Overview of Conversion of Pvt. Ltd. to Public Ltd
Private limited companies offer so much by itself, but at some point every private limited company, wishes to turn public so as to enlarge scalability. The question usually put across is, “Why to go public?” The answer depends on certain distinct difference that occurs between private limited companies & public limited companies which also offer the concept of Initial Public Offering (IPO) & has the concept of shares to the general public.
The concept of IPO - Initial Public Offering thereby removes the restriction on that transferability of shares, which is a characteristic of private limited companies. It has been settled that there is no cap in terms to the maximum number of members in any public limited company, thereby permitting them to raise & gain easy access to funding. Consequently, growth & flexibility are preferably the reasons for the changing from private to public.
What are the Requirements to Convert Pvt. Ltd. to Public Ltd?
By complying with the following requirements, a Private company can be converted in to public company, which are given bellow:-
- Alteration of its articles by AOA, thereby deleting the three restrictions of a Pvt. company, as per Section 14 by passing a special resolution;
- Altering its name thereby removing the word ‘Private’ from its name, as per Section 13 by passing special resolution;
- Moreover, steps should be taken to increase the number of members to at least 7 if the number of members is below 7, and if there are only 2 directors that the number of directors should be increase to at least 3.
- The company turns out to be public under Section 14 from the date of passing Special Resolution. However, the change in its name, by deleting the word ‘Private’ becomes in effect only on the issue of fresh incorporation certificate by the ROC.
Conversion of Pvt. Ltd. to Public Limited
What are the Benefits of a Converting Pvt. Ltd. to Public Ltd
- Efficient Share Transfer
The Shareholders of a Public Ltd Company can transfer own shares with great ease and efficiently. They need to file the share transfer form, and after that hand over the share certificate to the buyer. The procedure of transferring a share to a new business structure is very risky. Consult Legal Experts for your better understanding.
- Raise Capital
You can leverage it to raise capital from the general public via shares which is gain an advantage of the public limited structure which have it all. This would, however, require listing on a stock exchange. All public limited companies can issue debentures, fixed deposits, and convertible debentures to the general public.
- Greater Reliability
Public limited companies requires to inform the regulatory bodies of any structural change, disclose their audited statement of accounts, and hold annual general body meetings for all the shareholders. These compliance procedures bring an immense deal of credibility to the entity. Public Companies catch the attention of more brand identity.
- Limited Liability
The limited liability concept remains even after conversion from Pvt. Ltd. to Public Ltd.
- Free Transfer of Shares
The shares of Public Companies are freely transferable subject matter to SEBI Act & Companies Act
- Easy Acceptance of Deposits
As per the subject to Section 76 of Companies Act 2013, the rules Public Companies can accept deposits from public.
What are the Documents Needed for Conversion of Pvt. Ltd. to Public. Ltd.?
- PAN Card of shareholders & Directors.
- Foreign nationals should provide a valid passport.
- Voter ID/ Driving License/ Passport of Shareholders & Directors
- Address Proof: Electricity Bill/ Telephone Bill / Latest Bank Account Statement of Shareholders & Directors
- Photograph: Latest Passport-size photo of Shareholders & Directors
- Business Residence Proof: Telephone Bill/Electricity Bill of the certified office address
- No Objection Certificate from the landlord: NOC to be collected from the owner(s) of certified office
- Rent Lease: Rent Lease-Agreement of the certified office must be granted if any.
- Income Tax Return: ITR filed for the previous fiscal year to be submitted
- Memo: Documents of the director(s) must be notarized in case of NRI or Foreign National
- Financial Statements: Duly attested copy of latest audited Financial Statements
- Incorporation certificates: Declaration of Incorporation, MoA and AoA to be offered
What are the Minimum Requirements for Conversion?
- Minimum 7 Shareholders
- DSC for 1 Director
- DIN for all directors
- No Minimum Paid up Capital
- Director and shareholder can be the same person
- Minimum 3 Directors
What is the Procedure for Conversion into a Public Limited Company?
Procedure for Conversion into a Public Ltd. Company in pursuant to applicable provisions of the Companies Act, 2013 & the Companies (Incorporation) Rules, 2014 are given bellow in a nutshell for your understanding:-
1. Issuance Notice for Calling Board Meeting of Director
For conducting of Board Meeting, notice to be issued and agenda to be circulated along with. The proposed agenda shall be:-
- Pass Board Resolution for conversion
- Fix date, time & venue for conducting of Shareholder’s meeting (Extra-ordinary General Meeting)
- Approve the Notice of EGM & authorization to Company Secretary/Director for issuance of the Notice
2. Holding of Board Meeting- Discussing Agenda Items
- To approve the conversion of Pvt. Ltd. to Public Limited subject to approval of share holders.
- To adopt new set of Memorandum of Association and Articles of Association subject to approval of share holders.
