Private Limited To Public Limited

Private Limited To Public Limited

A private limited company can be converted into a public limited company. The procedure is quite straightforward. The company has to alter the memorandum of association and articles of association for this process. These provisions are present under the Companies Act, 2013.

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  • Procedure to Convert a Private Limited to a Public Limited Company
  • Digital Signature Certificate and DIN for directors
  • Liaising with the concerned regulatory authority for the conversion process
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Private Limited To Public Limited

Conversion of Private Limited to Public Limited Company- An Overview

Converting a private limited company to a public limited company is quite a straightforward process. All that needs to be done is to pass the resolution in the board meeting and the general meeting for the same. A special resolution is required for this process. A special resolution would include more than three quarters or majority of vote of the members.

There are many benefits of converting a private limited company to a public limited company. The company would be more reputed in the eyes of law. Apart from this, the company can also register its shares in a recognised stock exchange. The process of converting a private limited company to a public limited company is governed by the Companies Act, 2013 and the Companies (Incorporation) Amendment Rules, 2020.

What is a Public Limited Company?

A public limited company is an entity which is regulated under the provisions of the Companies Act, 2013. A public limited company is allowed to list its shares in a listed stock exchange. Such benefits are not allowed to be carried out by a private limited company. There are specific amount of members that are required for a public limited company. The public limited company must have a minimum of seven members. For conversion of private limited to a public limited company, some forms of resolutions have to be vetoed. Apart from this, the public limited company would have at the end of the name public limited company.

Benefits of Conversion of Private Limited to Public Limited Company

The following benefits can be enjoyed by the company due to the process of conversion:

Benefits of Conversion of Private Limited to Public Limited Company

Listing of Shares-

Through conversion of private limited to public limited company, the entity can list its shares in a recognised stock exchange. Though would be crucial for a company that wants to raise funds.

Raise Investment through the Public-

By listing the shares in a stock exchange the company can raise investment through the public. Different forms of shares can be utilised for this purpose. The company can raise investment though preference shares, equity shares or other forms of shares.

Shares can be transferred-

By going for the process of conversion of private limited to public limited company; the shares can be easily transferred from one shareholder to another shareholder. This would not be possible if the company is registered as a private limited company.

Increase in Reputation-

Conversion of private limited to public limited company would increase the reputation of the company. A public limited company is allowed to list its shares in the public stock exchange. Automatically this process of listing the shares in the public stock exchange would increase the reputation of the company.

Acceptance of Deposits-

Any public company is allowed to accept deposits under section 76 of the Companies Act, 2013.

Eligibility Criteria for Conversion of Private Limited to Public Limited Company

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

Primary Regulatory Authority for Conversion of Private Limited to Public Limited Company

The primary regulatory authority for conversion of private limited to public limited company is the Registrar of Companies and the Ministry of Corporate Affairs.

Apart from the above regulatory bodies, the Companies Act, 2013 and respective rules would apply for conversion of private limited to public limited company.

  • Section 2(68) defines the meaning of private companies under the Companies Act, 2013. These companies are not allowed to transfer their shares as per the articles of association of the company. Section 2(71) provides the meaning of public limited companies under the companies act, 2013. These companies are allowed to transfer their shares and also list shares as per the requirements of the stock exchange.
  • Section 3 of the Companies Act- Such section would relate to the objects of the company. The objects clause is present in the Memorandum of Association (MOA). The company has to change the objects clause for converting into a public limited company.
  • Section 18 of the Companies Act- This section provides that the company can go for the process of conversion of private limited to public limited company. Alteration of the MOA and AOA has to be carried out as per the requirements of the companies act, 2013.
  • Section 149 of the Companies Act- Such section relates to the appointment of directors of the company. A public limited company has more directors that a private limited company.
  • Section 13 along with Rule 29 of the Companies (Incorporation) Amendment Rules, 2020- When going for conversion of private limited to public limited company, the MOA has to be altered.
  • Section 14 along with Rule 33 of the Companies (Incorporation) Amendment Rules, 2020- This provision and section relates to alteration of the AOA of the Company.

What is the procedure of Conversion of Private Limited to Public Limited Company?

The following process and procedure has to be considered for conversion of private limited to public limited company:

  • Notice for Board Meeting
  • Hold the Board Meeting
  • Provide the Notice to Hold the EGM
  • Hold the EGM
  • File MGT-14 with the respective authority
  • File INC-27 with the respective authority
  • Approval of MGT-14 and INC-27
  • Provide Certificate of Incorporation

Notice for Board Meeting- A notice must be provided by the directors of the private company to hold a board meeting. The notice must be provided seven days before the meeting. The agenda of the meeting must be decided in this notice. The following items must be considered in the agenda of the board meeting:

  • Resolution which has to be passed in the board meeting
  • Time and Requirements to Hold an Extraordinary General Meeting
  • An approval of the EGM.

