In this blog, you will know how you can convert a private company into a public company. Here, it is important to register your company as a private limited company before conversion.
Online private limited company registration in India can be done by visiting the MCA website.
Process for conversion into a public company is possible and applied under the companies act, 2013.
Legal provisions concerning to conversion of private companies into the public company have been given in section 14 and section 18 of the companies act, 2013, read with section and rule 33 of the Companies (incorporation) Rules, 2014. E-form INC-27 is needed to be submitted for this conversion following section 14 and rule 33. Here is rule 33 from the said act for your perusal;
Defining rule 33 – alteration of articles
– To affect the conversion of a private company into a public company and vice versa, the application has to be submitted in form no. INC-27 with a fee.
– Competent authority’s order’s copy approving the alteration must be submitted with the registrar in form no. INC-27 with payment of fee and altered article’s printed copies within 15 days of the order’s receipt from the central government.
Note – for this sub-rule object, the term ‘competent authority’ means the central government.
Conversion of already registered companies under section 18.
As per section 18 of the companies act, 2013, an existing company can convert itself into another class of company through altering its MoA (memorandum of association) and AoA (articles of association) in the manner stated in chapter II of the companies act, 2013. Section 13 offers for the alteration of MoA, whereas section 14 offers for the alteration of AoA.
Adopting a new set of articles for a public company.
Generally, a private company’s articles include several limitations. During the conversion process, it is suggested to adopt a new set of articles for a newly public company to circumvent any future administrative intricacies. You would find several clauses such as quorum for a general meeting, numbers of directors and so forth that require to be redrafted according to a public company.
Section 14 of the companies act, 2013 (section 31 of former CA, 1956) plays a crucial role in the conversion process. This conversion involves alteration of AoA (articles of association) of private company u/s 14 that cannot be done without passing a special resolution of shareholders in the general meeting.
Here are the details of the secretarial process for the conversion.
- Convene a board meeting – issuance of notice as per the provision of section 173(3) of the companies act, 2013, for holding a meeting of the board of directors. The agenda of such meeting would be;
- Passing a board resolution to obtain in-principal consent of directors to convert a private company into a public company by altering the AoA.
- Fix the time, date, and place for convening extraordinary general meeting (EGM) to obtain shareholders’ approval through a special resolution to convert a private company into a public company.
- To approve EGM’s notice along with explanatory statement and agenda to be attached to the general meeting’s notice according to section 102(1) of the companies act, 2013.
- To authorize company secretary or director to issue a notice of EGM as consented by a board under clause 1(c) stated above.
- Issuance of EGM’s notice – to all the directors, members and auditors of the company as per the provision of section 101 of the companies act, 2013.
- Convening the EGM – holding the EGM on due time and date and passing the requisite special resolution to obtain shareholders’ approval to convert the private company into a public company along with alteration in AoA under section 14 of such conversion.
- ROC form submission – for alteration in AoA to convert a private company into a public company under section 14, a few E-forms have to be submitted with the concerned registrar of companies at various states as per the following details;
- E-form MGT.14 – for submitting special resolution with ROC, passed for conversion of the company.
When there is an alteration in the AoA to convert a private company into a public company, a special resolution must be passed under section 14. As per section 117(3)(a), a special resolution’s copy must be submitted with the concerned ROC via submitting a form MGT.14 within thirty days of passing a special resolution in the EGM. It is vital to note that you will have to submit MGT.14 as SRN no. of form MGT.14 will be utilized in form INC.27.
Documents that you will have to attach with E-form MGT.14;
– EGM’s notice along with a copy of the explanatory statement under section 102.
– Special resolution’s certified true copy.
– Altered MoA.
– Altered AoA.
– Board resolution’s certified true copy might be attached as an optional document.
- E-form INC.27 – application to convert a private company into a public company.
According to rule 33 of companies (incorporation) rules, 2014, for effecting private company conversion into a public company or vice versa, the application will have to be submitted in form no. INC.27 with a fee. Also, you are required to submit E-form INC.27 to the concerned ROC with requisite annexures and payment of a fee.
Documents of E-form INC.27;
– It is mandatory to attach minutes of member’s meetings where consent was given to convert and alter AoA.
– Altered AoA.
– Board resolution’s certified true copy might be attached as an optional attachment.
– Other information is optional.
Verification of documents by ROC.
According to section 18, ROC would verify all the relevant documents and compliance to satisfy himself/herself. If they are satisfied, then they would close the erstwhile registration and grant a certificate of incorporation for conversion. Under section 18(3), it has been said that the company’s conversion does not affect any liability, debts, contracts or obligations incurred or entered into by the company or on behalf of the company before conversion. Such things would be enforceable in the likewise manner as if such conversion has not been done.
Post-conversion formalities.
– Familiarise with all concerned authorities such as excise and sales tax and so forth for status change.
– Make a new PAN for the company—update details of the company’s bank account.
– Stationaries with new company’s name on it.
– Raise the paid-up capital to a minimal Rs. Five lacs, if it is less than that.
– Analyse MoA and AoA and expel things that are contrary to the condition of AoA.
– Numbers of directors has to be minimal 3.
Secretarial drafting and practice.
Sample of the board resolution for conversion.
‘resolved that as per section 14 and other concerning provisions of the companies act, 2013 if any, the board of directors’ consent has been given, approval from members of the company at the general meeting, to convert in the name of the company be and is hereby changed from ‘ABC private limited’ to ‘BCD’ public company.’
Also, remove the work ‘private’ from AoA and change its name with ROC.
Sample of special resolution for conversion.
‘resolved that as per section 14 of the companies act, 2013 and other applicable provisions, if any, the shareholders’ consent of the company has been taken for conversion, and subsequently the company’ name be changed from ABC automobile private limited to BCD automobile limited by expelling word ‘private’ from it, same would go in AoA as well.