Conversion of Public Limited Co. into Private Limited Co. Series 404
Conversion of
Public Limited Co. into
Private Limited Co.
Article updated as on 20th
December, 2018
As per Section 14(1)- for conversion of
Public Company into Private Limited Company approval of Tribunal is required.
[1]By ordinance, 2018: Power of Tribunal has been transferred to Central Government. Therefore, after
notification of ordinance Public Company can be converting into Private Company
with approval of Central Government.
MCA on 18th
December, 2018 has published Companies (Incorporation) Fourth Amendment Rules,
2018. They shall come into effect from 18th December, 2018.
By these rules MCA amended Rule 41 “applicability under section
14 for conversion of Public Company into Private Company”
Power of Central Government assigned to Regional Director for approval of conversion of public
limited company into private limited company.
In this
editorial the author shall discuss the process of Conversion of Public Company
in Private Limited Company6 along with comparison with earlier provisions.
This is
article no. 404 of the series of editorials written by the author on corporate
laws
{Including
Companies Act, 2013, SEBI, RBI Regulations, IBC, LLP Act, 2008 etc.}.
Short
Summary:
Keeping in view the relaxations
provided to a Private Company (Exemption given by 2
circulars vide notification dated 05th June, 2015 and [2]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.
REGULATORY REQUIREMENTS:
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 18 and 14 of the Companies Act, 2013 read
with Rule 41 of Companies (Incorporation) [3]Rules,
2014.
As per Section 13 and Section 14 of the Companies Act 2013 read
with Rule 41 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.
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
40 of Companies (Incorporation) Fourth Amendment Rules, 2018: Application under
Section 14 for conversion of public company into private company.
DETAILED
PROCEDURE FOR CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY:
First Step:
STEP – I: Convey Board Meeting of Directors: (As
per section 173 and SS-1)
To Pass a board resolution to get in principal approval of
Directors for conversion of a public company into a private company by altering
the AOA subject to the approval of Central Government (Power of Central
Government assigned to RD).
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.
§ To approve Notice of EGM along with
explanatory statement to be annexed with the notice as per Section 102(1) of
the Act.
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 at least 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.
§
Members
§
Auditors of Company
The notice shall specify the place, date, day and time of
the meeting and contain a statement on the business to be transacted at the EGM
Second Step:
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)]
§ Approval of Alteration in AOA for
conversion of Public Company into Private Limited Company
§ Approval of alteration in Memorandum of
Association.
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;
§ A printed copy of the Altered Article
of Associations and Memorandum of Association.
Note: It
is relevant to note that First you have to file form MGT.14
STEP-
VI: Drafting an Filing of Application with Regional Director (in Form RD-1)-
Application
in Regional Director shall be file at within 60 days from passing of Special
Resolution in e-form RD-1.
Application
shall be accompanied by following Documents:
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 with proposed alterations
§ Copy
of Minutes of General Meeting (mentioning details of votes cast in favour or
against)
§ Copy of Attendance Sheet of General
Meeting
§ Board Resolution for authorizing to
file application for conversion (dated not earlier than 30 days)
Other Documents to be attached:
Declaration in form of
Affidavit:
Declaration by Key Managerial Personal (If company not
having KMP then by any Director) i.e.:
I. The
Company limits the number of its members to 200, and that no deposit has been
accepted by the Company in violation of the
Act and rules.
Act and rules.
II. There
is no non-compliance of Section 73 to 76A, 177, 178, 185,186 and 188 of Act an
rules made thereunder
III. That,
No resolution is pending to be filed in terms of Section 179(3) and
IV. that
the company never listed on stock exchange and if listed complied with the
relevant provisions.
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 30 days, setting forth the
following details, namely:-
§ the names and address of every creditor
and debenture holder of the company;
§ the nature and respective amounts due
to them in respect of debts, claims or liabilities;
§ 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 List of Creditors:
The
applicant company shall file an 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.
Publication of News
Paper Advertisement:
The
company shall at least Twenty One days
before the date of filing of application:
§ News Paper Advertisement: Advertise the petition in Form
No. INC 25A, 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. (Widely
Circulated in the State in which the registered office of company is
situated)
§ Speed Post to Creditors: serve, by registered post with
acknowledgement due, individual notice to each debenture-holder and creditor of
the company; and
§ Service of Petition to ROC/RD: serve, by registered post with
acknowledgement due, a notice together with the copy of the applicaiton to the
Central Government (Regional Director), 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.
Fourth Step:
File Form RD-1
with the Regional Director within 60 days of passing of Special Resolution with
all the above mentioned annexures Like:
§ MOA & AOA
§ General Meeting Minutes and Attendance
Sheet
§ Board Resolution authorizing
application
§ Declarations
§ List of Creditors
§ Affidavit verifying the list of
creditors
§ Copy of News Paper Advertisement
Other Provisions:
A. Power to Inspect: A
duly authenticated copy of the list of the 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 of the same on the payment of a sum not exceeding ten rupees per page
to the company.
