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Procedure for Conversion of Private Company to Public Company

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Procedure for Conversion of Private Company to Public Company

June 24, 2021

1. INTRODUCTION:

Pursuant to provisions of Companies Act, 2013 (“Act”), a private company by its articles restricts the right to transfer its shares and limits the number of its members to two hundred. On the other hand, a public company has no such restrictions. A Company of any class already registered under the Act can convert itself as a company of other class by alteration of Memorandum and Articles of Association. The conversion of a Company does not affect any debt, liabilities and obligations.

This article briefly explains the procedure for conversion of a private company to public company under Act.

2.PROCEDURE OF CONVERSION:

Pursuant to Section 14 of the Act, a company, by approval of its members through a special resolution, may alter its articles of association including alterations having effect of conversion of a private company into a public company.

For conversion, a private company to take the following procedural steps:

A. Convene a Board Meeting:

  1. Issuance of notice of the Board Meeting to all the directors, at least 7 days prior to the date of Board Meeting or such other time pursuant to Articles of Association along with agenda and notes to agenda. A shorter notice can be issued in case of urgency.
  2. Hold a meeting of Board of Directors of the Company to consider and approve the proposal for conversion, subject to the approval of shareholders.
  3. To approve the draft new set of Memorandum and Articles of Association meeting the requirements of the Public Company.
  4. The name clause of Memorandum of Articles to be altered to delete the word “private”.
  5. The articles of association of the company to be altered in such a manner that they no longer contain the restrictions of a private company, include the provisions required to be contained in the articles of a public company and removal of provisions which are inconsistent with the requirements of a public company.
  6. The company may alter any number of articles or alternatively adopt a new set of articles.
  7. To fix, day, date, time and venue for holding general meeting.
  8. To approve draft notice of general meeting along with the explanatory statement.

B.Convene a General Meeting:

  1. Notice of general meeting along with explanatory statement shall be issued atleast 21 clear days prior to the date of meeting or such other time pursuant to Articles of Association. A shorter notice can be issued with the consent of atleast majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting.
  2. Hold the general meeting and pass a Special Resolution for conversion of Private Company into Public Company and altering the memorandum and articles of association.

C. Filing of Forms with Registrar of Companies:

  • The company to file Form MGT-14 within 30 days of passing of special resolution in the general meeting with the Registrar of Companies, along with following documents as attachments:
  • Certified true copy of special resolutions along with notice of general meeting and explanatory statement.
  • Copy of amended Memorandum and Articles of Association.
  • Shorter notice consents, if any.
  • The Company to file an application with Registrar of Companies for conversion of company in Form INC-27 within 15 days of passing of special resolution, along with following documents as attachments:
  • Certified true copy of special resolutions along with notice of general meeting and explanatory statement.
  • Copy of amended Memorandum of Association.
  • Copy of amended Articles of Association.
  • Minutes of Shareholders meeting.
  • Any other document, as required.

Note: All the SRNs generated for the forms filed by the Company shall be approved before filing the application with Registrar.

D.Fresh Certificate of Incorporation:

On the approval of e-forms MGT-14 and INC-27, Registrar to issue a fresh Certificate of Incorporation with the changed name.

Note: The company ceases to be a private company from the date of passing of special resolution for alteration of articles of the Company removing the restrictions and limitations to be included in the articles of a private company. However, the change in name will be effective from the date if issue of fresh certificate of incorporation by Registrar of Companies.

3. REQUIREMENTS UPON RECEIPT OF FRESH CERTIFICATE OF INCORPORATION:

  •  Arranging printing of copies of altered Memorandum and Articles of Association, noting every alteration made in the Memorandum of Association and Articles of Association.
  • Applying for new copy of PAN and TAN copy with changed name.
  • Paint new name of the company on outside every office, building, shops, etc. along with former name so changed.
  • Get its new name printed in its entire letterheads, business letters, Invoice Forms, and all other official documents.
  • Arrange for new rubber stamps and stationery with the new name.
  • Arrange for a common seal engraved with new name, if any and adopt the same in the Board meeting.
  • Intimate all Banks where company is operating Bank Accounts about its conversion.
  • Inform about the conversion and file necessary documents with all the concerned persons, other companies, government authorities like Goods and Service Tax Authorities, Customs Authorities, Income Tax Authorities, Provident Fund Commissioners, ESI regulators and other labour law authorities.

Author: Prashant Jain, Co-Founder & Partner, Prajakta V Ghokale, Associate and Nisha Jhawar, Associate.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at prashant@samistilegal.in,prajakta@rna-cs.com,nisha@rna-cs.co.in.

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