Conversion of Private Company into Public Company

OVERVIEW OF CONVERSION OF PRIVATE COMPANY TO PUBLIC COMPANY

Companies Act,2013 provides for various regulatory provisions including conversion of private companies into public companies. A Private company is registered under the Companies Act,2013 and basically defined in section 2(68) of Companies Act,2013.
A Private company has some restrictions when compared to a public company in the matters of issue of capital, Turnover, taking deposits, having limited members etc.
In case of expanding and taking assistance of worldwide exposures and expanding uncontrollably, private limited company requires to be converted into public limited company.

DOCUMENTS REQUIRED FOR CONVERSION

Details of directors and shareholder

PAN Card & Aadhar card
Voter id/ Driving License/ passport

Address Proof

Rent Agreement, Last month electricity bill & NOC of owner(if rented)
Electricity Bill/Property tax receipt(if owned)

Details of Company

Certificate of Incorporation
Income Tax Return
latest audited Financial Statements

Details of Directors

Passport size Photograph
DSC of all Directors
Phone No. and E-Mail ID

Newspaper Advertisement

Advertisement to be published in the newspaper intimating for conversion

BENEFIT OF CONVERSION OF PRIVATE COMPANY TO PUBLIC COMPANY

Raise Capital

Public Companies can easily raise huge capital within the domestic Country as well as globally by listing themselves in Stock exchanges.

Brand Identity

Public Companies are capable of attracting more brand identity.

Limited Liability

Limited liability concept of company shall remains, even after conversion from Private Limited Company to a Public Limited Company.

Transfer of shares

Public Companies are eligible for free transfer of its shares subject to the provisions of Companies Act and SEBI Act.

Accepting Deposits

Public Companies unlike private companies are not restricted to accept deposits from public, they can accept public deposits easily subject to the provisions of Section 76 of Companies Act,2013 and the rules.

PROCESS OF CONVERSION OF PRIVATE COMPANY TO PUBLIC COMPANY

CONDUCT OF BOARD MEETING

Following agenda will be discussed in board Meetings:

Fixation of time, date and place of holding Extraordinary General Meeting.
Approving conversion of private limited company to public limited company.
With the approval of shareholders adopting new set of MOA & AOA.

CONVENE GENERAL MEETING

Extra Ordinary General Meeting will be conducted for:-
Alteration in MOA and AOA.
Approval of shareholders for conversion.
Amendment in the name clause in MOA and substituting “Private Limited” to “Public Limited/Limited”.

Alteration of all the restrictions and limitations applicable on Private Company. Ensure Company has filed all the annual returns or financial statements due with the Registrar of companies.

FILING OF E FORM MGT-14

MGT-14 is to be filed with ROC within 30 days from the date of passing of special resolution in the Extra ordinary General Meeting.

FILLING OF E FORM INC-27

Within the period of 15 days from passing Special Resolution it is required to file INC-27 with following attachments:

Minutes of the EGM of the Members
Certified copy of Special Resolution
Altered MOA and AOA

FRESH CERTIFICATE OF INCORPORATION

When examiner is satisfied that the forms are filed accurate and appropriate. ROC shall issue a fresh certificate of incorporation of company in the name of changed name. It also close up the former registration of Company.

POST CONVERSION REQUIREMENTS

Obtaining fresh PAN card of Public Limited Company.
Updation of all business letterheads and related documents with the company’s new name with suffix Public Limited Company.
Updation of bank account details of the company.
The intimation to the tax authorities and other authorities in relation to the conversion into public limited company.
Publishing in Newspaper intimating the conversion into public limited company.

FREQUENTLY ASKED QUESTIONS

Which act govern the conversion of Private Company into Public company?

Companies Act,2013 provides for various regulatory provisions including conversion of private companies into public companies. A Private company is registered under the Companies Act,2013 and basically defined in section 2(68) of Companies Act,2013

Why Public Company is better than Private Company?

