In order to diversify the business on large scale it is better to convert private limited company to Public Limited Company. The main benefit of Public Company is that it is easy to raise funds on a large scale basis without approaching banking system and thereby reducing debts while in case of Private Limited Companies all the reserves are raised through the existing members or shareholders and promoters as it is managed privately. Though the chances of risk increase when a Private company goes public among its shareholders. If Public companies once raise funds through IPO, get an indirect promotion and the support through the stock exchange websites where their stocks are listed.
Overview of Conversion of Private Limited to Public Limited Company
Converting a private limited company to a public limited company is a significant step towards expanding the business and increasing access to capital. A public limited company can issue shares to the public, which means it can raise funds from a large number of investors. However, this process requires compliance with various legal and regulatory requirements, such as obtaining the approval of shareholders and the Registrar of Companies (ROC), and making changes to the Memorandum and Articles of Association. It is recommended to seek professional guidance from experts to ensure a smooth and efficient conversion of private company into public company.
Advantages of Conversion of Private Company into Public Company
Medium for preferred Investments- While investing, an investor prefers dealing widely in the market and hence it opens doors for the Public Limited Company to attract more funds from the market as their shares are freely transferable.
Limited Liability – The liability of the Members is limited to the extent of Capital invested by them in the Company and therefore, they cannot be held personally liable for it also it is a legal entity which means it is different from its Members and Directors.
Listing on stock exchange- A Public Limited Company can get itself registered on stock exchange by complying with certain norms which increase the scope of diversification of business and widening the shareholder base and also increasing the risk.
Easy to make acquisitions- Public Limited Companies are more approachable and also have many other advantages like liquidity which makes them attractive for the potential investors at the time of Merger and Acquisitions and it has a greater borrowing capacity.
Minimum Requirements for Conversion of Private Company into Public Company
- Minimum three persons as Director and maximum fifteen
- Minimum one Director shall be Indian resident
- Minimum seven persons as Members.
- No Minimum Capital requirement.
- Digital Signatures of any one Director
DIN for all the directors
Documents Required for Conversion of Private Company into Public Company
AOA of the company
List of Shareholders and directors
MOA of the company
What is the Procedure for Conversion of Private Company into Public Company?
- Calling of Board Meeting: Issue notices according to the provisions of section 173(3) of the Companies Act, 2013, for converting a meeting of the Board of Directors. The main objective of this Board meeting would be:
- Pass a board resolution to get in-principal permission of directors for the conversion of private company to a public company by altering the AOA(articles of association).
- To get the approval of shareholders, fix the date, time and place for holding an Extra-ordinary General meeting (EGM) , by way of Special resolution, for convert a private company into a public company.
- To approve the notice of EGM with agenda and statement to be added to the notice of General Meeting, as per section 102(1) of the Companies Act, 2013.
- To delegate the Director or Company Secretary to issue Notice of the Extra-ordinary General meeting (EGM) as recommended by the board under article 1(c) mentioned above.
- Pass Board resolution for an increase in the number of directors up to 3, if the number of directors is less than 3.
- Issue of EGM Notice: Issue Notice of the Extra-ordinary General Meeting (EGM) to all members and affiliates, directors and the auditors of the company following the requirements of Section 101 of the Companies Act, 2013.
- The holding of EGM meeting: It holds the Extra-ordinary General meeting on the due date, and transfers the required Special Resolution, to get the shareholder’s support for conversion of private company into a public company along with alteration in articles of the agreement, under section 14 for such conversion.
- Registrar of Company(ROC) filing: For alteration in the Article of Association for the conversion of a public limited company under section 14, few E-forms will be filed and registered with the concerned Registrar of Companies at different stages as per the details mentioned ;
- E-form- For filing special resolution with ROC, passed for conversion of private company into a public company.
- In case of modification in Article of Association for the conversion to a public company special resolution, it requires to be passed under section 14. According to section 117(3)(a), a copy of this special resolution is expected to be filed with the concerned ROC through the filing of form MGT.14 within 30 days of passing the resolution in the EGM.
- According to Rule 33 of Companies (Incorporation) Rules, 2014, for convert a private company into a public company, the application shall be listed in Form No. INC-27 with the fee. Moreover, the conversion of the company is to be registered in e-Form INC.27 to the ROC involved, with all the required annexures and with the prescribed fee.
- As per section 18, after receiving the documents for the conversion of a private limited company into a public limited company, ROC shall convince itself that the company complies with the necessary provisions for registering a company. If so convinced, ROC (Registrar of Companies) shall enclose the previous registration and issue a fresh certificate of incorporation, after registering the documents presented for change under the specific class of the company.
FAQs
What are a Public Limited Company (PLC) and its characteristics?
A Public Limited Company (PLC) is a legal entity that can offer its shares to the general public and is allowed to trade on the stock exchange. This structure is characterized by limited liability, meaning shareholders are responsible for the company’s debts only to the extent of their shareholdings.
What is the minimum capital required for a public limited company?
A public limited company must meet the Companies Act’s minimum capital requirement. This requirement can vary and is specified following the legal provisions.
Under which section can a private company be converted into a public company?
The Companies Act regulates the conversion of a private company into a public company. The specifics of this process, including the applicable sections, are outlined in the Incorporation Rules.
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