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Position under Erstwhile Companies Act, 1956

According to Erstwhile Companies Act, 1956, 2 methods were there for converting Private Limited Company into Public Limited Company. Let us discuss them in brief :

1. Conversion by Default as par Section 43 of Companies Act 1956 where if a Private Company made a default to fulfil basic conditions recommended in section 3(1)(iii) associated to the definition of a Private Company, the company will stop to be entitled to the advantages and exemptions discussed on private companies by or under Companies Act 1956 and the Act should be applied to the company as if it were not a private company.

2. Conversion took place by Act of volition under Section 44 of Companies Act 1956, where a private company freely converts itself into a Public company.

Position under Companies Act, 2013

Provisions for converting Private Company to Public Company are there in Section 14 with section 18 of the Companies Act, 2013 along with Rule 33 of Companies (Incorporation) Rules, 2014. E-Form INC-27 is necessary to file for this conversion procedure following section 14 and rule 33. Rule 33 of Companies (Incorporation) Rules, 2014, are reproduced for fast reference.

Rule 33 - Alteration of Articles

1. For effecting the conversion of a private company into a public company or vice versa, the application shall be filed in Form No.INC-27 with prescribed fee.

2. A copy of order of the expert authority accepting the change must be filed with the Registrar in Form No INC-27 with mandatory fee with the printed copy of the changed articles within 15 days of the receipt of the order from the Central Government.

Clarification – For the reasons of this sub-rule, the phrase "competent authority" denotes, the Central Government.

Conversion of Companies already incorporated [Section-18]

Section 18 of the Companies Act, 2013 permits an active Company for converting itself as a Company of other class by changing its memorandum and articles of association in the way arranged in Chapter II of the Companies Act 2013. Section 13 offers provisions for alteration of Memorandum of Association whereas Section 14 offers for changes of Articles of Association.

Approval of New Set of Articles for Public Limited Company

Articles of a Private Company generally includes certain limitations so during conversion procedure it is recommended to adopt a new set of articles for proposed public company to avoid any future administrative problem. You may find a variety of clauses like quorum for General Meeting, Number of Directors and others which requires to be drafted again according to Public Limited company. So, it is, advised to adopt a new set of Articles pertinent to a public company.

Process for conversion of a private limited company into a public limited

Section 14 of Companies Act, 2013 (Section 31 of Erstwhile Companies Act 1956) includes a significant role during conversion of a Private company into a Public company. Conversion of a Private company into a Public company includes changes of article of association of Private Company u/s 14 that cannot be performed without passing special resolution of Shareholders in the General Meeting.

Calling of Board Meeting - A notice must be issued consistent with the provisions of section 173(3) of the Companies Act, 2013, for organizing a meeting of the Board of Directors. Vital programme for this Board meeting include :

Passing a board resolution to obtain in-principal acceptance of Directors to convert a Private company into a public company by changing the Articles of Association

Arranging time, date and place for organizing extra-ordinary general meeting (EGM) to get approval of shareholders with special resolution to convert a Private company into a Public company.

For approving notice of EGM with Agenda and Explanatory Statement needs to be annexed to the notice of General Meeting according to the section 102(1) of the Companies Act, 2013

For authorizing the Director or Company Secretary to issue Notice of the Extra-ordinary General meeting (EGM) as accepted by the board under clause 1(c) stated above.

Issuing Notice of EGM - Notice of the Extra-ordinary General meeting (EGM) is to be issued to all members, directors and the auditors of the company in compliance with the provisions of Section 101, Companies Act, 2013

Organizing Extra Ordinary General Meeting - Organize Extra-ordinary General meeting (EGM) on due date and pass the Special Resolution, to get approval of shareholders while converting Private Company to a Public company with modifications in articles of association under section 14 for such conversion.

Registrar of Companies Form filing - For changes in Article of Association to convert Private Limited Company into a Public Limited company under section 14. Some E-forms should be filed with associated Registrar of Companies at diverse stages according to the below details :

E-form MGT14 – In order to file special resolution with Registrar of Companies, passed for conversion of Private Company into a Public company

For changes in Article of Association for converting Private Limited Company into a Public Company, special resolution needs to be passed under section 14. So as needed by section 117(3)(a), copy of this special resolution is important to be filed with associated Registrar of Companies through filing form MGT14 within 30 days of passing special resolution in the EGM (extra ordinary general meeting). It is applicable to note that at first you require filing form MGT14 as SRN No. of form MGT14 will be taken place in form INC.27.

