Procedures under Companies Act, 2013

Conversion of Private Company into A Public Company

Text of the provisions of Section 14(1) of Companies Act, 2013:

Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of—

  • a private company into a public company;

Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company

Key Considerations:

  • Members of the Company shall approve the conversion of Company into Public Company by Special Resolution.
  • Name clause of Memorandum needs to be amended to exclude the word 'Private'.
  • If the Company has less than 7 members, appropriate steps should be taken to increase them to at least 7.[Section 3(1)(a)]
  • If the number of directors of the Company is two, the number of directors should be increased to at least 3.[Section 149(1)(a)](Pl. ref. procedure for Appointment of Additional Director)
  • Increase the authorized share capital and paid up share capital as prescribed for public company, if required. Presently, minimum capital is not prescribed. (Pl. ref. procedure for increase in authorized and paid up capital of the company)
  • The Articles of the Company shall be suitably amended for the removal of restrictive provisions applicable to a Private Company. It is advisable to adopt a new set of Articles applicable to a Public Company.
  • Company has not defaulted in filing of Annual Returns or Financial Statement or any other document due for filing with the Registrar. [Rule 29(1) of Companies (Incorporation) Rules, 2014]
  • Company has not defaulted in repayment of matured deposits or debentures or interest on deposits or debentures. [Rule 29(1) of Companies (Incorporation) Rules, 2014]

Procedure for conversion of a Private Company into a Public Company:

[Section 14, Section 15, Read with Rule No. 29, 33 of the Companies (Incorporation) Rules, 2014]

  1. Issue not less than 7 days notice and agenda of Board meeting, or a shorter notice in case of urgent business, in writing to every director of the company at his address registered with the company  and call a Board meeting to consider the proposal of conversion of Company into a Public Company. Also follow the procedure prescribed for issuing and signing of notice of Board Meeting.
  1. Hold a meeting of Board of Directors-             
  • To pass the necessary Board Resolution for approving proposal of conversion of Company into a Public company, subject to the approval of Shareholders by Special Resolution in general meeting of the company
  • To delegate authority to Company Secretary or any one director of the company to sign, certify and file the required form with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the proposed conversion.
  • To fix day, date, time and venue for holding general meeting of the Company.
  • To approve the draft new set of Memorandum and Articles of Association meeting the requirements of a Public limited company.
  • To approve the draft notice of general meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013. The notice of general meeting must contain text of special resolution for conversion of Company into a Public company and consequent amendment in Memorandum and Articles of   Association of Company.
  • To authorize the Director or Company Secretary to sign and issue notice of the general meeting.

 

  1. Prepare and circulate draft minutes within 15 days from the date of the conclusion of the Board Meeting, by hand/speed post/registered post/courier/e-mail to all the Directors for their comments. Also follow the procedure prescribed for preparing, circulation, signing and compiling of Board Minutes.(Secretarial Standards-1 )
  1. Send notice of the General meeting proposing the aforementioned special resolution to all the shareholders, directors, auditors and other persons entitled to receive it, by giving not less than clear 21 days notice or shorter notice if the consent is given in writing or through electronic mode by not less than 95% of the members entitled to vote at such meeting, either in writing or through electronic mode (Section 101). Also follow the procedure prescribed for issuing and signing of notice and convening of General Meeting.
  1. Hold the general meeting on the fixed day and pass the Special Resolution for conversion of company into Public company and  altering the Memorandum of Association  and Articles of Association including removal of restrictive provisions as applicable to Private Company in accordance with Section 14 of the Act, by 3/4th  majority as per Section [114(2)(a)] [Section 14(1)(a)].
  1. Follow the procedure prescribed for preparing, signing and compiling of minutes of General Meeting.
  1. File certified true copy of each special resolution(s) passed in general meeting along with a copy of notice including explanatory statement and altered Memorandum and Articles of Association of Company with the Registrar in E-Form No. 14 under Section 117 of the Act within 30 days of passing Special Resolution in general meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014.
  1. For effecting conversion of Private Company into Public Company, file an application in E-Form No. INC-27with the Registrar along with prescribed fees within fifteen days of passing of Special Resolution along with the following attachments:
  1. Minutes of the members' meeting;
  2. Altered Memorandum of Association
  3. Altered Articles of Association
  4. List of members with number of shares held, details of members voting in favor of and against the resolution and abstained from voting;
  5. Optional attachment(s) (if any).[ Section 14(2) &Rule 33(1)of Companies (Incorporation) Rules, 2014]
  1. On the approval of E-Form No. MGT.14 and E-Form No. INC-27, Registrar will issue a fresh Certificate of Incorporation with the Changed name i.e. the existing name with the word “Private” deleted   consequent upon   conversion of company into a Public Company.[Section 13(3) & Rule 29(2)of Companies (Incorporation) Rules, 2014]

Important Note:

*Company ceases to be a Private Company with effect from the date of passing of special resolution for alteration in Articles of Company in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under the Act but the change in the name of the company shall be complete and effective from the date of issue of fresh Certificate of Incorporation by ROC. [Section 13(3) and 14(1)]

 

ACTION POINTS REQUIRED TO BE TAKEN AFTER GETTING FRESH CERTIFICATE OF INCORPORATION:

  • Company may optionally issue a general notice in newspapers informing members and all other concerned persons and public at large that the Company has been converted into a Public Company and its name has been changed from___Pvt. Ltd. to____ Ltd.
  • Every Alteration made in the memorandum or articles of the company shall be noted in every copy of the memorandum or articles as the case may be.[Section 15(1)]
  • Arrange printing of fresh copies of Altered Memorandum and Articles of Association with new Certificate of Incorporation;

Record minutes of Board meeting and shareholder’s meeting in the minutes book within 30 days of conclusion of meeting along with the date of such Entry.[Section 118]

  • Arrange new rubber stamps with the new name, and all the stationary in the new name of Company.
  • Change the specimen of Blank Share Certificates with the new name, if already printed.
  • Have painted the new name of the Company on outside every office, building etc. along with former name so changed [Pursuant to Sec 12(3)(a) and First proviso to Section 12(3)]
  • Arrange a new common seal engraved with new name and adopt it at the meeting of Board of Directors( Common Seal is optional now). [Pursuant to Sec 12(3)(b)]
  • Get its new name printed in its entire business letters, letter heads, Billheads, Invoice Forms, Receipt Forms and all other official publications along with former name so changed. [Pursuant to Sec 12(3)(c) and First proviso to Section 12(3)]
  • Have its new name printed on hundies, promissory notes, bills of exchange etc. [Pursuant to Sec 12(3)(d)]
  • Inform about the conversion of the Company to all concerned persons/ govt. authorities like Central Excise Authorities, Customs Authorities, Sales Tax Authorities, Service tax Department, Chief Inspector of Factories, and Regional Provident Fund Commissioner etc.
  • Intimate all the Banks where Company is operating Bank Accounts about its conversion and file necessary applications and documents, as required by Bank, with regard to change in the name and status of Account holder.
  • Make application to Income Tax Department for Arranging New Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
  • Update the new name of the Company with the Basic Utility Service providers like Electricity providers, Telephone Internet connections in the name of the Company etc.
  • Inform all other Companies where Company has made Investments, taken loans, taken Insurance Policies, entered agreements of any kind and to all stakeholders.

Procedure Authors

ACS Divya Jain
ACS Palak Jain
ACS Ankita Jain
ACS Sugandh Jain
ACS Mansi Kapor
ACS Bhawna Sharma


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