Section 18 of Companies Act, 2013 deals with conversion of existing Company from form to another by alteration of Memorandum and Articles of the Company. The conversion process of the Company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into by or on behalf of the Company before conversion and the same may be enforced if no conversions are complete by the Company.

SL. NO. PARTICULARS DETAILS
1. Public limited company “Public Company” means a company which—

(a) is not a private company;

(b) Has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital, as may be prescribed:

Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles.

2. Basic Requirements 1. Minimum 7 Members

2. Minimum 3 Directors

3. If there are only 2 Directors in a Private Limited Company, an additional Director shall be appointed in the Board Meeting, to comply the requirement of minimum three Directors.

4. The Company shall become a Public Limited from the date of passing special resolution. However the change of name by deleting the word Private shall take effect only on issue of fresh certificate by ROC.

3. Benefits of conversion of Private Limited Company into Public Limited Company
  • Raising of Capital: Public Companies can raise huge capital from within the Country and also globally by listing themselves in Stock exchanges.
  • Brand Recognition: Public Companies attract more brand identity.
  • Limited Liability: Even after conversion from Private Limited Company to a Public Limited Company, limited liability concept remains.
  • Free transfer of Shares: Shares of Public Companies are freely transferable subject to Companies Act and SEBI Act.
  • Deposits: Public Companies can accept deposits from public subject to Section 76 of Companies Act 2013 and the rules.

Please refer our article on acceptance of deposits – https://taxguru.in/company-law/acceptance-deposits-companies-act-2013-rules.html

Procedure for conversion of Private Limited Company to Public Limited Company
4. Issue Notice for calling of Board Meeting Notice to be issued for conducting of Board Meeting and agenda to be circulated along.

The proposed agenda shall be :

  • Pass Board Resolution for conversion
  • Fix date, time and venue for holding of Shareholder’s meeting (Extra-ordinary General Meeting)
  • Approve Notice of EGM and authorisation to Director/ Company Secretary for issuance of Notice
5. Holding of Board Meeting for discussing the agenda items
  • To approve conversion of Private Company into Public Company subject to approval of share holders.
  • To adopt new set of Memorandum and Articles subject to approval of share holders.
  • Fix date, time and venue for conducting general meeting
6. Issue notice of general meeting
  • At least 21 days (clear days of notice before the meeting to the members).
  • A general meeting may be called after giving a shorter notice if consent is given in writing or by electronic mode by not less than 95% of the members entitled to vote at such meeting.
  • The notice period can be followed as specified in the Articles.
7. Conduct General Meeting
  • For passing special resolution for conversion of private limited company to public limited Company
  • For adoption of amended Memorandum of Association and Articles of Association.
8. File form MGT- 14
  • To be filed within 30 days of passing special resolution

Attachments to Form MGT 14:

  • Notice of EGM
  • Explanatory Statement
  • Certified true copy of special resolution passed in EGM
  • Amended AOA
  • Amended MOA
  • Consent of shorter notice, if EGM held at shorter notice.
9. File form INC – 27
  • To be filed within 15 days of passing special resolution.

Attachments to Form INC 27:

  • Certified true copy of special resolution passed in EGM
  • Amended AOA
  • Amended MOA
  • Consent of shorter notice, if EGM held at shorter notice.
  • Minutes of general meeting of the members
10. Approval of MGT-14 and INC-27 If the ROC is satisfied that the Private Company has complied the prescribed requirements of conversion, forms shall be approved by ROC.
11. Certificate of Incorporation from ROC Once ROC has approved the forms MGT 14 and INC 27, it will issue fresh Certificate of Incorporation and shall cancel former registration of Company.

This article is co-authored by Mrs. Asha Diwakar (Practicing Company Secretary, Bangalore) who is Co-founder and Designated Partner of M/s CLAAT Corporate Advisors LLP (Chhota CFO).

Chhota CFO (www.chhotacfo.com) offers a range of services and integrated solutions in the areas of India corporate regulations, compliance, accounting and taxation for Start-ups, SMEs and Corporates – right from incorporating new companies, statutory registrations, secretarial compliance, bookkeeping and accounting, tax consulting & filing, audit & assurance, FEMA and other associated professional services to start, maintain and grow your business.

Priyanka Sethia Asha Diwakar

Mrs. Asha Diwakar may be contacted at asha.diwakar@chhotacfo.com/connectus@chhotacfo.com and +91 973 973 6999/ +91 991 666 8146

Disclaimer:

Utmost care has been taken to prepare the article. However, inadvertently if any error occurs, please note that the authors shall not be held responsible for any such cause. The content published is only for educational purpose and shall not be construed as rendering of any professional advice in any manner whatsoever. The readers must exercise their own judgement and refer the original source before any implementation. The content is an original work of the authors and may be used only after prior written permission.

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