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Private limited companies and Public limited companies are considered to be separate legal entities with limited liabilities given to their shareholders and members. Both forms of company are incorporated under The Companies Act. Though, both types of companies have a lot of differences. Be it in terms of requirement or legal registrations. To incorporate a public company you require a minimum of seven members and three directors. However, in the case of a private limited company you require only two members and two directors to incorporate your own company. There is a difference in the minimum share capital also. There are many other areas where you can notice the difference between these two form of companies. There are times when you find yourself in complicated situations. Situations like converting your private limited company or your public limited company in some other form of company. A similar sort of situation is discussed below. The situation describes the private limited company conversion into a public limited company.
The Private limited company conversion follows a proper regulated legal procedure. This procedure is governed by the Companies Act, 2013 given by the MCA or Ministry Of Corporate Affairs.
The private limited company conversion is generally done due to the following reasons:
Recognition, and
Ease of raising funds.
It is quite understandable that going public or giving the general public a chance to interact with your company directly, increases the company’s recognition. Also, due to public company’s reliability and big exposure, raising funds is comparatively easy. In order to proceed with private limited company conversion, you need to:
Convene a Board meeting. The board of directors should pass a resolution with mutual consent regarding the approval of company’s conversion.
Then, convene a general meeting, including the members, directors and the auditors of the company. A special resolution is then passed. This special resolution is made in order to reflect the amendments to Memorandum of Association and Article of Association and also to increase the share capital of the company. For, a public company the minimum share capital is rupees five lakhs. So, the resolution should be passed accordingly.
Finally, an application is filed along with specified documents. The application is filed by filing form MGT 14 and INC-27 along with the special resolution within 30 days of the passing of the special resolution. Other than that, documents like altered copy of MoA and AoA, minutes of the board as well as general meeting, an explanatory statement for conversion, particulars of members(at least seven) and directors(at least three) has to be submitted also.
Alternatively, conversion into a public company can be done online by filling Forms INC-32, INC-33 (MoA) and INC-34 (AoA) through the Simplified Proforma for Incorporating Company Electronically (SPICE).
All these documents are submitted to The Registrar of Companies. An application is filed. An acknowledgment slip is obtained. Online filing can give you the liberty to check the progress of your application online.
Finally, after all, the verification, a certificate is issued, hence completing the private limited company conversion.
A new PAN number will be required for the new company. That is the public company after the conversion of a private company. An increase in a number of directors and members is obviously mandatory along with the increase in share capital. The conversion may seem like a tedious process. But, it shouldn’t stop you from doing the necessary.
