Conversion of Public To Private Company

Overview

Public company has many regulatory compliance and can accept deposits from public at large and have no restriction on capital and can have unrestricted turnover. If any company does not have vast business and does not have any deposits from public or any statutory due and creditors due and want to have less regulatory compliance then such company can avail the option to convert itself into private limited company .

Procedure for Conversion of Public Ltd. Company to Pvt. Ltd. Company

• CONDUCT BOARD MEETING - To conduct a board Meeting to discuss the following agenda:
  • Fixing time, date and venue of holding EGM.
  • Approve of conversion to public limited company ,adopting new set of MOA & AOA subject to the approval of shareholders.
  Note: The notice of board meeting to be circulated at least 7 days before the meeting to of all the Directors at their registered address.
• CONVENE GENERAL MEETING -
  • An Extra Ordinary General Meeting is to be conducted for passing special resolutions for the purpose of alteration in MOA and AOA & to get approval of shareholders for conversion of the private limited company into public limited company.
  • Amending the name clause in MOA and substitute from "Private Limited" to "Public Limited/Limited" wherever used.
  • All the restrictions and limitations applicable on Private Company has to be altered from Articles of Association of Company.
  • Make ensure the limit of number of Director to be three & number of members in Company is seven before to conversion.
  • Ensure Company has completed filing of annual returns or financial statements due with the Registrar of companies.
  • Note: 21 days clear notice of EGM is required be send to the members, Directors and Auditors of the Company. However, General Meeting can also be hold at a shorter notice with the consent of more than 95% of shareholders entitled to vote.
• 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 EGM with the following attachment:
  • Notice of calling EGM
  • CTC of Special Resolution
  • Altered MOA and AOA
  • CTC of Board Resolution as an optional attachment.
• Publication of Newspaper Advertisement - The advertisement of application in the INC-25A, in a vernacular newspaper in the vernacular language in the district and in English language which is circulated widely in the State in which the registered office is situated.
• Application to Regional Director and file form-RD-1 - An application is required to draft and filing in Form RD-1 to Regional Director within 60 days of passing of the special resolution for conversion of Public Company into Private Limited alongwith following attachment:
  • Minutes of the Extra Ordinary General Meeting of the Members
  • CTC of Special Resolution
  • Altered MOA and AOA
  • Affidavit verifying list of creditors and debentures holders
  • CTC of Board Resolution in which the authorization for Conversion is given
  • Copy of News Paper Advertisement
  • Declarations from KMP of the company that it restricts the number of members to two hundred and no deposit will be accepted by the company in violation of the Act and rules made thereunder.
• Filing of Form INC-28 - Once the RD satisfied with submission of all relevant documents and approves the entire conversion process then RD shall issue an order for such conversion and the said order is required to be filed in form INC-28 with ROC within time limit of 30 days from the date of passing of order.

Forms to be Filed

• Copy of Special Resolution- MGT-14
• Application for Conversion of company to RD- Form RD-1
• Filing of copy of order- Form INC-28

Post Compliances of Conversions

The following are the key points for consideration of conversion of public company to private company :

Advantages for Conversion of Public Company into Pvt. Company

• The listing public limited company is on a recognized stock exchange and the stocks are traded publicly whereas in a private limited company is not listed on the stock exchange and not traded as it is held by its members only privately by making restriction on transfer in Private Company so that the membership of undesirable persons can be prevented.
• Public companies are compulsorily 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 public company whereas it is not applicable in the case of a private company.
• There is heavy compliance burden to match with the regulations provided by SEBI on a public limited company whereas in case of private limited company compliances are less.
• Appointment of company secretary is mandatory for public companies and in case of private companies, it is optional and discretionary.
• The Quorum at AGM is 5 members in case of public limited company and in private limited company, it is 2 members.

Conclusion

Depending on requirement, a type of company is chosen to be register. However, the main reason for selecting a private company is to enjoy the less compliance part.