A Private company has some restrictions when compared to a public company in the matters of issue of capital, Turnover, taking deposits, having limited members etc.
In case of expanding and taking assistance of worldwide exposures and expanding uncontrollably, private limited company requires to be converted into public limited company.
Together with rights some compliances and regulation applies in conversion of private company to public company.

What are the various assistance provided to Public Company?

As per Companies Act,2013 Public companies have various regulatory compliance and are eligible to accept deposits from the public at large and with no restriction on capital and can have unrestricted turnover. If a concerned company does not accept any deposits from the public or any statutory due such company can avail the option to convert itself into a private limited company.

How conversion of Private Company into Public Company effects Private Company?

‘Convert’, in relation to a private company converting into a Public company, means a transfer of:
-Property,
-Tangible and intangible Assets,
-Interests,
-powers and Rights,
-Liberties,
-Liabilities,
-Obligations and
-The undertaking shall be transferred to a public company.

What is the procedure of conversion of Private Company into Public company?

Convene a board meeting
Conduct a general meeting
Filling an e-form (MGT14)
Filing of e form (INC-27)
Issue of incorporation certificate

What are the procedure required on conversion of Private Company into Public company?

PAN card & Aadhar card of directors and shareholders are compulsory.
Identity Proof: Self attested Passport/ Voter-ID/ Driving License (any one)
Proof of Address,Self attested Latest Electricity Bill/ Telephone Bill/ Mobile Bill/ Bank Statement with latest entries (any one)
Email address and phone number of each director
Certificate of Incorporation
Digital Signature Certificate (DSC)
Passport size picture of Directors.

What are the E forms to file for conversion of Private Company into Public company?

The following are the two main e forms necessary required for conversion of private limited into public company:

Special Resolution Copy in MGT-14
Conversion of Company e form INC-27

What are the key points kept in mind before conversion of Private Company into Public company?

Companies should repay matured deposits or debentures or interest there on.
Company has to organize letterheads, an altered set of Memorandum of Association and Article of Association Post conversion.
An application for change in PAN of Company and alteration bank account details of the company.
Notify to Departments of govt where the Company is registered or any other concerned authority like Excise and sales tax/GST / DGFT and others about the change in status.

Why Private Company is more desirable than Public Company?

The listed public limited company is recognized on stock exchange & the shares were traded publicly even though a private limited company is not listed on the stock exchange and not traded as it is held by its members only privately.
Public companies are mandatorily required to call a statutory general meeting of members and in case of a private company there is no such compulsion.
The issue of prospectus or statement is mandatory with a public company whereas it is unfeasible in the case of a private company.
The shareholders of a public company can hand over their shares freely but such transferability of shares is restricted entirely in private limited company.
The owners of the public company can raise capital from the common people but private limited companies can’t.
There is a heavy compliance burden equivalent to the regulations provided by SEBI on a public limited company whereas in case of private limited company compliances are less.
There is no restriction for Managerial remuneration to Directors whereas in case of private limited company, it can’t exceed 11% of the net profit.
The Quorum at AGM is 5 members of public limited company and in private limited company, it’s 2 members.
Depending on the specification, a type of company is chosen to be registered. However, the main reason for selecting a public company is to delight the ability to offer shares to the public and raise funds from the public.

Do the applicant requires to present physically for filing application for conversion?

No, You are not required to be physically present for the filing application for conversion. LegalDisha provides you online services and assistance for the same.