B. Objection if Any Received:
Where any objection of any person whose interest is
likely to be affected by the proposed application has been received by the
applicant, it shall serve a copy thereof to the Central Government on or before
the date of hearing.
C. Where No Objection Is Received:
Where
no objection received from any person in response to the advertisement or
notice under sub-rule (5) or otherwise, the application may be put up for
orders without hearing and the order either approving or rejecting the
application shall be passed within 30 days of receipt of the application.
D. Where Objection Is Received:
After
checking of application with Annexures the hearing will take place at the
Regional Director office and it should be represented by the company or
practising professional or advocate.
E. The
Regional Director will make an order confirming the alteration on such terms
and conditions, if any, as it thinks fit, and may make such order as to costs
as it thinks proper:
F. Obtain
certified copies of the order confirming the shifting of registered office from
one state to another, passed by the Central Government,
18) File e-form INC-28 with ROC within 30 days of confirmation of
shifting by Regional Director along with copy of order.
STEPS AFTER OBTAINING NEW CERTIFICATE FROM ROC:
§ Make
alteration in the MOA with respect to the state in every copy of Memorandum.
§ Each
stationery, banner, signboard, bills, invoice etc. should show the new address
and necessary advice should be sent to shareholders, debenture holders, and
other concerned parties.
§ Necessary
changes are required to be made in the letter heads, books, records etc. of the
company. The necessary changes are required to be made in PAN. TAN and ST2 etc
and inform to all the Government departments, banks, customers and others
wherever required.
Tail Piece: Provided that the
shifting of registered office shall not be allowed if any inquiry, inspection
or investigation has been initiated against the company or any prosecution is
pending against the company under the Act.
|
POST CONVERSION REQUIREMETNS
|
|
|
A.
|
Arrange new PAN No. of the
company
|
|
B.
|
Arrange new stationary with new name of the Company
|
|
C.
|
Update company bank account
details
|
|
D.
|
Intimate all the concerned authorities like Excise and sales
tax etc about the status change
|
|
E.
|
Printed copy of new MOA &
AOA.
|
FLOW CHART- CONVERSION OF COMPANY
|
S. No.
|
Date
|
Days
|
Extra Days
|
Particular
|
|
1
|
01/12/2018
|
0
|
0
|
Issue
of Notice of Board Meeting
|
|
2
|
08/12/2018
|
7
|
7
|
Holding of Board Meeting
|
|
3
|
15/12/2018
|
7
|
7
|
Issue
of Notice of General Meeting
|
|
4
|
05/01/2019
|
28
|
21
|
Holding of Genearal Meeting
|
|
5
|
04/02/2019
|
58
|
30
|
Filing
of e-form MGT14 with ROC
|
|
6
|
05/01/2019
|
28
|
21
|
Drafting of Application
|
|
7
|
05/01/2019
|
28
|
0
|
-Copy
of MOA & AOA
|
|
8
|
05/01/2019
|
28
|
0
|
-Minutes and Attendance Sheet of
AGM
|
|
9
|
05/01/2019
|
28
|
0
|
-
Declaration by Directors (Affidavit and Notary Date)
|
|
10
|
05/01/2019
|
28
|
0
|
- List of Creditors (Not older then
30 days from the date of filng of application with RD)
|
|
11
|
05/01/2019
|
28
|
0
|
-Affidavit
vefifying list of Creditor
|
|
12
|
14/01/2019
|
37
|
9
|
- Publicaiton of advertisement in
news paper (at least 21 days before from the date of filing of application)
|
|
13
|
14/01/2019
|
37
|
9
|
-
Service of Notice to Creditors(at least 21 days before from the date of
filing of application)
|
|
14
|
14/01/2019
|
37
|
9
|
- Service of Petition to ROC and
filign of GNL- 1 (at least 21 days before from the date of filing of
application)
|
|
15
|
04/02/2019
|
57
|
30
|
Filing
of e-form RD-1
|
|
|
|
60
|
|
|
[1]
All the matters filed with NCLT before date of commencement of the Ordinance,
2018 shall be disposed off by the Tribunal in according with earlier
provisions.
[3]
Companies (Incorporation) Fourth Amendment Rules, 2018
Good Evening Sir,
ReplyDeleteJust gone through the above procedure. In the flow chart relating to such conversion you have mentioned that we have to file Form GNL1 to the ROC with the copy of petition. But the application has to be sent online in Form RD1. Do we have to make a petition along with the above attachments as we were doing in case of NCLT.
Also whether Form GNL-1 is to be filed or notice to be sent through Registered post?
Please clarify as we are converting one such company and would be thankful for the reply.
asddfds
ReplyDelete