Following things need to be attached with E-form MGT.14

Notice of Extra ordinary General Meeting with copy of explanatory statement under section 102 :

Changed memorandum of association

Certified True copy of Special Resolution

Certified True copy of Board Resolution can be attached as a non-compulsory attachment.

Modified articles of association

E-form INC27 – Application for converting a private limited company into a public company

According to rule 33 of Companies (Incorporation) Rules, 2014, for performing conversion of a private limited company into a public limited company or vice versa, the application must be filed in Form No INC-27 with prescribed fee. Therefore an application to convert a Private Limited Company into a Public Limited Company is needed is to be filed in e-Form INC27 to the associated Registrar of Companies with all the essential annexure along with prescribed fee.

Attachments of E-form INC.27

It is compulsory to attach Minutes of the member's meeting where approval was offered to convert and change articles of association

Changed Articles of Association

Certified True copy of Board Resolution can be attached as a non-compulsory attachment

Other information if any can be offered as a not obligatory attachment(s)

Scrutiny of Documents by Registrar of Companies

According to Section 18, after getting the documents to convert a Private Limited Company into a Public Limited Company, Registrar of Companies shall persuade itself that the Company has satisfied the requisite provisions for registration of company. If satisfied, Registrar of Companies shall close the previous registration and issue new certificate of incorporation, after registering the documents submitted for change in category of company.

It is further clarified in section 18(3) that conversion of company does not concern any liability, debts, requirements or contracts acquired or entered into, by the company or on behalf of the company before conversion took place. Such liability, debts, contracts or obligations shall be enforceable in the same way as if such conversion has not been performed.

Post conversion rules and regulations

After converting Private Limited Company into a Public Limited Company, following points should be taken into consideration :

All the associated authorities like Excise and sales tax and others should be informed about the status change

Set up new PAN No of the company and update bank account details of the company

Set up new stationary along with new name of the Company

Analyze newly adopted Articles of Association and Memorandum of Association and eradicate all things that are not matched with the conditions of Articles of Association.

Enhance the paid-up capital to minimum Rs. 5 lakhs when the same is less than Rs. 5 lakhs.

Minimum 3 directors are essential.

Secretarial Practice

Sample Board Resolution for converting of a Private Company to a Public Company "Resolved that following provisions of Section 14 and other pertinent provisions of the Companies Act, 2013 if any, the approval of the Board of Directors of the Company be and is hereby accorded, depending on the agreement of the Members of the Company at the General Meeting, to the conversion of this Company into a Public Limited Company and as a result the name of the Company be.

Resolved further that the word "Private" wherever coming out in the Memorandum and Articles of Association of the Company in the name of the Company be and is hereby deleted.

Resolved further that the Company secretary or any director of the company be and is hereby authorized to make application, file forms and others for alteration of status of the Company and thus its name with the Registrar of Companies office and are hereby further authorized to perform all such acts, deeds and things as may be essential or deemed useful to implement this resolution.

Frequently Asked Questions

Ques: What is the primary need for creating a Public Limited Company in India?

The primary necessity to incorporate a public limited company includes that it needs at least 7 shareholders and 3 directors. The minimum Authorised Capital of the company should be Rs 5 Lakhs instead of Rs. 1 Lakh in the case of Private Limited Company.

Ques: Whether change of name is mandatory for conversion?

The suffix "Private Limited" will be changed with "Limited." For this change, the company must get permission from the shareholders and after that make the necessary changes in the Memorandum of Association to get it modified.

Ques: What are known as liabilities of a Public Limited Company?

As Public limited company manages the public's money, it needs taking actions which enhance the statutory compliance on its part. The regulatory liabilities are not limited to the income tax but with MCA/ ROC, RBI, SEBI and others. It is vital to take extra measures as the stakes are much higher as compared to any other company.

Ques: How to modify Memorandum of Association and Articles of Association of the company?

Once the name approval letter is obtained from the Registrar of Companies, the Memorandum of Association and Articles of Association must be drafted. The name clause and capital clause are changed with the removal of restriction to Private Company as offered by definition.

Ques: When business operations can be started by a company as a public limited company?

The company can begin its business operations as a Public Limited Company on receiving the new Certificate of Incorporation from Registrar of Companies.

Ques: Whether a new GST registration is needed for the public limited company?

No. Since the PAN details of the company remains same, there is no need of new registration. Though, application of alteration must be filed for name change in records.

Ques: Who can be a member of Public Limited Company?

Any organization / individual can be the member of Public Limited Company that includes NRIs or foreigners.

Ques: Is it essential to have minimum 3 directors in a public limited company?

Yes, a minimum of 3 Directors are compulsory for a Public Limited Company. If you are sole proprietor, you can register as a One Person Company.



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