Overview of Private Limited Company and a Public Limited Company
- Private Limited Company
Any Private Limited company meant to get operated for small companies. The liability of the features of a private restricted company is assigned to the number of shares personally held by them. The legacy of a private limited company can't be shared or updated.
- Public Limited Company
A company whose shares are purchased on a stock exchange and can be obtained and traded by anyone. It is also called a publicly held company. A public limited company, like the signature, signifies that the business offers shares to the public. A public limited company following the company's Act 2013 is a company that has limited liability and contribute shares to the general public. Anyone can acquire its stock, either privately through (IPO) 'Initial Public Offering' or trades on the stock market.
Subjects on Conversion of Private Limited to Public Limited
- A Public Company possesses seven or more members and can invite the public to contribute to its shares. A subsidiary corporation of a Public company is meant to be a public company.
- A Private company is an organisation which limits its number of categories to 200 and cannot invite the public to contribute to its shares. The Companies Act, 2013 provides for converting a Public Company to a Private Company by altering the MOA and AOA of the business.
- The main benefit of Public Company is that it can raise resources at a large scale without addressing the banking system and reducing debt. In contrast, Private Companies which are privately controlled, all the funds are raised by existing members, shareholders and promoters. If a private company goes public, then the opportunity is also shared between the shareholders. Public companies once registered, get indirect promotions and support through stock clearinghouse websites where their stocks are recorded.
- Earlier, the National Company Law Tribunal (NCLT) influences the conversion of Public Company into Private Company. Various amendments took place in Companies Act, 2013 and NCLT has a lot of responsibilities. Since 2013 Act came into effect, NCLT has the discretion to entertain the winding-up Petitions earlier same was given by the High Courts.
Conversion of Pvt. Ltd. to Public Limited
Conversion by Negligence
- Wherever a private company performs a default in complying with the legal requirements as laid down in Sec. 3(1)(iii) of the Companies Act (i.e., if its association exceeds fifty, it allows the free transfer of shares, or invites the public to subscribe to its shares or debentures), it becomes a public company naturally.
- The 'Company Law Board may relieve the corporation from being entertain as a public company on any terms and conditions as it thinks just and equitable only if it believes that the default was due to inadvertence or accident or some other sufficient cause.
- It is to be remarked that a private company which displays a public company automatically under the preceding provisions need not comply with any legal ceremony. Again, notwithstanding the conversion, such a company may hold the features of a private company, i.e., it can have limitations as to transfer of shares, company and public subscription. It can proceed to have only two 'members' and 'two directors'.
- Section 43-A sub-section (1) opines that a private company would be meant to be a public company where twenty-five per cent or more of its paid-up share capital.
Conversion by Operation to Convert Private Limited to Public Company
- Section 43 a proposed by the Companies (Amendment) Act, 1960 attached a new class of organisations of "Considered to be Public Company".
- Private businesses are released from the operation of several divisions of a Companies Act and enjoy exceptional opportunities, particularly on the ground that they are family businesses in which the public is not immediately entertained.
- However, it is well known that there are many private companies with significant capital doing great business and controlling various public companies. This got made feasible because funds of other companies, public and private, are advanced in such companies.
- The predicament of private companies has always remained somewhat tricky. On the one hand, there are individual private companies which are zero but a glorified partnership. On the other hand, there are private companies whose services, financial and industrial, are far more comprehensive than those of many public organisations.
- The Companies (Amendment) Act, 1960 attached a new section 43-A planning to deal with those private companies which operate free money in no small amount but escape the limitations and restrictions as to disclosure as applying to public companies.
- The Companies (Amendment) Act of 1974 and 1988 have considerably enlarged the Section 43-A by including three new sub-sections-(1A), (1B) and (1C).
Documents Needed for Conversion of Private Company to Public Company
- PAN Card of shareholders and Directors
- Foreign nationals must provide a valid passport.