Hold the Board Meeting – In the next step the company has to hold the board meeting. In the board meeting the following has to be approved:

  • Prepare the resolution of conversion of private limited to public limited company
  • Finalise the list of creditors of the company
  • Approve the drafts of the Memorandum of Association and Articles of Association
  • Consider to fix the time and place for holding the EGM.

Provide the Notice to Hold EGM-

In the next step of the board meeting, the directors have to provide notice to all the shareholders to hold the Extra-ordinary general meeting (EGM) at least 21 days before the meeting. For calculating the period, 21 clear days notice is required to be provided.

Hold the EGM-

In the next step, an EGM must be held by the company. Here a special resolution which requires the vote of the majority must be considered to be passed. Along with this the approved MOA and AOA must be considered by the directors of the meeting.

File MGT -14 with the Respective authority-

After holding the EGM, the directors have to file form MGT-14 with the Registrar of Companies (ROC) within 30 days of the EGM.

File INC -27 with the Respective Authority-

Even form INC-27 has to be filed with the ROC within 15 days of the EGM.

Approve MGT-14 and INC-27-

In the next step, the ROC will verify whether the particulars related to the MGT and INC have been carried out as per the requirements of the Companies Act, 2013. If there are no issues with this then the ROC will approve the forms.

Provide Certificate of Incorporation-

After the process of approval, the ROC will provide the Certificate of Incorporation to the newly formed company.

Post-Compliance requirements for Conversion of Private Limited to Public Limited Company

The following post-compliance requirements have to be carried out by the company in order to comply with the requirements of the Companies Act, 2013:

Post Compliance requirements for Conversion of Private Limited to Public Limited Company

Forms required for Conversion of Private Limited to Public Limited Company

The following forms are required for conversion of private limited to public limited company:

  • Form MGT 14- This has to be filed with the Registrar of Companies. Along with this information such as the notice of the EGM, Amended AOA, Amended MOA, Statements with Explanations, Resolutions taken in the EGM must be provided to the ROC.
  • Form INC 27- This has to be filed with the Registrar of Companies. Along with this information such as the notice of the EGM, Amended AOA, Amended MOA, Statements with Explanations, Resolutions taken in the EGM must be provided to the ROC. Along with this the minutes of the meeting must be provided to the ROC.

Documents required for Conversion of Private Limited to Public Limited Company

The following documents are required for conversion of private limited to public limited company:

  • PAN details of the shareholders
  • If the shareholder is a foreign national, then the copy of the passport of the foreign national must be provided
  • Identification documents of the shareholders and directors- PAN, Aadhaar Card, Voter ID
  • Utility Bill- Electricity, Water and Other bills
  • NOC from the owner of the registered office (No –Objection Certificate)
  • Rental Agreement and other documents of the registered office
  • If the individual is a foreign national, then all the documents must be notarised by the requisite authority.
  • MOA and AOA
  • Copy of the Certificate of Incorporation of the company
  • Income Tax Returns of the company
  • Latest Audited Financial Statements of the Company

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Frequently Asked Questions

One of the most important compliance requirements after converting a private limited company to a public limited company is to change the name of the company.

A public limited company has a minimum of seven shareholders and three directors.

First the board meeting has to be held. For this a notice must be provided to all the directors. Once the board meeting is held, the agendas and various resolutions must be discussed. Apart from this the amendments of the MOA and AOA should take place. The schedule to holding the EGM must be considered in the board meeting. In the EGM a special resolution must be passed by the majority regarding the conversion of private limited to public limited. After this is considered the same must be filed with the ROC along with MGT-14 and INC-27. If the ROC considers that all requirements have been fulfilled, then the certificate of incorporation would be provided for the new company.

Usually the process to convert a private limited company to a public limited company would take a period of 30 days.

Clear days would include just the days which it takes for a particular transaction or process to occur. For example, if the filing is done on Thursday evening, then for the purpose of calculating the amount of clear days the time from Friday is only taken. However, for business days the time from Thursday would be taken for calculation.

The main individuals having authority over the public limited company are the directors and shareholders of the public limited company.

No, any additional fee should not be provided for the process of conversion of private limited to public limited company. A fee should not be paid even when the registrar issues the certificate of incorporation for the public limited company.

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