How to Convert a Private Limited Company to Public Limited Company?

Deepti Shikha

09 Jan, 2021

Section 18 of the Companies Act, 2013 confers right to the companies for the conversion of companies already registered.  Conversion of Private Limited to a Public Limited Company opens new doors of opportunities. A company already registered as a Private Limited can convert itself as a Public Limited Company. The conversion of Private Limited to Public Limited Company is possible by alteration of memorandum and articles of the Company. Furthermore, a minimum of seven members and three directors are required for the conversion of Pvt. Ltd. to Public Limited Company. The rights, liabilities, powers, and obligations of the Company remain the same, even after the conversion. The conversion of a company from Pvt. Ltd. to Public Limited Company shall not affect any debt, liabilities, and obligations. The debt, liabilities, obligation, and contracts may be enforced as if there is no such conversion.

What are the Regulatory Requirements for Conversion of Private Limited to Public Limited Company?

• Legal provisions for Conversion of Private Limited to Public Limited Company are specified in Section 18 and Section 14 of the Companies Act,2013 to be read with Rule 33 of the Companies (Incorporation) Rules, 2014.
• According to Section 13 and Section 14 of the Companies Act, 2013 read with Rule 33 of the Companies (Incorporation) Rules, 2014– Conversion of Pvt. Ltd. to Public Limited Company involves alteration of Article of Association of Private Company which cannot be done without passing a special resolution of Shareholders in the General Meeting.

Procedure for Conversion of Private Limited to Public Limited Company

Board Meeting

• As per the provisions of Section 17(3) of the Companies Act, 2013 Notice must be issued.
• The notice must be issued for convening a meeting of the Board of Directors.
• The main agenda of Board Meeting will be:

• To pass Board Resolution for an increase in Number of Directors, i.e. a minimum of three Directors.
• To fix place, date and time for holding of Extraordinary General Meeting or EGM
• To get the approval of all the shareholders by way of special or ordinary resolution to increase authorized capital of the Company in Extraordinary General Meeting.
• A per Section 102(1) of the Companies Act, 2013 the notice of Extraordinary General Meeting must be approved along with the Agenda and Explanatory statement to be annexed in the notice of General Meeting.
• The Director or Company Secretary (CS) must be authorized to issue Notice of Extraordinary General Meeting or EGM as approved by the Board.

Notice of Extraordinary General Meeting

According to the provisions of Section 101 of the Companies Act,2013 the issue of Notice of Extraordinary General Meeting to be made in writing at least 21 days before the actual date to the following members:

• The Directors
• Members and 
• Auditors of the Company

Convene Extraordinary General Meeting 

• Holding of Extraordinary Meeting or EGM on the due date.
• As per Section 146 of Companies Act, 2013- check whether the auditor is present or not. And in case the auditor is absent to check whether the leave of absence is granted or not.
• According to Section 114(2) of the Companies Act, 2013-A Special Resolution to be passed to get shareholders’ approval for an increase in the authorized capital of the Company.
• Get approval for alteration of Memorandum of Association or Articles of Association as prescribed in Section14.

Registrar of Companies or ROC Form Filing 

As prescribed in Section 14 regarding alteration in Articles of Association for the conversion of Pvt. Ltd. to Public Limited Company few E-Forms need to be filled with the concerned Registrar of Companies or ROC at different stages as per the details given below:

E- Form MGT.14- According to Section 117(3), a copy of the special resolution is required to be filed with a concerned Registrar of Companies or ROC through the filing of form MGT.14 within 30 days of passing of the special resolution in the Extraordinary General Meeting or EGM.

The following documents must be attached with Form MGT.14–

1. Notice of Extraordinary General Meeting or EGM along with a copy of the explanatory statement under Section 102.
2. Duly certified original copy of Special Resolution
3. Altered Memorandum of Association(MOA) and Articles of Association (AOA)
4. Duly certified copy of Board Resolution may be attached as an optional attachment.

