The Companies Act, 2013 (Act) allows Companies to convert itself into any other Companies at any time subject to the fulfilment of conditions prescribed in the Act and rules thereunder. Ministry of Corporate Affairs (MCA) by its notification dated 18th December 2018 has introduced new Rule 41 in the Companies (Incorporation) Rules, 2014 specifying the process of fling an application under Section 14 of the Act for conversion of public company into private company.
As per Rule 41, the application for conversion is to be made to Regional Director having jurisdiction over companies. Earlier the application for conversion was made with National Company Law Tribunal and the process was gradual. Therefore to reduce the burden of NCLT and in order to expedite the process of conversion of Public Company in to Private Company, MCA took this move. Now, the application is to be made to Regional Director within sixty days from the date of passing of special resolution in e-form RD-1.
1. The Companies Amendment (Ordinance), 2018: Amendment in Section 14 by inserting second proviso of sub-section (1).
2. The Companies (Incorporation) Fourth Amendment Rules, 2018: Inserting new Rule 41- Application under section 14 for conversion of public company into private company.
1. Reduce the number of Shareholders / members up to 200: Before filing any application of conversion to the authorities, the Company is required to reduce its number of shareholders/ members up to the permissible limit for Private Limited Company.
2. Comply with the provision of Deposits applicable to Private Limited Company: The Company, if accepted deposits from public, is required to repay/ refund the same to whom it accepted before filing an application.
3. Delist the Company, if Listed: If the Company is listed on any of the recognised stock exchange then it should take the necessary steps to delist the shares in accordance with the applicable rules and regulations laid down by Securities Exchange Board of India before filing such conversion application.
4. No inquiry, inspection or investigation or prosecution is pending: If inquiry, inspection or investigation has been initiated against the Company or any prosecution is pending against the company under the Act, then conversion shall not be allowed to such Company.
1. Convene a Board Meeting and pass resolution for following agenda items with requisite majority:
2. Dispatch the Notice of EGM to all Shareholders of the Company in accordance with the provisions of Section 101 of the Act read with Secretarial Standard – 2.
3. Convene an EGM and pass following resolutions as Special Resolution:
4. File an E-Form MGT-14 with in thirty days of passing Special Resolution stated in above clause.
5. Give an advertisement in Form No. INC 25A, at least 21 days before filing application, in 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;
6. Prepare and finalize the application for conversion comprising under mentioned mandatory particulars:
[For example if we are filing application on June 15, then the date of List of Creditors & debenture holders shall not be the date before May 17.]
7. The List of Creditors and debenture holders shall be setting forth the following details, namely:-
8. Take necessary steps for filing of E-Form RD-1. The following documents will be accompanied with E-Form RD-1:
[Author’s Comment: It is no where mentioned in the Act or rules that we need to attach attendance sheet with minutes but it is demanded by the Office of Regional Directors. That’s why it is suggestible to attach the same with Minutes.]
It may be noted that the Power of Attorney shall not be older than thirty days from the date of filing application for conversion. [For example if we are filing application on June 15, then the date of Power of Attorney shall not be the date before May 17.]
[Author’s Comment: It is no where mentioned in the Act or rules that we need to attach Certificate from CA for certifying the List of Creditors whereas it is demanded by office of Regional Director, hence suggestible to attach.]
9. If the No Objection received from any person in response to the advertisement or notice referred in clause 5 above and the application is complete in all respects, the same may be put up for orders without hearing and the concerned Regional Director shall pass an order approving the application within 30 days from the date of receipt of the application.
10. If 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 30 days from the date of receipt of the application, give intimation of such information called for or defects or incompleteness, on the last intimated e-mail address of the person or the Company, which has filed such application, 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;
In 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, the Regional Director shall reject the application with reasons within 30 days from the date of filing application or within 30 days from the date of last re-submission made as the case may be.
11. If no order for approval or re-submission or rejection has been explicitly made by the Regional Director within the stipulated period of 30 days, it shall be deemed that the application stands approved and an approval order shall be automatically issued to the applicant.
12. If an objection has been received by Regional Director or any other person under the provisions of Act, the same shall be recorded in writing and the Regional Director shall hold a hearing or hearings within a period thirty days as required and direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Regional Director shall pass an order either approving or rejecting the application along with reasons within 30 days from the date of hearing, failing which it shall be deemed that application has been approved and approval order shall be automatically issued to the applicant.
13. In case where no consensus is received for conversion within 60 days of filing the application while hearing or otherwise, the Regional Director shall reject the application within stipulated period of 60 days;
14. The order conveyed by the Regional Director shall be filed by the company with the Registrar in Form No.lNC-28 within 15 days from the date of receipt of approval along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.]
1. Print the revised copies of MOA & AOA with fresh name and Fresh Certificate of Incorporation;
2. Make all requisite changes in the signboards, Letter heads, Books Rubber Stamps, Bill Books, Common Seal, visiting cards and other documents and items;
3. Make the necessary changes in PAN, TAN, GST Portal, Bank Accounts etc;
4. Intimate about change to Banks, Income Tax Department, PF Department, ESI Department and all other departments.
5. Use the former name of the Company with present name upto two years on every document of the Company.
Message form Author:
The applicability for the conversion of Public Limited Company into Private Limited Company has prescribed under Section 14 read with rule 41 of Companies (Incorporation) Rules, 2014. In today’s scenario the Compliances on Public Companies are increasing day by day which puts lots of obstacles on doing business. On the other hand, various exemptions from the compliances of various provisions of the Companies Act, 2013 are given to Private Limited Company by Government. Keeping in view the relaxation given to Private Companies, a lot of public companies have converted into private companies and many are under process. We did our best to serve you a better service in order to meet your requirements, however, in case of any other query / explanation please feel free to write us.