Conversion of Public Limited Company to private Limited Company

Manage Your
Company Conversion

Conversion of Public Limited Company to Private Limited Company

Private Limited Companies are entitled to many relaxations and exemptions whereas compliance requirements are pretty stringent for Public Limited Companies. Public Companies are obliged to follow various statutory guidelines. Public Limited Companies are converted into Private Limited Companies chiefly to avail the relaxations or exemptions provided to the latter by Ministry of Corporate Affairs. It will be easier to exercise more control over the company, post conversion.

Procedure for Conversion

The Company should convene board meeting to consider the proposal for conversion into a Private Limited Company. Approval for passing resolution in the general meeting pertaining to the amendment of MoA and AoA too will be sought in the Board Meeting. The Board Meeting fixes a date for the General Meeting in which resolution regarding Company conversion will be passed. Notice shall be sent to the members at least 21 days prior to the general meeting

Resolution for company conversion will be approved in the General Meeting. Approval for amendment of MoA and AoA too will be passed through a special resolution. Auditor must be present in the General Meeting.

Within 30 days of passing the special resolution, form MGT-14 should be filed along with certified copies of altered MoA, altered AoA and passed special resolution, and notice of General Meeting with an explanatory statement.

Within 60 days of passing the special resolution, an application should be filed in e-Form RD-1 to the Regional Director, along with copies of MoA and AoA with proposed alterations, and minutes of the General Meeting held. The Board Resolution in which the authorization for Conversion was given as well as the list of creditors and debentures holders too should be attached, if any. If the Regional Director asks for more information, resubmissions must be made in 15 days in Form RD-5. 

An application should be advertised in Form INC-25A, in a vernacular newspaper in the principal vernacular language in the district in which the registered office of the company is situated, and in an English newspaper, which is circulated widely in the State.

Regional Director approves the conversion process and issues the order for conversion to the applicant. This order needs to be filed in Form INC-28 to Registrar of Companies (RoC) within 30 days from the date of passing the order.

In the event of the conversion meeting all compliances, the RoC issues a new certificate of incorporation by which the Public Limited Company gets re-incorporated as a Private Limited Company.

FAQ

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.

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.

Public Limited Companies are required to follow strict compliances and regulations. But Private Limited Companies are entitled to many relaxations and exemptions. Ease of management is yet another advantage of the conversion.

E-Form RD-1 is filed for approval of the conversion of Public Limited Company to Private Limited Company. It shall be filed within 60 days of passing the conversion resolution in the General Meeting convened to approve company conversion.

error

Here's how you can share it