Private Limited to Public Limited Company Conversion

Private Limited Company Vs Public Limited Company

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A private limited company and a public limited company are two different forms of business organizations in India, each with its own set of characteristics and requirements.

A private limited company is a type of business entity where the shareholders have limited liability and the number of shareholders is limited to 200. The company’s financial information is not publicly available and shares are not traded on a stock exchange. They are relatively easier and less expensive to set up and maintain and are suitable for small to medium-sized businesses.

On the other hand, a public limited company is a type of business entity where the shareholders have limited liability and there is no limit on the number of shareholders. The company’s financial information is publicly available and shares are traded on a stock exchange. They are more complex and expensive to set up and maintain, but they have greater access to capital through the sale of shares and bonds and are suitable for larger businesses.

In summary, a private limited company is more suitable for small and medium-sized businesses, while a public limited company is more suitable for larger businesses looking to raise more capital and increase the liquidity of their shares.

Requirements for Converting Private Limited to Public Limited

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i) Digital Signature Certificate (DSC) – A digital signature certificate has to be created for at least one director.
ii) Seven members as Shareholders- Seven members have to be appointed as shareholders of the company to be a public limited company.
iii) Director Identification Number for all the Directors- All the directors need a director identification number (DIN).
iv) Shareholder and Director- An individual can be appointed as a shareholder and a director.
v)Three Directors- Apart from this to operate, the public company has to have minimum of three directors.

Procedure for Conversion of Private Limited to Public Limited

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Procedure for Conversion into a Public Limited Company:

Board Meeting:

Notice of the board meeting is issued to the Directors at least 7 days prior to the meeting
Agenda includes:
– Approval of new/amended Memorandum of Association (MOA) and Articles of Association (AOA)
– Approval for conversion of private limited company to public limited company
– Approval for conducting an Extraordinary General Meeting (EGM) and appointment of person in charge of circulating notice of EGM
– Fixing date, time and place for EGM
– Passing of Board Resolution for increase in number of directors as per Section 149(1)(a) of the Companies Act 2013

Issuance of notice for EGM and holding the EGM

– Notice is issued to Directors, Shareholders, Auditors
– Notice period should be 21 days, but can be shorter with 95% member consent
– Resolutions passed subject to shareholders’ approval

Filing of form with Registrar of Companies (RoC)

E-Form MGT-14 filed with RoC within 30 days of passing resolution with attachments of:
– Notice of EGM and Explanatory Statement
– Certified copies of resolutions passed
– Copy of new MOA and AOA

E-Form INC-27 filed with RoC within 15 days of passing resolution, with attachments of:
– Minutes of meeting
– Copy of new AOA and MOA
– Copy of resolution passed
– List of members of the company with details.

Documents Required to Convert Private Limited to Public Limited

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1. Digital Signature Certificates (DSC) of all Directors.
2. Director Identification Number (DIN) of all Directors.
3. Identity proof of all Directors.
4. Address proof of all Directors.
5. Passport size photographs of all Directors.
6. Proof of business address:
– Where the premises are owned, the property papers.
– Where the premises are on a rental basis:
– No Objection Certificate from the owner.
– Rent Agreement
7. Copy of utility bills (Not more than two months old)
8. Certified copy of the latest financial statements.
9. Copy of the latest Income Tax Return Acknowledgement.

Benefits of a Public Limited Company

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There are several benefits of a Public Limited Company in India, including:

Listing of shares: Conversion of private limited to public limited company allows the entity to list its shares in a recognized stock exchange, which is crucial for a company looking to raise funds.

Raise investment through the public: By listing shares in a stock exchange, the company can raise investment through the public by issuing preference shares, equity shares, or other forms of shares.

Transfer of shares: Conversion of private limited to public limited company allows for easy transfer of shares from one shareholder to another, which is not possible for private limited companies.

Increase in reputation: Conversion of private limited to public limited company increases the reputation of the company as it is allowed to list its shares on a public stock exchange.

Acceptance of deposits: Public companies are allowed to accept deposits under Section 76 of the Companies Act, 2013.

FAQs on Conversion of Private Limited to Public Limited Company

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