Introduction and Background
Companies Act, 2013 (Act) provides for conversion of companies from one form to another. One such important conversion is conversion of public company to private company.
On December 18, 2018, the Ministry of Corporate Affairs (“MCA“) issued the Companies (Incorporation) Fourth Amendment Rules, 2018, which marked the commencement of Rule 41 (“New Rule/ Rule 41“), i.e. a complete new procedure relating to conversion of a public company into a private company. The major highlight of the whole new procedure was that the power to confirm or reject the application for conversion of public company into private company was taken away from National Company Law Tribunal (“NCLT”) and the same was granted to Central Government.
Therefore, as on date, the matter relating to hearing of application for conversion of a public company into private company no longer vests with the Hon’ble NCLT. It is being dealt now by the Regional Director. This has been done keeping in mind the increasing litigation before the benches of Hon’ble NCLT. Moreover, since the matter is more administrative in nature, it is apt that the Ministry came out with such a move.
Now, in view of the above, a step wise chart has been prepared in accordance with the provisions of the newly inserted Rue 41, containing therein the detailed procedure along with applicable section/ rule and form no.
After going through the given step chart, one can understand the procedure for conversion along with applicable secretarial practices, which we hope might assist the professionals and students in the professional/ academic endeavors.
For the sake of ready reference, please take a note of below mentioned and applicable Sections/ Rules
|Step No.||Particulars||Detailed Procedure||Time Frame||Reference|
|1.||Convene Board Meeting of Directors||Call, hold and convene meeting of the board of directors and obtain their approval for conversion of a public company into a private company, which shall be subject to approval of shareholders by way of Special Resolution and further subject to approval of Central Government.
Note: Powers have been delegated to Regional Directors at Mumbai, Kolkata, Chennai, New Delhi, Ahmedabad, Hyderabad and Shillong vide notification dated 18.12.2018, published in the Official Gazette on 20.12.2018.
|X||Section 173, 174 read with rules made thereunder and further read with SS-1 as issued and amended by ICSI from time to time.|
|2.||Agenda for the Board Meeting||Following agenda items must be placed before the board of director on the date of meeting:
Note: Documentation with respect to calling, convening and conducting the board meeting such as drafting of Notice, Agenda, and Notes to Agenda, Minutes, and maintenance of Attendance Register shall be carried out strictly in accordance with the relevant provisions of the Act and S.S-1.
|3.||Issue of Notice of General Meeting||Issue notice of General Meeting at least 21 clear days prior to date of meeting to:
Note 1: The notice shall specify the place, date, day, and time of the meeting and contain a statement on the business to be transacted at the EGM.
Note 2: Documentation with respect to calling, convening and conducting the general meeting such as drafting of Notice, Explanatory Statement, Minutes, and maintenance of Attendance Sheets etc shall be carried out strictly in accordance with the relevant provisions of the Act and S.S-2.
|X (Assuming notice is issued to members on the date of Board Meeting)||Chapter VII – Management and Administration read with rules made thereunder and further read with SS-2 as issued and amended by ICSI from time to time.|
|4.||Convene General Meeting||Conduct and Convene the meeting in accordance with the provisions of the Act, Rules made thereunder, and SS-2.
Few items for consideration:
Grant of approval for alteration in Memorandum of Association.
|Say (X+30) days
(Assuming date of EGM to be held within 30 days)
|5.||Post General Meeting compliances||File e-Form MGT-14 with the Registrar along with the requisite filing within 30 days of passing the special resolution, along with following documents:-
||Within (X+30+30) days||Section 117(3)|
|6.||Publication of Newspaper Advertisement||The company shall atleast 21 days before the date of filing application with RD:
(a) 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;
(b) serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company; and
(c) serve, by registered post with acknowledgement due, 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.
|7.||Drafting and filing of application with Regional Director||Application in Regional Director shall be file at within 60 days from passing of Special Resolution in e-form RD-1, mentioning therein the following particulars:
List of documents to filed along with the application:
Note 1: The aforesaid declarations shall be signed by any Director of the company, in case such a company is not required to appoint key managerial personnel.
Note 2: The affidavit verifying list of creditors and debenture holders shall be signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be managing director, where there is one, to the effect that they have made a full enquiry into affairs of the company and, having done so, have formed an opinion that the list of creditors and debenture holders is correct, and that the estimated value as given in the list of the debts or claims payable on contingency or not ascertained are proper estimates of the values of such debts and claims that there are no other debts, or claims against, the company to their knowledge.
Note 3: An authenticated copy of list of creditors and debenture holders shall be kept at the registered office for the purposes of inspection and taking of extracts thereof.
|Within (X+30+60) days||Rule 41(1), (2) & (3)|
|8.||Order of Regional Director either confirming or rejecting the application||In case no objection has been received from any person in response to the advertisement or notice and the application is complete in all respects, Regional Director shall pass an order approving the application within 30 days from the date of receipt of the application.||Requisite time||Rule 41(6)(a)|
|9.||Post conversion compliance||File e-Form INC-28 with the Registrar within 15 days from receipt of RD order.||
|10.||Issuance of fresh certificate of Incorporation by Registrar||On being satisfied that all the information and documents are submitted and all requirements under the Act are complied with, Registrar shall issue a new certificate of incorporation of the Company.||
Disclaimer: This write-up is only for academic purposes. Please do not consider this as a professional advice and the same shall not be relied upon for real life facts. We hope that our readers will find this write-up useful in having a better understanding of the revised procedure of conversion of public company to private company. Although great care has been taken while preparing this Step chart, still the possibility of errors, omissions, and/ or discrepancies cannot be rules out. The content is hereby released with an understanding that we shall not be responsible for any errors, omissions and/or discrepancies or any action taken in that behalf. Happy Reading!