Conversion of Private Limited Company into Public Limited Company
What Is a Private Company?
A private company is a business entity held under private ownership. The company may issue stock and have shareholders, but company's shares do not trade on public exchanges like BSE or NFT and are not issued through an initial public offering (IPO). That means private companies do not need to meet the Securities and Exchange Commission's (SEC) strict filing needs for public companies. The shares of private companies are less liquid but valuations of shares are not easy to determine at all.
What is a Public Company?
A Public Ltd Company (PLC) sells all or a portion of itself through an IPOs or initial public offering. In Public Company, shares are not restricted to be transferred to the public at large like private limited companies.
What are the Minimum Requirements for Conversion?
Some of the minimum requirements for conversion of a private limited company into a public limited company are mentioned here.
- Minimum 7 Shareholders
- DSC for 1 Director
- DIN KYC for all directors
- No Minimum Paid up Capital
- Director and shareholder can be the same person
- Minimum 3 Directors
Benefits of Conversion of Private Limited to Public Limited Company
Listing of Shares
Through conversion of private company to public company, the firm can list its shares in a stock exchange. Though it would be crucial for a business entity that wants to raise funds.
Raise funds through the Public
You can raise investment through the public by listing the shares in a stock exchange like BSE or NFT. A variety of forms of shares can be used for this purpose. Your company can raise investment through forms of shares such as preference shares, equity shares, etc.
Even after conversion from private limited company to Public limited company, the limited liability concept remains.
Transfer of Shares Freely
The shares of Public Ltd firms are freely transferable subject matter to the security exchange board of India (SEBI) Act & Companies Act.
Easy Acceptance of Deposits
The rules Public limited companies can accept deposits from the public as per the subject to Section 76 of Companies Act 2013.
Increase in Reputation
Conversion of private Limited company to public Ltd company registration would increase the reputation of the company. Public limited companies are permitted to list their shares in the public stock exchange. The process of listing the shares in the public stock exchange will definitely increase the reputation of the firm.
Acceptance of Deposits
A public company is permitted to accept deposits under section 76 of the Companies Act, 2013.
Procedure of Converting Pvt Limited Company into Public Limited Company
We can convert a private limited company into a public limited company by following ways:
1) Calling of Board Meeting
The Board Meeting must be held to discuss the following agendas mentioned below.
- To adopt a new MOA (Memorandum of Association).
- AOA (Articles of Association)subject to the approval of shareholders.
- To get the approval of Conversion of Private limited company to Public limited company from the shareholders.
- Fix date, time and the place for holding an extraordinary general meeting (EGM) in the Company.
- To get approval for an extraordinary general meeting and authorize someone to circulate notice of EGM.
- Issue of extraordinary general meeting notice. The issue of notice of EGM will be provided to all the Directors, Members and Auditors of the Company according to the provisions of Section 101 of Companies Act, 2013.
2) Hold Extraordinary General Meeting
The approval of shareholders for the Conversion of Private limited Company to Public Limited Company will be taken in the resolution passed by all the shareholders in the EGM. The notice of EGM must be given not less than 21 days before the date on which the extraordinary general meeting is to be held.
Remember, the notice period to shareholders can be shorter if the consent is provided in writing or through an electronic medium by not less than 95% of the members entitled to vote at such meetings. Don't forget to follow the procedure prescribed for issuing and signing of notice of extraordinary general meeting.
The extraordinary general meeting will be held on the fixed date and resolution will be passed. Also, the resolution will be passed for conversion of Private limited company to public limited company registration and alteration of MoA & AoA.
3) Filing of the form with RoC:
The formalities with regard to form filing with the Registrar of Companies (RoCs) has to be completed within the given time frame once the resolutions are passed in the EGM.
E-Form MGT – 14:
It has to be filed with the RoC within 30 days of passing the respective resolutions. This form is be filed on the MCA portal, with the following attachments:
- Notice of the extraordinary general meeting along with the Explanatory Statement as per Section 102 of the Act.
- Certified copies of the resolutions which are passed in the extraordinary general meeting.
- Copy of the new MOA and AOA.
E-Form INC – 27:
It is specifically for the application for this conversion. The form has to be filed with the RoC within 15 days after passing of the resolutions in the extraordinary general meeting. Documents must be enclosed along with the form mentioned below.
- Minutes of the meeting.
- List of the members of the company along with the essential details
- Copy of the new AOA & MOA.
- Copy of the resolution(s) passed at the EGM.
What are the Post Conversion Requirements?
- You must apply for a fresh PAN / TAN card
- All business letterheads and related stationery must be updated with your company’s new name
- Your company's bank account details must be updated.
- Must have DSC(Digital Signature Certificate).
- The intimation regarding conversion into public limited company must be given to the tax authorities and other related personnel.
- Printed copies of the new MOA and AOA must be made at the earliest.
As you have to keep up with the security exchange board of India regulations as well, companies that are counted on the list tend to have a lot more work in terms of compliances. So, there is a lot of considerable planning that takes place when you make the decision that your company must go public.
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