- Fix date, time and venue for holding the general meeting
3. Issuance of notice for General Meeting
- At least 21 days notice before the meeting to the members
- If consent is given in writing or by electronic mode, a general meeting may be called after giving a shorter notice; by not less than 95% of the members allowed to vote at such meeting.
- The notice period can be pursued as specified in the Articles.
4. Conduct the General Meeting
- For passing special resolution for conversion of Pvt. Ltd. to Public Limited
- For adoption of amended Memorandum of Association (MOA) and Articles of Association (AOA).
5. File form MGT- 14
To be filed around within 30 days of passing the special resolution
• Attachments to Form MGT 14
- Explanatory Statement
- Notice of EGM
- Certified true copy of special resolution passed in EGM
- AOA Amended
- MOA Amended
- If EGM held at shorter notice, consent of shorter notice.
6. File form INC – 27
To be filed within 15 days of passing special resolution.
• Attachments to Form INC 27:-
- Certified real copy of the special resolution passed in EGM
- AOA Amended
- MOA Amended
- If EGM held at shorter notice , consent of shorter notice.
- Minutes of general meeting of the members
7. Getting Approval of MGT-14 & INC-27:-
The forms shall be approved by ROC, if the ROC is contented that the Private Company has adhered with the prescribed requirements of conversion.
8. Certificate of Incorporation from ROC
It will issue fresh Certificate of Incorporation, once ROC has approved the forms MGT 14 and INC 27, & shall cancel former registration of Company.
What are the Post Conversion Requirements?
- A fresh PAN card has to be applied for.
- All business letterheads and related stationery should be updated with the company’s new name
- The bank account details of the company are to be updated.
- The intimation is to be given to the tax authorities and other related personnel regarding the conversion into public limited company.
- Printed copies of the new MOA and AOA have to be made at the earliest.
Being counted on the stock exchange is one more advantage of going public. This aid the companies get simpler access to capital and also enable them to scale their operations in an easy way.
As they have to keep up with the SEBI regulations as well, companies that are counted on the list also tend to have a lot more work in terms of compliances. Therefore, there is a lot of thought and considerable planning that takes place when the company makes the decision to go public.
CorpBiz Procedure for Pvt. Ltd. to Public Limited
Kindly utilize the steps given above to integrate legally and securely a conversion of Pvt. Ltd. to Public Limited and get the benefits in the form of better-quality sales and satisfied clients. Our CorpBiz experts will be at your disposal for assisting you with guidance concerning conversion of Pvt. Ltd. to Public Limited and its compliance for the smooth functioning of your business in India. CorpBiz professionals will assist you in planning seamlessly at the least cost, confirming the successful conclusion of the process.
It is advisable that an attorney with “Incorporation experience” must be appointed to overwhelm many of the potential pitfalls that creep around within conversion of Pvt. Ltd. to Public Limited and to understand the requirement in detail. The elementary information would be mandatory from your end to start the process. The Attorney will begin working on your request once all the information is provided, and the payment is received.
CorpBiz is one of the platforms which coordinate to fulfil all your legal and financial requirements and connect you to consistent professionals. Yes, our clients are pleased with our legal service! Because of our focus on simplifying legal requirements, they have consistently regarded us highly and providing regular updates.
Our clients can also track at all times the progress on our platform. If you have any questions about the process of conversion of Pvt. Ltd. to Public Limited, our experienced representatives are just a phone call away. CorpBiz will ensure that your communication with professionals is charming and seamless.
- Purchase a Plan for Expert Assistance
- Add Queries Regarding conversion of Pvt. Ltd. to Public Limited
- Provide Documents to Corpbiz Expert
- Prepare Application for conversion of Pvt. Ltd. to Public Limited + Complete all Admissibility Criteria for Preliminary Screening
- Complete Procedural Actions
- Get your Fresh Converted Certificate of Incorporation at your Door Step!
Frequently Asked Questions
Yes, the suffix “Private Limited” will be replaced with “Limited”.
There are limited ways, such as- A director’s salary, Issuing dividend payments from available profits, Taking money out of a limited company, as a director’s loan, claiming expenses for business-related items
Subsequently the Public limited company deals with the public’s money, it requires taking procedures which increase the statutory compliance on its part. The regulatory obligations are not limited to the income tax but with ROC/MCA, SEBI, RBI, etc.
A limited liability company is a very tax-efficient business structure because limited companies pay corporation tax on their profits, of a flat rate of 19%.
Once the name approval letter is received from the ROC, the MoA and AoA are required to be drafted
Shareholders are the owners of a public limited company, but they elect a board of directors who manage and make decisions on behalf of the business.
Corpbiz can help you convert your Private limited into a Public Limited Company within 20-25 working days. The time taken for conversion will depend on the submission of relevant documents by the client and speed of Government Approvals.
No. However, application of modification must be made for name change in records.