Conversion of Private Limited Company to Public Limited Company

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Company Conversion

Conversion of Private Limited Company to Public Limited Company

Every Private Limited Company, at one point of the other, wishes to turn public on account of growth and flexibility prospects. Conversion into Public Limited Company augments the scalability of a Private Limited Company. There are a handful benefits that are inherent of this conversion. Initial Public Offering (IPO) is one among them. Transferability of shares is not possible for Private Limited Companies. IPO nullifies this stipulation. Public Limited Companies can offer their shares to the general public through IPO. Public Limited Companies have no limits as for the maximum number of members. This can result in easy access to funding.

A Private Limited Company can be converted into a Public Limited Company voluntarily. There are a couple of minimum requirements prescribed for the conversion of a Private Limited Company to a Public Company. DSC for at least one of the directors, a minimum of 7 shareholders, DIN for all the directors, minimum authorized share capital of Rs 5lacs and minimum paid-up share capital of Rs.5lacs are a few among the minimum requirements.

Procedure for Conversion

Proposal for conversion needs to be approved by the board members. Notice will be issued to all members of the company. Date and time will be fixed in the board meeting to convene an extra ordinary general meeting.

An extra-ordinary general meeting is convened to pass special resolutions for alteration of articles for conversion and alteration of memorandum.

Copy of special resolution along with explanatory statement needs to be filed with the registrar in form MGT-14. The Form is to be filed on the MCA portal, with the following attachments.

– Notice of the EGM along with the Explanatory Statement as per Section 102 of the Act.

– Certified copies of the resolutions which are passed in the EGM.

– Copy of the new MOA.

– Copy of the new AOA.

Propose of Form INC-27 is to make an application for conversion of a private limited company into a public limited company. This form has to be filed with the Roc  within 15 days after passing of the resolution in the EGM. The following documents are to be enclosed along with the form: 

– Minutes of the meeting.

– Copy of the new AoA.

– Copy of the new MOA.

– Copy of the resolution(s) passed at the EGM.

– List of the members of the company along with the essential details. 

Upon acceptance of the application of the conversion, the ROC issues a fresh certificate of incorporation.

 

Documents Required

1. Digital Signature Certificates (DSC) of all Directors.

2. Director Identification Number (DIN) of all Directors.

3. PAN Card of shareholders and Directors

4. Identity proof of all Directors.

5. Address proof of all Directors.

6. Passport size photographs of all Directors.

7. Proof Of Business Address

1. If Premises is not owned by company:

  • No Objection Letter for Premises.
  • Authorization from the owner or authorized occupant of the premises.
  • Lease/rent agreement in company’s name.
  • A Utility Bill (Telephone bill, Electricity bill or Gas bill not older than two months) in owner’s name.

2. If Premises is owned by company:

  • Registered titled document in company’s name.
  • A Utility Bill (Telephone bill, Electricity bill or Gas bill not older than two months) in company’s name.

8. Certified copy of the latest financial statements.

9. Copy of the latest Income Tax Return Acknowledgement.

FAQ

A private limited company is a limited liability entity that can have a maximum of 200 shareholders. Share transferability is restricted in a Private Limited Company. Private Limited Company structure is usually preferred by families or groups that do not want outsiders to subscribe for the shares of the company.

A Public Limited Company is a limited liability company in which shares are freely transferable between shareholders. It can take debt funds, deposits and investment in the form of shares from the general public. Public Limited Company can be listed on a stock exchange and can have any number of shareholders.

Private Limited Companies are entitled to many privileges and exemptions. A Private Limited Company is different from Public Limited Company in many ways. To cite a few, the minimum members and directors required for a Private Limited Company are 2 each, where as it is 7 and 3 respectively, for a Public Limited Company. Private Limited Companies have an upper cap of 200 as for the maximum number of members where as it is unlimited for Public Limited Companies. Private Limited Companies need not issue prospectus. But issue of prospectus is mandatory for Public Limited Companies.

There are plenty of benefits. Prospect for growth and flexibility is the main draw. The conversion aids the scalability of a Private Limited Company. There are no limits as for the maximum number of members which in turn can result in easy access to funding.

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