising funds thereof.
No restriction on number of shareholders
The maximum number of shareholders in a private limited Company is 200 whereas there is no such limit on number of shareholders in a public limited Company.
Brand Awareness
When the brand is doing really good then it is generally preferred by the founders and management to go for listing and raise funds from public. This is a great tool for creating brand awareness’ as the particular brands comes under everyone’s notice.
Limited Liabilities
The liability of each shareholder is limited to the amount of shares subscribed by them.
Transferability of shares
The transferability of shares is limited in case of a private limited Company whereas the shares of a public limited Company are easy transferable among the existing shareholders or even new one.
REGULATORY FRAMEWORK:
Section 18, Section 13, and Section 14 of the Companies Act, 2013 read with Rule 33 of the Companies (Incorporation) Rules, 2014.
PROCEDURE FOR CONVERSION INTO A PUBLIC LIMITED COMPANY
CONVENE A BOARD MEETING:
Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business. The following mandatory agendas need to be taken care of:
- To fix the day, date, time and venue of the General Meeting and to approve the draft notice convening the General Meeting along with the explanatory statement.
- Pass resolution for conversion of private limited Company into a public Company.
- Alteration of memorandum and articles of association of the Company pursuant to conversion.
CONVENE EXTRA ORDINARY GENERAL MEETING:
Notice for convening the General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, or on shorter notice, whatever may be decided by the Board to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting for passing the resolution for conversion of the Company into a public Company and consequently, alteration of memorandum and articles of association thereof.
FILING OF FORM INC-27 WITH ROC:
For effecting conversion of Private Company into Public Company, we need to file an application in e-Form INC-27 with the registrar along with prescribed fees within fifteen days of passing of Special Resolution along with the following attachments: –
- Minutes of the Members’ Meeting
- Certified True Copy of Special Resolution
- Altered Memorandum of Association
- Altered Articles of Association
- Any other documents, as required.
FILING OF FORM MGT-14 WITH ROC
File e-Form MGT-14 with the Registrar of Companies within 30 days of passing the special resolution in the General Meeting, along with following documents as an attachment:
- Certified True Copies of the Special Resolutions along with explanatory statement
- Copy of the Notice of meeting sent to members
- An altered copy of the Memorandum of Association and Article of Association
- Shorter Notice Consent, if any.
On satisfaction, the Registrar shall issue the fresh certification of incorporation.
FREQUENTLY ASKED QUESTIONS (FAQs):
Q.1 Is there any minimum timeline for a private limited to be incorporated to get converted itself into a public limited Company?
There is no minimum time limit mentioned as such in the Act and therefore, if we managements intends, they can convert their private Company into a public one at any point of time.
Q.2 What are the post conversion requirements?
- A fresh PAN card has to be applied for.
- All business letterheads and related stationery should be updated with the company’s new name.
- The bank account details of the Company need to be updated.
- All other registrations like GST, Import Export Code, FSSAI License, etc. shall require to be updated.
- The intimation is to be given to the tax authorities and other related personnel regarding the conversion into public limited company.
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(The author i.e., Kajal Goyal is a Company Secretary in Practice at M/s. Kajal Goyal and Associates and can be reached at (M) +91-9999952595 and (E) [email protected])
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