Overview

As per the Private limited companies are concerned, they offer so much by itself, but at some point every private limited company wishes to turn public so that they can enlarge their scalability. So, the question that we come across is, “why to choose public?” The answer to this question depends on certain differences that occur between private limited companies and public limited companies which also offer the concept of Initial Public Offering (IPO) and also has the concept of shares to the general public.

The restriction on transferability of shares is removed by Initial Public Offering, which is the characteristic of private limited companies. In any public limited company it has been settled that there is no cap in terms to the maximum number of members, thereby it permits them to gain and raise easy access to funding. Consequently, flexibility and growth are the preferable reasons for the changing from private to public.

The Requirements to Convert Private Limited to Public Limited

• As per Section 14 by passing a special resolution, alteration of its articles by AOA, thereby deleting the three restrictions of a Pvt. Company.
• As per Section 13 by passing special resolution, altering its name thereby removing the word ‘Private’ from its name.
• If there are only 2 directors then the number of directors should be increased to at least 3, for these steps should be taken to increase the number of members to at least 7 if the number of members is below 7.
• Under Section 14 from the date of passing Special resolution the company turned out to be public. However, the change in its name, by deleting the word ‘Private’ becomes in effect only on issue of fresh incorporation certificate by the ROC.

Benefits of Converting Private Limited to Public Limited

1. Transfer of shares efficiently: Public limited company shareholders can transfer their own shares with great efficiency and ease. Filing of share transfer form is needed, and after the hand over the share certificate to the buyer. The procedure of transfer of shares to a new business structure is very risky.
2. Raise in Capital: One can leverage to raise the capital from the general public via shares which is an add on advantage of the public limited structure which has it all. This however, requires listing on a stock exchange. All public limited companies can issue fixed deposits, debentures, and convertible debentures to the general public.
3. Greater Reliability: Public limited companies have to inform about any structural change to the regulatory bodies, the audited statement of their account must be disclosed, and for all the shareholders have to hold annual general body meetings. To the entity these compliance procedures bring an immense deal of credibility. Public companies catch the attention of more brand identity
4. Free Transfer of Shares: There is free transfer of shares of Public Companies in the subject matter to SEBI Act & Companies Act.
5. Limited Liability: The concept of limited liability remains even after there is conversion from Private Limited to Public Limited.
6. Easy Acceptance of Deposits: The rules Public Companies can accept deposits from the public as per the subject to Section 76 of Companies Act 2013.

Documents Required for Conversion of Private Limited to Public Limited

• Passport/Voter ID/Driving License of Directors and shareholders.
• Directors and Shareholders PAN Card.
• A valid passport must be provided by foreign nationals.
• Recent passport-size photograph of Shareholders and Directors.
• Proof of Address: Electricity Bill/Telephone Bill of the certified office address.
• Residence Proof of Business: Electricity Bill/Telephone Bill of the certified office address.
• Income Tax Return: filed ITR for the previous fiscal year to be submitted.
• Financial Statements: A copy of duly attested audited Financial Statements.
• Certificate of Incorporation: declaration of Incorporation, MoA and AoA to be offered.
• Memo: In case of NRI or Foreign National documents of the director(s) must be notarized.
• Rent Lease: Agreement of Rent Lease of the certified office must be granted if any
• No Objection Certificate from the landlord: Collection of NOC from the owners(s) of certified office.

What Are the Minimum Requirements for Conversion?

• Minimum 7 Shareholders
• DSC for 1 Director
• DIN for all directors
• No minimum Paid up Capital
• Director and shareholder can be the one person
• At least three Directors

What is the Process of Conversion into a Public Limited Company?

The procedure for conversion into a Public Limited Company in accordance with the applicable provisions of the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014 is briefly given below for your understanding:-

1. Issue of notice for convening a meeting of the Board of Directors

   Notice is to be issued for holding the Board meeting along with the agenda to be circulated. The proposed agenda would be:-

   • Pass Board Resolution for Conversion
   • Fix date, time & venue for conducting of shareholder’s meeting (Extraordinary General Meeting)
   • Approve the Notice of EGM & authorized to Company Secretary/Director for issuance of the notice
2. Holding of Board Meeting - Discussing Agenda Items
   • To approve the conversion of Pvt. Limited to Public Limited subject to the approval of the shareholders.
   • To adopt the new set of Memorandum of Association and Articles of Association subject to the approval of the shareholders.
   • Fix the date, time and place of holding the general meeting
3. Issuance of Notice For General Meeting
   • Notice to the members at least 21 days before the meeting
   • If consent is given in writing or by electronic means, a general meeting may be convened by giving a short notice; At least 95% of the members shall be allowed to vote in such a meeting.
   • The notice period can be extended as specified in the articles.
4. Conduct The General Meeting
   • To pass a special resolution for the conversion of Pvt. Limited to Public Limited
   • To adopt the Compliance Memorandum of Association (MOA) and Articles of Association (AOA).
5. File Form MGT-14

   Special resolution to be filed within 30 days from the date of passage

   • Attachment with Form MGT 14
   • explanatory statement
   • Notice of EGM
   • Certified true copy of the special resolution passed at the EGM
   • AOA Revised
   • MoA Revised
   • If the EGM is held at short notice, consent to short notice.
6. File Form INC - 27

   The special resolution has to be filed within 15 days of its passing.

   • Attachments to Form INC 27:-
   • Certified original copy of the special resolution passed at the EGM
   • AOA Revised
   • MOA Revised
   • If the EGM is held at short notice, consent to short notice
   • Minutes of the General Meeting of Members
7. Obtaining the approval of MGT-14 and INC-27:-

   The forms will be approved by the RoC, if the RoC is satisfied that the private company has complied with the prescribed requirements of the conversion.

8. Certificate of Incorporation from ROC

   It will issue a fresh Certificate of Incorporation, once ROC has approved the forms MGT 14 and INC 27, & shall cancel former registration of the company.