- Voter ID/ Passport/ Driving License of Shareholders and Directors
- Address Proof: Telephone Bill /Electricity Bill/ Latest Bank Account Statement of Shareholders and Directors
- Photograph: Latest Passport size photo of Shareholders and Directors
- Business Residence Proof: Electricity Bill/ Telephone Bill of the certified office address
- NOC from the landlord: No Objection Certificate to be collected from the owner(s) of certified office
- Rent Lease: Rent Agreement of the certified office should be granted if any.
- Memo: In case of NRI or Foreign National, documents of the director(s) must be notarized
- Incorporation certificates: Declaration of Incorporation, MoA & AoA to be presented
- Financial Statements: Duly attested copy of latest audited Financial Statements
- Income Tax Return: ITR filed for the previous fiscal year to be submitted
Minimum Requirements for Conversion
- DSC for 1 Director
- Minimum 7 Shareholders
- DIN for all directors
- Director and shareholder can be the same person
- Minimum 3 Directors
Procedure Concerning Conversion of Private Limited Company to Public Limited Company
- Fulfil our Simple Form
- For further schemes, details furnished by you will be verified by our experts.
- After presenting your documents, we will draft/modify MOA/AOA for your Company.
- We will organize your documents and credentials and file them with ROC.
- Once your Corporation is incorporation, we send you all the reports and DSCs.
Prospectus - Conversion of a Private Company into a Public Company
- Statutory Requirements related to Conversion of Private Company into Public Company are stated in 'Section 18 and 14' of the Companies Act, 2013 showed with 'Rule 33' of Companies (Association) Rules, 2014.
- Section 14 of Companies Act, 2013' plays an indispensable role during the Conversion of Private Limited Company into Public Limited Company.
- The Conversion of Private Limited Company into Public Limited Company requires alteration of the article of association (AOA) of Private Company 'u/s 14' which cannot be done externally passing a special resolution of Stockholders in the General Meeting.
Legal Provisions - Sections and Rules of Companies Act, 2013 Essentially Applicable for Conversion
- Section 2(68) and 2(71): Description Of Private And Public Company
- Section 3: Establishment of Company
- Section 13 held with Rule 29 of Companies (Incorporation) Rules 2014: Modification of Memorandum of Association(MOA)
- Section 14 read with Rule 33 of Companies (Incorporation) Rules 2014: Exchange/Remodelling of Articles of Association
- Section 18: Conversion of Companies Previously Registered
- Section 149: Company to have a Board of Directors
Plans and Schemes
- Section 13 of the Act articulates about the alteration of memorandum Company can change memorandum in terms of 'S. 61 of the Act'. This Section disclosed about any changes in the capacity of protocol for that determination prior permission of the central authority is needed. This Section additional provisions that no such consent is required on account of exchange if addition/ deletion concerning the word "Private" determines if the entire name is changed in that circumstances, prior approval is needed as envision in said Section.
- Section 14 of the Act articulates about the modification of memorandum and conversion in Public Company into Private Company, and it is also mentioned that prior permission is required. Also, we need to understand this Section with Companies Incorporation (Fourth Amendment) Rules 2018, wherein the circumstances scheme for the conversion of Public Company into Private Company has been discussed and elaborated.
- Section 18 of the Act speaks about the conversion of Companies which are already registered under the provisions of the Act. Section 18 states that a Company of any class may convert itself a Company of another category under the provisions of the Act by alteration of memorandum and articles of the Company in terms of the relevant chapter relating to the Section 18 of the Act. Absolute compliance is required to be done, and the registrar should satisfy with the said compliances. This Section further states that registration of the Company under this Section shall not affect any debts, liabilities obligations or contracts means assumed liabilities cannot carve out the mere conversion of Public Company into Private Company.
- As discussed earlier 14 of the Act, a Public Company may transform into a Private Company with prior permission from the Central Government. The conversion of Public Company into Private Company has been explained in the Companies Incorporation (Fourth Amendment) Rules, 2018. The Central government has vide power to change said rules. These rules are revised from time to time. Because of this, we require to update recent announcements that are updated on time to time at the website of MCA.
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.