Converting to Public Limited Company in India
Transforming from a Private Limited Company to a Public Limited Company in India involves meticulous steps. With a minimum requirement of three directors, the process begins with a board meeting for approval of new MOA and AOA. Subsequently, an extraordinary general meeting is convened to pass necessary resolutions, followed by filing requisite forms with the Registrar of Companies (RoC), marking the legal transition. Post-conversion, administrative tasks such as updating bank accounts and notifying tax authorities ensue, paving the way for enhanced capital opportunities and listing on stock exchanges, amplifying growth prospects.
Overview
A Private Limited Company is a small business which is maintained privately, it is one of the highly recommended businesses in India especially for startups. The registration of the private limited company is governed by The Companies Act 2013 in India. According to the Companies Act, 2013, a minimum of 2 shareholders is needed to begin a private company, while a maximum of 200 members. In case a private limited company undergoes any financial risk, the personal assets of members or shareholders are not subject to sell, i.e. they ought to have limited liability.
A limited company allows limited liability to its proprietors and to its management team. But in the case of a public limited company, a firm can sell shares to investors which are considered as a beneficial act in raising the capital for the business. To establish a Public Limited Company, a minimum of three Directors are required and there is no cap on the maximum number of members. Importantly, it has more strict regulatory requirements when compared to a Private Limited Company.
Public Limited Company is a different type of company but holds most of the characteristics of a private limited company. It enjoys more benefits such as ease of transferability, borrowing capacity, limited liability, and perpetual existence. Like any other companies in India, Public Limited Company is also registered according to the rules and regulations of the Companies Act, 2013.
Advantages Of Public Limited Company
Most Suitable Business For Heavy Investment
Public Limited company is the best business structure for heavy investment.
Favourite Business Type For Investors
Investors and other parties prefer Public Limited companies to invest their money as it is well structured and also transparent business structure. If anyone wants to raise capital for your business and to sell the ownership in the business, this type of company is what they should consider.
Easy To Raise Funds And Loans
Public Limited company is like a person as it can list itself in various stock exchange markets in India and can raise capital from the stock market and from interested investors. It also enjoys wide options to raise capitals through the general public, bank loans and Institutional investors.
Uninterrupted Existence
A Public Limited Company has ‘perpetual succession’, which means it has uninterrupted existence until it gets legally dissolved. Being a separate legal person, a company is unaffected by the departure or death of any member, it continues to be in existence regardless of the changes in the membership of the company.
Owning Property
A Public Limited Company is a juristic person; it can own, acquire, enjoy and estrange, properties in its own name. There is no right to the shareholder to make any claim upon the property which is in the name of the company so long as the public limited company is a going concern.
Easy Transfer Of Shares
Importantly, it is very easy to way out from a Public limited company, as only shares of the company have to be handed over to the investor or purchaser along with share transfer forms.
Checklist Requirements For Conversion Of A Private Limited Company To A Public Limited Company
- Digital Signature Certificate or DSC and Director Identification Number or DIN of two directors.
- Preparation and drafting of MOA or Memorandum of Association and AOA or Articles of Association of the company.
- PAN card and TAN number.
- Find the unique name for the company, application and name reservation.
- CIN or Certificate of Incorporation.
- Documents required for conversion of a private limited into a public limited company
- Copy of PAN card of the directors
- Copy of Aadhar card or voter ID of the directors.
- Passport size photographs of directors.
- The rental agreement of the registered business place.
- Electricity or water bill of the registered business place.
- If the office is its own place then the copy of property papers is required.
- NOC or No Objection Certificate from the landlord.
The Process Of Converting A Private Limited To A Public Limited Company
Basically, a company already enrolled in a type of business structure may change itself as a company of another type of business structure by modifying the memorandum and articles of the company. An application as per the requirement is needed and it should be submitted to the registrar of that specified state. The registrar after verifying and getting convinced with all steps and with the required documents, the formal registration of the company is done. After the registration process, the documents required for the conversion are verified by the Registrar, if everything is fine that the registrar will grant a certificate of incorporation. Procedure for Conversion into a Public Limited Company
Procedure for Conversion of private limited company into a Public Limited Company (consistent to applicable provisos of the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014):-
Board Meeting
The Directors are to be formally informed with a notice regarding the agenda of the Board Meeting. This notice has to be sent to the company’s respective registered addresses at least one week or 7 days prior to the date on which the Board Meeting is planned to be held. The mention below matters have to be specified in the agenda of the Board Meeting for discourse:
- Approval of the shareholders or members regarding –
- Adoption of a new and amended MOA or Memorandum of Association.
- Adoption of a new and amended AOA or Articles of Association.
- Conversion of a private limited company into a public limited company.
- Approval for conducting an extraordinary general meeting followed by authorisation of an individual to be in charge of circulation of the notice concerning the EGM.
- The place, date and time for the extraordinary general meeting have to be fixed too.
- Authorizing of a Board Resolution for the increase in the number of members or shareholders or directors, as a public limited company would need a minimum of 3 directors according to the provisions under Section 149(1)(a) of the Companies Act 2013.
Issuing Of A Notice Regarding EGM And Declaring The EGM
Once the Board Meeting was done, the Director and Company Secretary who is appointed to circulate the notice regarding the extraordinary general meeting may bring out the notice to all of the following:
- Shareholders
- Directors
- Auditors
The notice of the EGM or extraordinary general meeting has to be issued not less than 21 days prior to the date on which the extraordinary general meeting or EGM is to be held. Moreover, a shorter notice period has to be given if and only the consent is given by not less than 95% of the shareholders or members who are ennobled to vote at the meeting. The consent has to be received either through writing or through Electronic mode such as email, sms etc. At the EGM or extraordinary general meeting, the resolutions will be authorized by the shareholders.
Filing Of The Form With ROC:
Once the resolutions of the company are passed in the extraordinary general meeting or EGM, form filing formality with the Registrar of Companies has to be completed within the specified time frame.
- E-Form MGT – 14:
This E-Form MGT – 14 form is a form which has to be filed with the RoC within the time period of 30 days after passing there solutions along with the specified fees. The form can be filed on the MCA portal, along with the following documents:
- Notice of the extraordinary general meeting or EGM with the Explanatory Statement according to Section 102 of the Act.
- Certified copies of the company resolutions which are passed in the extraordinary general meeting or EGM.
- Copy of the newly drafted MOA.
- Copy of the newly drafted AOA.
- E-Form INC – 27:
This E-Form INC – 27 form is the application which is used for the conversion of a private limited company into a public limited company. This form can be filed with the RoC within the time period of 15 days after passing of the resolutions in the extraordinary general meeting or EGM. The following documents have to be enclosed with the form:
- Minutes of the extraordinary general meeting or EGM.
- Copy of the newly drafted AOA.
- Copy of the newly drafted MOA.
- Copy of the resolution(s) passed at the extraordinary general meeting or EGM. – List of the members or shareholders of the company along with the essential documents.
Post Conversion Requirements
- A new PAN card has to be applied for the company.
- All letterheads and stationery related to business should be updated with the new company name.
- The bank account information of the company has to be updated.
- The intimation or information regarding the conversion into public limited company has to be given to the tax authorities and all other related personnel.
- Printed copies of the newly drafted MOA and newly drafted AOA have to be prepared at the earliest.
- Along with conversion, the company will be listed on the stock exchange which is another advantage of conversion. As it helps the company to raise more capital for the company and also alters them to scale their business function in an easier way.
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