Conversion of Public Ltd to Private Ltd Company
The Conversion of Public Company into Private Company is mentioned in the Companies Act, 2013, and Incorporation of Companies Rules, 2014. The Private Company has less compliance as compared to Public Company to be followed under the Companies Act, 2013. The need for less compliance leads to increase Conversion of Public Company into Private Company. Before coming of the Companies Act, 2013, the National Company Law Tribunal (NCLT) has the power for the Conversion of Public Company into Private Company.
After certain amendments in the Companies Act, 2013 Conversion Procedures of Public Company into Private Company are in the hands of Central Government and the approval of public company into private company is given by the Regional Director, MCA.
Get your Public limited company converted to Private limited in the fastest possible manner.
It usually takes 20 to 25 working days.
- Filing of SPICe+ Form
- Issue of Incorporation Certificate along with PAN and TAN
- Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
- Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
- Assistance in Opening Bank Account
- Businesses looking to expand or scale operations on higher level
- Startups looking to raise capital and issue ESOPs
- Businesses looking to convert their private limited company to public ltd company
- Businesses aiming to work globally or with reputed clients
Name approval form filing
Preparation of Documents
Getting those docs signed by the respective stakeholders
Filing of e-Forms with ROC
Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.
Name, Contact Number and Email Id of all the Stakeholders.
Directors Identification Number, if already.
Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.
Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.
Latest Month Personal Bank statement of all the Stakeholders.
Specimen Signatures of all Stakeholders.
Few Proposed Business Names along with Objects.
Latest Electricity Bill/Landline Bill of Registered Office.
NOC from owner of registered office, If Owned. (Download Template)
Rent Agreement from Landlord, If Rented/Leased. (Download Template)
Brief description of main business activities of the proposed Company.
Shareholding pattern (50:50 or 60:40) between the Stakeholders.
Authorised & Paid Up Share Capital of the Company.
What is Private & Public Limited Company?
Public Limited Company:
Public Limited Companies are companies whose shares are traded in stock market or issues fixed deposits. The Public limited company in India is a voluntary association of members which has a separate legal existence and the liability of whose members is limited. A Public Limited Company can either be an unlisted Company or listed Company on the Stock Exchange. Public Limited company also enjoys wide options to raise funds through bank loans, the general public, and Institutional investors.
Private Limited Company:
A Private Limited Company is that type of company that offers Limited Liability or legal Protection to its shareholders. Private Limited Company in India lies somewhere in between a partnership firm and a widely owned public company. It can be registered with minimum two people. A person can be both a director and shareholder in a Private Limited Company.
Benefits of conversion from Public Ltd to Private Ltd
The Private Company has less compliance as compared to Public Company to be followed under the Companies Act, 2013. The need for less compliance leads to increase Conversion of Public Company into Private Company. In this article, we will go through the provisions and procedure related to the Conversion of Public Company into Private Company. By the Conversion of Public Company into Private Company, it gets easier to meet the regulatory provisions and exercise greater control in the Company, such as:
- The members of Private Company cannot issue their shares publicly. The shareholders need to discuss and take prior consent of the other shareholders for the transfer of shares. By putting a restriction on transfer in Private Company, the membership of undesirable persons can be prevented.
- The control of Company is in the hand of the owners of capital which is not so in the Public Company.
- The Private Company can grant Loans to Directors without the prior approval or consent of the Central Government.
- There is no requirement to hold a Statutory Meeting in Company as no outsider is a shareholder of the Private Company.
Eligibility/Mandate for Conversion
- Name clause of Memorandum needs to be amended to include the word ‘Private’.
- The Articles of the Company shall be suitably amended for the insertion of restrictive provisions applicable to a Private Company. It is advisable to adopt a new set of Articles applicable to a Private Company.
- Company has not defaulted in filing of Annual Returns or Financial Statement or any other document due for filing with the Registrar. [Rule 29(1) of Companies (Incorporation) Rules, 2014]
- Company has not defaulted in repayment of matured deposits or debentures or interest on deposits or debentures. [Rule 29(1) of Companies (Incorporation) Rules, 2014]
Legal Provisions regarding conversion
- SECTION 13 OF COMPANIES ACT, 2013, provides for the Alteration of Memorandum of Articles (MOA) of Company. The Conversion of Public Company into Private Company can be done if the Memorandum allows for the Conversion. Hence, to convert the Company into Private Company, the alteration of MOA is necessary. Also Include the Change in Name Clause.
- SECTION 14 OF COMPANIES ACT, 2013, provides for Alteration of Articles of Association (AOA) for Conversion of Public Company into Private Company. If New Article is not adopted then it also to be adopted as per Companies Act, 2013.
