Conversion of Public Company into Private Company under Companies Act, 2013
Background:
As per section 14 of the Companies Act, 2013 a public company may convert itself into a private company by taking approval of members by way of passing special resolution in the General Meeting and by taking the approval of Central Government on an application made in such form and manner as may be prescribed.
NCLT was handling the cases of Conversion of Public Companies into Private Companies, before the notification issued by the Ministry of Corporate Affairs dated 18th December, 2018 to amend the Companies (Incorporation) Rules, 2014.
In view of aforesaid Section 14 of the Act, a Public Company may convert into a Private Company with prior approval from the Central Government. The conversion of Public Company into Private Company has been explained in the Companies Incorporation (Fourth Amendment) Rules, 2018. The Central government has vide power to amend said rules. These rules are amended from time to time.
Sections and Rules Relevant for the Conversion under the Act:
1. Section 13: It provide for Alteration of Memorandum.
2. Section 14: It provide for alteration of Articles.
3. Section 18: It allows existing Company to convert itself into as a company of other class under this act by alteration of Memorandum and articles in accordance with the provision of Chapter II of the Act.
4. Rule 41 of the Companies Incorporation (Fourth Amendment) Rules, 2018. Application under section 14 for the conversion of public company into Private Company.
- Rule 41 describes the procedure/steps for the conversion of Public Company into Private Company.
E-Forms that will be included:
1. Form MGT 14: To file Special Resolution.
2. Form RD-1: Application of Conversion
3. Form RD-GNL-5: To file re-submissions
4. Form INC-28: To file copy of Order
STEPS TO CONVERT PUBLIC COMPANY TO PRIVATE COMPANY
1. HOLD THE BOARD MEETING as per the provisions of Section 173, applicable Secretarial Standards and other applicable provisions of Companies Act, 2013
a. To discuss and approve the agenda of conversion and to recommend the same for approval of Shareholders.
b. To approve the alteration of Memorandum and Articles and to recommend the same for approval of Shareholders.
c. To fix the date, time and place of general meeting of Shareholder.
d. To approve the draft notice along with Explanatory Statement of the general meeting and to authorise Company Secretary or any other person to issue the Notice of General Meeting as per provisions of Companies Act and Secretarial Standards.
2. ISSUE THE NOTICE OF GENERAL MEETING give at least 21 clear days Notice before the General Meeting.
3. HOLD GENERAL MEETING and PASS THE SPECIAL RESOLUTIONS under Section 13 & 14 to:
a. Approve the conversion of Public Company into Private Company
b. Approve the Alteration of Memorandum of Company to comply with the provisions of Section 2 (68).
c. Approve the Alteration of Articles of the Company to comply with the provisions of Section 2 (68).
4. Filling of forms with ROC (Section 117)
1. Filing form MGT- 14 within 30 days of passing of special resolution along with following attachments:
2. Certified true Copies of the special Resolutions along with explanatory statement.
3. A Signed Copy of Notice of the General Meeting with all annexure.
4. Signed and Stamped Altered copy of Memorandum and Articles of the Company.
Note: At least TWENTY ONE DAYS before the date of filing of the application advertise in the Form No. INC-25A, in a vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper, widely circulated in the State in which the registered office of the company is situated.
- At least TWENTY ONE DAYS before the date of filing of the application serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company and a notice to the Regional Director and Registrar and to the regulatory body, if the company is regulated under any law for the time being in force.
5. Drafting an filing of application with Regional Director (in form RD-1)
Application in Regional Director shall be file within 60 days from passing of special resolution in e-form RD-1.
1. Attachment of RD-1
a. Signed Copy of
b. Draft copy of Altered Memorandum of Association and Articles of Association.
c. Copy of the MINUTES of the general meeting with details of votes cast in favor and or against with names of dissenters.
d. Copy of Board resolution dated not earlier than THIRTY DAYS authorising to file application for such conversion.
e. Scanned, Signed and Stamped Copy of Advertisement in Newspaper.
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- File Form RD-1 within 60 days of passing of Resolution with Regional Director along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 with following attachments:
- Signed copy of application
- Draft copy of altered Articles and Memorandum.
- Copy of Minutes of General Meeting
- Copy of Board Resolution authorizing to file such application not earlier than 30 days
- Scanned, signed, Stamped copy of the Advertisement
- Declaration by KMP or any director
- That No deposits has accepted by the Company.
- There has been NO NON-COMPLIANCE of sections 73 to 76A, 177, 178, 185, 186 and 188 of the Act and rules made there under.
- That NO RESOLUTION is pending to be filed in terms of sub-section (3) of section 179 and
- The Company was never listed in any of the Regional Stock Exchanges and if was so listed, all necessary procedures were complied with in full for complete delisting of the shares in accordance with the applicable rules and regulations laid down by Securities Exchange Board of India.
Also Note that :
- List of Creditors
- List of Debentures of not more than 30 days before the filling of Application
With details of list of creditors and debentures with their name and address, amount and nature of debts, claims and liabilities ,Contingent or unascertained debt, the value, so far as can be justly estimated of such debt or claim.
Note: Copy of List of Creditor and debenture should be kept at registered office of the Company. And any person can inspect the same at any time during the duration of the business and can take the note, extraction of the same on amount of not less than Rs. 10 per page.
1. When no objection is received
Hearing will take place after checking all the annexure at the RD office which should be represented by the Company or Practicing Professional or advocate.
The RD will make an order confirming the alteration on such terms and conditions ,if any thinks fit, and may make such orders as to costs as it think proper.
2. Where objection is received the regional director will call the person who raised objection and to the Company (any Representative on behalf of the both) for hearing and after giving proper opportunity to being heard, the regional director will take the decision.
3. Where the Regional Director on examining the application finds it necessary to call for further information or finds such application to be defective or incomplete in any respect, he shall within thirty days from the date of receipt of the application, give intimation of such information called for or defects or incompleteness, directing the person or the company to furnish such information, to rectify defects or incompleteness and to re-submit such application within a period of FIFTEEN DAYS in e-Form No. RD-GNL-5.
Note: Maximum of two re-submissions shall be allowed.
- Note: Cases where such further information called for has not been provided or the defects or incompleteness has not been rectified to the satisfaction of the Regional Director within the period allowed i.e. FIFTEEN DAYS, the Regional Director shall reject the application with reasons within thirty days from the last date up to which re submission was required to be made or from the date of last re-submission made as the case may be.
- If No Objection is received or Objection received then after complying with the decision of Regional Director as given above in point 10, and the application is complete in all respects, the same may be put up for orders and the concerned Regional Director shall pass an order approving the application within thirty days from the date of receipt of the application or the date of last re submission made, as the case may be.
- Obtain certified copies of Order of Regional Director.
- File E-form INC-28 with ROC within 30 days of confirmation of shifting by Regional Director along with certified copy of the order of Regional Director.
Steps after receiving certificate from the RD
- Make alteration in MOA of the Company with respect to state in every copy of Memorandum.
- Make all requisite changes in the signboards, Letter heads, Books Rubber Stamps, Bill Books, Common Seal, visiting cards and other documents and items and necessary advices to be sent to the shareholders, debenture holders and other concerned parties.
- Make the changes in PAN, TAN, GST Portal, Bank Accounts.
- Intimate the changes to Banks, Income Tax Department, PF Department, ESI Department and all other departments.
Author Bio
If there is no creditors and debenture holders in the company, the affidavit & declaration of directors/kmp is required stating that there is no creditors.