Conversion of Public Limited Co. into Private Limited Co. - Series 394
Keeping in view the relaxations provided to a Private Company (Exemption given by 2 circulars vide notification dated 05th June, 2015 and 13th June, 2017), 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.
We believe that the procedure for Conversion of Public Company into Private Company along with sample resolutions discussed through this article would be of some help for everyone.
Conversion of status of company from public to private would become effective form the date of receipt of the approval of the Registrar through the change of name would become effective on the issue of fresh Certificate of Incorporation.
The Companies Act, 2013 was expected to simplify the provisions but on the contrary it brought lot of restrictions on doing business. Therefore the public companies are converting themselves into private limited company.
The procedure for conversion from one company to the other is expounded within the Act with certain statutory requirements such as alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) of the company.
Legal Provisions related to Conversion of Public Company into Private Company are given in Section 13 and 14 of the Companies Act, 2013 read with Rule 33 of Companies (Incorporation) Rules, 2014.
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 Tribunal and approval of shareholders by way of passing of special resolution in general meeting.
Relevant Sections & Rules of the Act:
1. Section 13: It provides for alteration of memorandum.
2. Section 14: It provides for alteration of articles.
3. Section 18: It allows an existing Company to convert itself as a company of other class under this Act by alteration of memorandum and articles of the company in accordance with the provision of chapter II of the Act.
4. Rule 33 of Companies (Incorporation) Rules, 2014: INC-27 for Conversion of Public Company into Private Company.
STEP – I: Convey Board Meeting of Directors: (As per section 173 and SS-1)
STEP –II: Held Board Meeting: (As per section 173 and SS-1)
§ To consider In-principal approval for conversion of Public Company into Private Company by altering Articles.
§ Get Approval to Alteration in Article of Association and recommending the proposal for members' consideration by way of special resolution.
§ Fixing the date, time, and venue of the general meeting and authorizing a director or any other person to send the notice for the same to the members.
STEP- III: Issue Notice of General Meeting: (Section 101)
Notice of EGM shall be given at least 21 days before the actual date of EGM. EGM can be called on Shorter Notice with the consent of atleast majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting:
§ All the Directors.
§ Auditors of Company
STEP- IV: Hold General Meeting: (Section 101)
§ Check the Quorum.
§ Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146).
§ Pass Special Resolution.[Section-114(2)]
STEP- V: Filing of form with ROC: (Section 117)
File Form MGT-14 (Filing of Resolutions and agreements to the Registrar under section117) with the Registrar along with the requisite filing within 30 days of passing the special resolution, along with given documents:-
§ Certified True Copies of the Special Resolutions along with explanatory statement;
§ Copy of the Notice of meeting send to members along with all the annexure;
STEP- VI: Drafting an Filing of Petition with NCLT -
(not less than three months from date of passing SR)
Annexure B: following documents are required to be attached with petition for conversion of Public Company into a Private Company under Section 14(1) of the Act:
§ Copy of the memorandum and articles of association.
§ Copy of the documents showing that the company ceased to become a public company.
§ Affidavit verifying the petition.
§ Bank draft evidencing payment of application fee.
Other Documents to be attached: Details of Creditors
There shall be attached to the application, a List of Creditors and Debenture Holders, drawn up to the latest practicable date preceding the date of filing of petition by not more than two months, setting forth the following details, namely:-
Affidavit Verifying List of Creditors:
Publication of News Paper Advertisement:
Affidavit Verifying News Paper Advertisement:
File Form INC-27 with the Registrar of Companies within 30 days from date of order of NCLT- along with given documents:-
§ Minutes of the member’s meeting where approval was given for conversion and alteration of the articles of association.
§ Copy of SR
§ Copy of altered MoA & AoA
§ Order of NCLT
POST CONVERSION REQUIREMETNS
Arrange new PAN No. of the company
Arrange new stationary with new name of the Company
Update company bank account details
Intimate all the concerned authorities like GST / Bank
Printed copy of new MOA & AOA.
(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at email@example.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