- SECTION 18 OF COMPANIES ACT, 2013,provides for Conversion of Companies which is already registered. Section 18 provides for converting of any class of Company into another class by doing Alteration in MOA and AOA of the Company.
- THE COMPANIES INCORPORATION (FOURTH AMENDMENT) RULES, 2018,the Conversion of Public Company into Private Company is explained. The Central Government has wide powers to amend the said rules. This Power Delegated to the Regional Director.
Procedure for Conversion of Public Ltd to Private Ltd
- Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
- Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
- Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
- Hold a meeting of Board of Directors of the Company to discuss and approve the agenda of conversion
- Pass Board Resolution
- for approving proposal of conversion of Public Company into a Private Company, and to recommend the same for approval of Shareholders in General Meeting of the Company
- to consider and approve the reduction in the total number of members of the company to a maximum of 200 members
- to fix the day, date, time and venue of the General Meeting
- to approve the draft notice for convening the General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013
- to approve the draft new set of Memorandum and Articles of Association meeting the requirements of a Private Company and to recommend the same for approval of Shareholders
- to authorize the Director or Company Secretary to sign and issue notice of General Meeting. The notice of general meeting must contain text of Special Resolution for conversion of Company into a Private Company and consequent amendment in Memorandum and Articles of Association of Company
- to delegate authority to Company Secretary or any one director of the company to sign, certify and file the required form with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the proposed conversion.
- Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments.
- Entries in the Register of Members (Section 88 read with Rule 5(1) of the Companies (Management and Administration) Rules, 2014
Companies whose shares are held in physical form shall make entries in the Register of Members in the Form MGT-1 within seven days after the Board of Directors approved the transfer of shares to reduce the number of members to a maximum of 200.
- Convene General Meeting [Section 96, 100 and Secretarial Standard-2 (SS-2)]
- Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least 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 in accordance with Section 101.
- Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
- Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
- Hold the General Meeting on fixed day and pass a Special Resolution for conversion of Public Company into Private Company and altering the Memorandum of Association and Articles of Association including insertion of restrictive provisions as applicable to Private Company. Also check the Quorum and check whether auditor is present, if not. Then Leave of absence is Granted or Not.
- Prepare the minutes of General Meeting, get them signed and compile accordingly. [Procedure for Preparation and Signing of Minutes of General Meeting].
- Filing of forms with ROC [Section 117]
Company shall file Form MGT-14 with ROC within 30 days of passing such resolution along with given documents as an attachment
- certified true copies of the special resolutions along with explanatory statement
- copy of the notice of meeting sent to members along with all the annexure
- a printed copy of the Memorandum of Association and Article of Association
- copy of Attendance Sheet of General Meeting
- shorter notice consent, if any.
- Publication of an Advertisement [Rule 41(5) of the Companies (Incorporation) Rules, 2014]
The company shall, at least twenty-one days before the date of filing of the application
- advertise in the Form 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
- serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company
- 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.
- Draft and File an Application for Conversion of Public Company into Private Company [Rule 41(1) and 41(3) of the Companies (Incorporation) Rules, 2014]
An application for the conversion of Public Company into Private Company shall be drafted and to be filed to Regional Director within sixty days from the date of passing of Special Resolution in e-Form RD-l along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 and with following Documents
- a draft copy of Memorandum of Association and Articles of Association, with proposed alterations including the alterations pursuant to Section 2(68)
- a copy of the minutes of the General Meeting at which the Special Resolution authorizing such alteration was passed together with details of votes cast in favor and or against with names of dissenters
- a copy of Board resolution or Power of Attorney dated not earlier than thirty days, as the case may be, authorizing to file application for such conversion
- declaration by a Key Managerial Personnel that pursuant to the provisions of Section 2(68), the Company limits the number of its members to two hundred and also stating that no deposit has been accepted by the Company in violation of the Act and rules made thereunder
- declaration by a Key Managerial Personnel that there has been no non-compliance of sections 73 to 76A, 177 , 178, 185, 186 and 188 of the Act and rules made thereunder
- declaration by a Key Managerial Personnel that no resolution is pending to be filed in terms of sub-section (3) of section 179 and also stating that 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. But in case of such Companies where no Key Managerial Personnel is required to be appointed, the aforesaid declarations shall be filed any of the director
- a list of Creditors, Debenture Holders, of a date not more than 30 Days before the filing of Application with Regional Director, setting forth the following details
- Name and Address of every creditor and debenture holder
- Nature and amounts due to them in respect of debts, claims or liabilities
- in respect of any contingent or unascertained debt, the value, so far as can be justly estimated of such debt. The company shall file an affidavit, 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.
