PROVISIONS OF COVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY
PROVISIONS OF COVERSION OF PUBLIC COMPANY INTO PRIVATE
COMPANY
Keeping in view the relaxations
provided to a Private Company, many public companies have converted into
Private Companies or in the process of such conversion. Through this brief
write up an attempt has been made to unlock the technicalities related to Conversion
of Public Company into Private Company prescribed under Companies Act, 2013. Power
of Conversion of Public Company into Private Company has been transferred to
NCLT (Tribunal) [1]w.e.f.
1st June, 2016 vide MCA notification S.O. 1934(E).
At the time of Conversion Company
have to make several alterations. Some of them are mentioned below:
REGULATORY REQUIREMENTS:
Conversion of status of company
from public to private would become effective form the date of receipt of the
approval of the Registrar by means of issuing a new certificate of
Incorporation. Section 13, 14, 15 & 18 of Companies Act, 2013, Rule 33(2) Companies
(Incorporation) Rules, 2014 and [2]Rule
68-National Company Law Tribunal Rules, 2016 regulate the conversion of public
Company into Private Limited Company.
As per Section 13 and Section 14 of
the Companies Act 2013 read with Rule 33 of Companies (Incorporation) Rules,
2014. A public company can be converted into the private company only after
obtaining its shareholders approval by way of passing of special resolution in
general meeting.
[As per Second Proviso of Section
14(1)] For Conversion of Public Company into Private Limited Company foremost
requirement is Alteration in Article of Association of Company. According to
the Act any alteration having the effect of conversion of a public company into
a private company shall not take effect except with the approval of the [3]Tribunal
(NCLT) which shall make such order as it may deem fit.
Procedure/Steps for Conversion of Public
Company Into Private Company
First Step: Holding of Board Meetings
Holding of Board Meeting:
Company will convey a Board Meeting
as per provisions of Section 173 and Secretarial Standard 1 to meet with
primary requirement for such conversion. General matters for discussion in
board meeting are like:
§ Approval of Conversion of Company subject to
approval of Tribunal
§ Authorize any Director, Company
Secretary of the Company for completing the necessary compliances, formalities,
Issue of Notice of General Meeting (As per SS 2) etc.
§ Authorizing professional or legal
practitioner/ advocate to appear before Tribunal
§ To fix date, time and place for
holding Extraordinary General meeting (EGM) to get approval of shareholders, by
way of Special Resolution, for conversion of a public company into a private
company
Holding of General Meeting:
Company will convey the General
meeting to pass special resolution for alteration in AOA & MOA of the
Company for the purpose of conversion of the Company.
Filing of MGT-14 with ROC:
As per Section 117(3) Copy of this special resolution is required to
be filed with concerned ROC through filing of form MGT.14 within 30 days of
passing special resolution in the EGM.
Second Step: Preparation of Petition
Preparation of
Petition:
The petition under second provision
of Section 14(1) for the approval of conversion of public company into a
private company shall be filed with the Tribunal (NCLT). The petition shall be filed in form No.
NCLT-1.
Time Period of Filing
of Petition:
The petition shall be filed with
the Tribunal not less than 3 month from the date of passing of Special
Resolution.
Particulars of
Petition in NCLT-1:
As per Rule 68(2) of National Company
Law Tribunal Rules, 2016 every petition filed under NCLT-1 shall set out the
following particulars:
i.
The date of the Board meeting at which the proposal for
alteration of Articles was approved;
ii.
The date of the general meeting at which the proposed alteration
was approved;
iii.
State at which the registered office of the company was
situated;
iv.
Number of members in the company, number of members attended the
meeting and number of members of voted for and against;
v.
Reason for conversion into a private company, effect of such
conversion on shareholders, creditors, debenture holders and other related
parties.
vi.
Listed or unlisted public company;
vii.
The nature of the company, that is, a company limited by shares,
a company limited by guarantee (having share capital or not having share
capital) and unlimited company.
Third Step: Preparation of Documents to be filed with
Petition in NCLT-1:
Details of Creditors
& Debenture Holders:
There shall be attached to the
application (NCLT-1),
§ List of creditors and
§ List of debenture holders,
List of Creditors and debentures
holders should not be older than 2 month from the date of filing of application
with Tribunal.
List should conation
the following details, namely:-
i.
The names and address of every creditor and debenture holder of
the company;
ii.
The nature and respective amounts due to them in respect of
debts, claims or liabilities;
iii.