E- Form INC.27- An Application for conversion of Private Limited to Public Limited Company is required to be filed in e-Form INC 27^[1] to the concerned Registrar of Companies (ROC) with all the necessary annexure along with the prescribed fee.

The following documents are to be attached in e- Form INC 27:

1. It is compulsory to attach the Minutes of the member’s meeting where permission was granted for conversion and altered articles of association.
2. Copy of order of Competent Authority need not be attached.
3. Altered Articles of Association
4. If any other information is available, it can be provided as an optional attachment.

Note– Some attachments require further documents in Form INC-27, such as:

1. An affidavit from the Director or Managing Director or Whole Time Director stating the following:

1. A letter of no objection has been obtained from all the creditors and Debenture holders.
2. There is no pending demand from the Sales Tax or Income Tax.

1. Certified list of all the Creditors of the Company as on the date of Extraordinary General Meeting.
2. Certified list of all the Members of the Company as on the date of Extraordinary General Meeting.
3. Proof of filing of a statutory report with the Registrar of Companies.
4. List of any pending cases before any court of Law where the Company is a party.

If the Registrar of Companies is satisfied, then the former registration shall be closed, and a fresh certificate of incorporation shall be issued, after registering the documents submitted for change in class of Company.

Our Recommendation: How to Change Business Entity? – Detailed Conversion Procedure of Different Business Entities

Documents Required for Conversion of Private Limited to Public Limited Company

What are the Minimum Requirements for Conversion from Private Limited to Public Limited Company? 

The minimum requirements for conversion of Pvt. Ltd. to Public Limited Company are mentioned below:

• Digital Signature Certificate or DSC for 1 Director.
• Minimum 7 shareholders.
• Director identification number or DIN for all the directors.
• Director and shareholder can be the same person.
• Minimum of 3 Directors.

What are the Benefits of Conversion of Private Limited to Public Limited Company?

What are the Post Conversion Requirements?

After receiving approval of the Registrar of Companies for conversion, there are some requirements to be followed:

1. Arrange a new PAN Number of the Company.
2. Arrange new stationery with the Company’s new name to be printed on it.
3. Update all the bank account details of the Company.
4. Inform all the concerned authorities like Excise and sales tax about the change of status.
5. A printed copy of the new Memorandum of Association and Articles of Association.

Basic Key points to be Considered for Conversion of Pvt. Ltd. to Public Limited Company

• Name of the Company must be altered from “Private Limited” to “Public Limited/Limited” wherever mentioned.
• The shareholders and the Central Government must approve the conversion.
• Alteration of Memorandum of Association to give effect to conversion.
• Articles of Association of the Company to be altered in such a manner that the restrictions and limitations applicable to Private Company are no longer included.
• As per Section 3(1) of the Companies Act, 2013 ensure that the number of members in the CompanyCompany is seven prior to conversion. 
• According to Section 149(1) of the Companies Act, 2013- ensure that the number of directors to be three.
• According to Rule 29 of Companies (Incorporation) Rules, 2014 -ensure CompanyCompany has filed annual returns of financial statements due for filing with the Registrar of Companies.
• The company has paid all its matured deposits or debentures or interests.
• Post conversion Print New set of Memorandum of Association and Articles of Association, arrange for new stationery and letterheads. 
• Make an application for modification in the PAN of Company.
• Provide Intimation to concerned Government Departments where Company is registered or any other authority.

Contact Enterslice

Our experts in Enterslice are here to help you to convert your Private Company to a Public Limited Company. Our Professionals will provide you with the best assistance for the conversion of your company.

Conclusion

The Public Limited Company can raise funds through Public Issue of shares and can also accept deposits. Transfer of shares is also possible as the restriction on transfer is removed on conversion from Pvt. Ltd. to Public Limited Company. With a large source of investment available after conversion, the Company is able to stimulate growth within the Company. It is advisable to seek professional advice before converting a Private Limited Company as the affairs are very complex. If you wish to be listed on a Stock Exchange, it may be preferable to form a Public Limited company.

Read our article:Private Limited Company Incorporation in India