COMPARATIVE START UP STRUCTURE

BASIS OF DIFFERENCE	PRIVATE LIMITED COMPANY Register Now	ONE PERSON COMPANY Register Now	LLP Register Now	PARTNERSHIP FIRM Register Now	PROPRIETORSHIP CONCERN Register Now
Meaning	Private Limited Company Private company means a company which is formed by coming together of people for a profit motive.	One Person Company One Person Company (OPC) means a company which is formed with only single person as a member.	LLP LLP is a body corporate which is hybrid of partnership firm and company.	Partnership Firm A partnership firm is not a separate legal entity distinct from its partners. It is merely a collective name given to the individuals composing it.	Proprietorship Firm Proprietorship is a type of business that is owned, managed, and controlled by one person – who is the proprietor.
Prevailing laws	Companies Act Companies are governed by ‘Companies Act,2013’& rules made under.	Companies Act Companies are governed by ‘Companies Act,2013’ & rules made under.	LLP Act Limited Liability Partnership are prevailed by ‘The Limited Liability Partnership Act, 2008’ and various Rules made there under.	Partnership Act Partnership is prevailed by ‘The Indian Partnership Act, 1932’ and various Rules made there under.	NA
Charter Documents	MOA & AOA Memorandum and Article of Association is the charter of the company which provides its main object clauses & scope of operation.	MOA & AOA Memorandum and Article of Association is the charter of the company that defines its scope of operation.	LLP Agreement LLP Agreement is a charter document of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP.	Partnership Deed Partnership Deed is a charter document of the firm which denotes its scope of operation and rights and duties of the partners.	MSME (Udhyam Aadhar) Udyog Aadhar (MSME) is certificate which signifies that the entity is micro, small or medium enterprise.
Limit of Members	2-200 It must have at least 2 and maximum 200 members.	1 OPC is manages by one person only hence it requires only single person.	2-Unlimited There is no maximum limit on number of partners but must have at least two individuals as Designated Partners.	2-20 At least 2 partners are required for it and which can’t exceed 20 partners.	1 Single owner i.e. proprietor required for Proprietorship firm.
Directors /Designated Partners	2-15 It requires At least 2 Director and maximum 15 and further can be increased by special resolution.	1-15 It required At least 1 Director and maximum 15 and further can be increased by special resolution.	2-Unlimited Minimum 2 designated partners and there is no maximum limit for LLP.	NA	NA
Separate legal identity	Yes Company has separate legal identity from its subscribers of MOA.	Yes Being single owner still have separate legal identity from the company.	Yes LLP has separate legal identity from its partners and designated partners.	No Partners and the partnership firm are treated as single identity.	No Proprietor and proprietorship concern have same legal identity.
Limited Liability	Yes The liability of Members are limited up to the amount of share capital which is subscribed by them.	Yes The sole Member of the company is liable only up to the amount of capital introduced by him.	Yes Designated Partners and Partner’s liability is restricted to the amount of capital contribution as mutually decided at the point of Agreement.	No Partners are jointly and severally liable for any liability of the firm as their liability is unlimited.	No Single owner has unlimited liability for any losses or debt in the proprietorship concern.
Perpetual Life of the entity	Yes Entity’s life is not based on the shareholder’s life. It continues by changing of the owner’s share.	Yes In case of death of the shareholder the company is run by the nominee of the company.	Yes On death of partner or designated partner, Share of them will be transferred to their legal heir but this may not result in dissolution.	No It does not have perpetual succession as this depends upon the will of partners.	No Perpetual existence does not exist with the death of the proprietor concern.
Annual Statutory Comapliance	High Annual Filing of Company, Directors compliance, Audit, Income tax Return, Meeting and other Filing GST compliances.	High Annual Filing of Company, Directors compliance, Audit, Income tax Return, Meeting and other Filing GST compliances.	Low Annual Filing, Income tax Return, GST compliance is to be required and Audit is not mandatory.	Low Income tax Return and GST compliance Audit in case of Turnover crosses the limit.	Lowest Compliance with Income tax and GST only(if any).
Transferability	Yes Shares are easily transferable from one to other.	Yes Share can be transferred by one person to other but nominee needs to be changed.	Yes Addition and deletion of partners are possible through change in share of capital contribution.	Yes Addition and removal of partner is possible new deeds with the changes in capital and profit sharing needs to be done.	No It cannot be transferred.
Foreign Direct Investment (FDI)	Yes FDI is available under automatic route.	No Single owner hence FDI is not possible and not allowed.	Yes FDI is permitted subject to prior approval by the central government.	No FDI is not permitted in partnership firm.	No Small scale Business organization hence no FDI is permitted.

CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY

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