In respect of any contingent or unascertained debt or any such
claim admissible to proof in winding up of the company, the value, so far as
can be justly estimated of such debt or claim:
Affidavit verifying
the List of Creditors/ Debenture Holders:-
Company shall file an [4]affidavit
signed by the company secretary of the company, if any, and not less than two
directors of the company, one of whom shall be a managing director, where there
is one, to the effect that they have made a full enquiry into the affairs of
the company and, having done so, have formed an opinion that the list of
creditors is correct, and that the estimated value as given in the list of the
debts or claims payable on a contingency or not ascertained are proper
estimates of the values of such debts and claims and that there are no other
debts of , or claims against, the company to their knowledge.
Inspection of List of
Creditors/ Debenture Holders:-
A duly authenticated copy of the
list of creditors shall be kept at the registered office of the company and any
person desirous of inspecting the same may, at any time during the ordinary
hours of business, inspect and take extracts from the same on payment of the
sum of rupees ten per page to the company
Affidavit of
Acknowledgement of Issue of Advertisement and service of Notice:
An affidavit shall be filed to the
Tribunal, not less than three days before the date
fixed for hearing, stating whether the petition has been advertised in
accordance with this rule 35 and whether the notices, if any, have been duly
served upon the persons required to be served.
Fourth Step: Publication and Service of application:
Publication of
Advertisement:
The Company shall at least 14 days
before the date of hearing advertise the petition in accordance with Rule 35.
The application will be advertise in form NCLT 3A. As per rule 35 following are
the provisions regarding advertisement of the petition:
·
To be publish at least once in a vernacular newspaper in the
principal vernacular language of the district in which the registered office of
the company is situate, and at least once in English language in an English
newspaper circulating in that District.
Details to be
mentioned in Advertisement:
Every such advertisement shall
state;-
i.
the date on which the application, petition or reference was
presented;
ii.
the name and address of the applicant, petitioner and his
authorised representative, if any;
iii.
the nature and substance of application, petition or reference;
iv.
the date fixed for hearing;
v.
a statement to the effect that any person whose interest is
likely to be affected by the proposed petition or who intends either to oppose
or support the petition or reference at the hearing shall send a notice of his
intention to the concerned Bench and the petitioner or his authorised
representative, if any, indicating the nature of interest and grounds of
opposition so as to reach him not later than two days previous to the day fixed
for hearing.
Publication on Website
of the Company:
Where the advertisement is being
given by the company, then the same may also be placed on the website of the
company, if any.
Notice to Creditors/
Debenture Holders:
The Company shall at least 14 days
before the date of hearing serve, by registered post with acknowledgement due, individual
notice in Form No. NCLT-3B to each
debenture-holder and creditor of the company.
Notice to Authorities:
The Company shall at least 14 days
before the date of hearing serve , by registered post with acknowledgement due,
a notice together with the copy of the petition to the Central Government,
Registrar of Companies and to the Securities and Exchange Board of India, in
the case of listed companies and to the regulatory body, if the company is
regulated under any other Act.
Objections:
Where any objection of any person
whose interest is likely to be affected by the proposed petition has been
received by the petitioner, it shall serve a copy thereof to the Registrar on
or before the date of hearing.
Fifth Step: Hearing by Tribunal:
Tribunal shall hear the Company and
all the parties that have raised objections and are desirous of being heard. It
will also take note of the observations/ objections, if any, received from the
statutory authorities.
After hearing all the Parties, if
it is satisfied, having regard to all the circumstances of the case, that the
conversion would be in the interest of the company or is not being made with a
view to contravene or to avoid complying with the provisions of the Act, allow
the conversion.
Sixth Step: Filing of Form with ROC:
After
receiving of order Company will file Form INC-27 along with copy of the order
of the Tribunal along with below mentioned attachment within 15 days.
·
Copy of Order of Tribunal
·
Minutes, CTC of Special Resolution, Notice & explanatory
statement of General Meeting
·
Altered copy of MOA & AOA
·
List of Creditor
·
Affidavit from the Director or MD or WTD affirming letter of no
objection is obtained from the all creditors and debenture holders.
Seventh Step: New Certificate of Incorporation from ROC:
On being satisfied that all the information and
documents are submitted and all requirements under the Act are complied with,
ROC shall issue a new certificate of incorporation of the Company after
regarding all the documents and information.
(Author – CS Divesh
Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi
and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, I assume no responsibility therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not a professional advice and is subject to change without notice.
I assume no responsibility for the consequences of use of such information. IN
NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR
INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE
OF THE INFORMATION.
This is only a knowledge sharing initiative and author does
not intend to solicit any business or profession.
[3]
Till 1st June, 2016
power of tribunal was assign to ROC, As per General Circular No. 18/2014 dated
June 11, 2014. “For Conversion of Public Company into Private Limited Company
the corresponding provisions of Companies Act, 1956 shall remain in force till
corresponding provisions of Companies Act, 2013 are notified. Power of Central
Government will be vest into the ROC.”
[4]
Duly notarized copy of the Afidavit.
Comments
Post a Comment