CONVERSION OF PRIVATE LIMITED INTO PUBLIC LIMITED

CONVERSION OF PRIVATE LIMITED INTO PUBLIC LIMITED

When a Private Limited Company seeks to expand its operations, attract public investment, or list on a stock exchange, it can convert into a Public Limited Company. The process is governed by the Companies Act, 2013, and requires adherence to specific legal and procedural steps. 

Requirements for conversion

• Minimum members: The number of shareholders must be increased to at least seven.
• Minimum directors: The company must appoint a minimum of three directors.
• Articles of Association (AoA): The AoA must be altered to remove restrictions on the transferability of shares and limitations on the number of members.
• Memorandum of Association (MoA): The MoA's name clause must be amended to remove the word "Private" from the company's name.
• Special resolution: Shareholder approval for the conversion and changes to the MoA and AoA must be secured through a special resolution.
• Audited financial statements: The company must have up-to-date, audited financial statements.
• Clear records: The company must not have defaulted on the repayment of matured deposits or debentures. 

Step-by-step conversion process

1. Board meeting: The directors must convene a board meeting to approve the proposal for conversion, amend the MoA and AoA drafts, and call for an Extraordinary General Meeting (EGM).
2. Issue notice for EGM: Send a notice of the EGM to all shareholders, directors, and auditors at least 21 days before the meeting.
3. Hold EGM: Pass a special resolution with a 75% majority of shareholders to approve the conversion and the altered MoA and AoA.
4. File with ROC: The company must file the following e-forms with the Registrar of Companies (ROC):
   • MGT-14: Within 30 days of passing the special resolution, file this form along with the altered MoA and AoA, the EGM notice, and a certified copy of the special resolution.
   • INC-27: Within 15 days of passing the special resolution, file this application for conversion along with the minutes of the EGM.
5. Obtain fresh certificate of incorporation: After reviewing the forms and being satisfied that all requirements have been met, the ROC will issue a new Certificate of Incorporation. 

Post-conversion requirements

• Update statutory documents: The company's name and status must be updated on its PAN card, letterheads, and other stationery.
• Update bank details: Notify all banks and financial institutions of the conversion and update account details.
• Inform authorities: Inform relevant tax and regulatory bodies, such as the GST department, of the change.
• Higher compliance: A public limited company is subject to increased regulatory scrutiny and higher compliance costs and must follow corporate governance standards.