- Approval of Application, in case of No Objections [Rule 41(6)(a) of the Companies (Incorporation) Rules, 2014]
Where no objection has been received from any person in response to the advertisement or notice referred 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 thirty days from the date of receipt of the application.
- Submission of Further Information as demanded by Regional Director [Rule 41(6) of the Companies (Incorporation) Rules, 2014]
- 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 RD-GNL-5. Maximum of two re-submissions shall be allowed.
- 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 i.e. Fifteen Days, the Regional Director shall reject the application with reasons within thirty days from the date of filing application or within thirty days from the date of last re-submission made, as the case may be.
- Submission of Copy of Objection with Regional Director [Rule 41(7) of the Companies (Incorporation) Rules, 2014]
- Where an objection has been received or Regional Director on examining the application has specific objection under the provisions of the Act, the same shall be recorded in writing and the Regional Director shall hold a hearing or hearings within a period of 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 the reasons within thirty days from the date of hearing.
- In case where no consensus is received as referred above, the Regional Director may approve the conversion, if he is satisfied having regard to all the circumstances of the case, that the conversion would not be against the interests of the company or is not being made with a view to contravene or to avoid complying with the provisions of the Act, with reasons to be recorded in writing.
- Approval of Application of Conversion [Rule 41(9) of the Companies (Incorporation) Rules, 2014]
On completion of such inquiry inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, conversion shall be allowed.
- File Form INC-28 with ROC [Rule 41(9) of the Companies (Incorporation) Rules, 2014]
Company shall file the order conveyed by the Regional Director with the Registrar in Form lNC-28 within fifteen days from the date of receipt of approval along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.
- File Form INC 27 with ROC [Section 14(2) read with Rule 33(2) of the Companies (Incorporation) Rules, 2014]
Company shall file the copy of order of the Central Government approving the alteration of article along with the printed copy of altered articles with the Registrar in Form INC -27 with fee together within fifteen days from the date of receipt of the order.
- File Necessary Amendment Application under following Acts
- Goods and Services Act
- Shops & Establishment Act
- Factories Act
- Inter-State Migrant workmen Act
- Private Security Agency Act
- Other Labour Laws
- Industry Specific Laws
- Actions to be taken after Conversion of Public Company into Private Company are
- Every Alteration made in the memorandum or articles of the company shall be noted in every copy of the memorandum or articles as the case may be. [Section 15(1)]
- Arrange printing of fresh copies of Altered Memorandum and Articles of Association with new Certificate of Incorporation.
- Arrange new rubber stamps with the new name, and all the stationary in the new name of Company.
- Change the specimen of Blank Share Certificates with the new name, if already printed.
- Have painted the new name of the Company on outside every office, building etc. along with former name so changed. [Section 12(3)(a) and First proviso to Section 12(3)]
- Arrange a new common seal engraved with new name and adopt it at the meeting of Board of Directors (Common Seal is optional now). [Section 12(3)(b)]
- Get the new name printed on its entire business letters, letter heads, Billheads, Invoice Forms, Receipt Forms and all other official publications along with former name so changed. [Section 12(3)(c) and First proviso to Section 12(3)]
- Have its new name printed on hundi's, promissory notes, bills of exchange etc. [Section 12(3)(d)]
- Inform about the conversion of the Company to all concerned persons/ govt. authorities like Central Excise Authorities, Customs Authorities, Sales Tax Authorities, Service tax Department, Chief Inspector of Factories, and Regional Provident Fund Commissioner etc.
- Intimate all the Banks where Company is operating Bank Accounts about its conversion and file necessary applications and documents, as required by Bank, with regard to change in the name and status of Account holder.
- Make application to Income Tax Department for Arranging New Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
- Update the new name of the Company with the Basic Utility Service providers like Electricity providers, Telephone Internet connections in the name of the Company etc.
- Inform all other Companies where Company has made Investments, taken loans, taken Insurance Policies, entered agreements of any kind and to all stakeholders.
- Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
Post Conversion Compliances
1. Intimate the changes to Banks, Income Tax Department, PF Department, ESI Department and all other departments.
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. Use word “Formerly” for at least 2 years on every documents of the company with present name.
4. Use the copy of altered Memorandum and Articles of the Company.
5. Make the changes in PAN , TAN, GST Portal.
6. Request to Bank for the change in name of Bank Accounts.
7. Intimate other regulatory authority in this regard.