Private Limited to Public Limited

What is a Private Limited Company and a Public Limited Company?

Let us have a brief understanding of what is private and public limited company.

Limited Liability Company

a privately held firm for small businesses. In a private limited corporation, each member’s responsibility is limited to the amount of shares that they each own. A private limited company’s shares cannot be exchanged.

Company Limited by Shares

a business whose shares are freely tradable and available for purchase on a stock exchange. Another name for it is a publicly traded firm. A public limited company, as its name suggests, is a business that sells stock to the general public. A public limited company is one that has limited liability and sells firm shares to the general public, according to the Company’s Act of 2013. Anyone can purchase shares of this company’s stock either through stock-market trading or via IPOs

Benefits of Conversion of Private Limited to Public Limited Company

Listing of Shares: Shares can be listed on a recognized stock market after the entity converts from a private limited to a public limited corporation. Though would be essential for a business looking to raise money.

Increase Investment through the Public: The corporation can raise capital from the general public by listing the shares on a stock exchange. Shares in a variety of types can be used for this. Preference shares, equity shares, and other types of shares are all possible investment vehicles for the company.

The ability to transfer shares: The process of converting a private limited company to a public limited company allows for the simple transfer of shares from one shareholder to another. If the business is set up as a private limited company, this would not be possible.

Increase in Reputation: Conversion of a private limited to public limited company would increase the reputation of the company. A public limited company is allowed to list its shares in the public stock exchange. Automatically this process of listing the shares in the public stock exchange would increase the reputation of the company.

Acceptance of Deposits: Any public company is allowed to accept deposits under section 76 of the Companies Act, 2013.

Eligibility Criteria for Conversion of Private Limited to Public Limited Company

  • Digital Signature Certificate (DSC) – At least one director must have a digital signature certificate generated for them.
  • Seven individuals must be appointed as shareholders for the company in order for it to qualify as a public limited company.
  • Director Identification Number for all the Directors- All directors must have an identifying number, which is called a director identification number.
  • Director and Shareholder: A person may be chosen to serve as both a director and a shareholder.
  • Three Directors: A public corporation must have a minimum of three directors in order to operate.

What is the process of converting a privately limited to a public limited company?

A corporation that has already enlisted in a class may switch to another class by amending the firm’s memorandum and articles. To the registrar must be made an application in this regard. Once the registrar is satisfied that all actions have been taken in accordance with the rules, it will close the company’s previous registration. The Registrar will provide a certificate of incorporation following the registration of the conversion-related documents. A firm cannot assume any debts, claims, liabilities, or responsibilities when it transforms. These obligations, liabilities, and contracts may be upheld and carried out as if there had been no such transaction.

  • Calling a Board Meeting: Issue notices in accordance with section 173(3) of the Companies Act of 2013, in order to convert a Board of Directors meeting. This Board meeting’s primary goals would be:
  • Pass a board resolution to get the directors’ in-principle consent for the conversion of a private limited company to a public company by amending the AOA.
  • Fix the date, time, and location of an Extraordinary General Meeting (EGM) to be held in order to convert a private business into a public corporation with the consent of the shareholders.
  • To accept the notice of the Extraordinary General Meeting (EGM) with agenda and statement according to section 102(1) of the Companies Act,2013.
  • To assign the Director or Company Secretary the responsibility of publishing the notice of the Extraordinary General Meeting (EGM), in accordance with the board’s recommendation under the aforementioned Article 1(c).
  • If there are less than three directors, the Board should approve a resolution to increase the number of directors.
  • Notice of EGM: In accordance with Section 101 of the Companies Act of 2013, give notice of the Extraordinary General Meeting (EGM) to all members and affiliates, directors, and auditors of the company.
  • The Extraordinary General Meeting (EGM)- is held on the scheduled day and passes the necessary Special Resolution to obtain shareholder approval for the conversion of the private company into a public company and the amendment of the articles of the agreement, under section 14 for such conversion.
  • Registrar of Companies (ROC) filing: A few E-forms will be filed and registered with the relevant Registrar of Companies at different stages in accordance with the details stated for the amendment in the Articles of Association for the conversion of a public limited company under Section 14;
  • A special resolution issued for the conversion of a private company into a public corporation must be filed using an electronic form (E-form).
  • A special resolution must be passed in accordance with section 14 in the case of an amendment to the articles of association for the conversion to a public company. Within 30 days of the resolution’s passage in the EGM, a copy of this special resolution must be filed with the relevant ROC using form MGT.14, as required by section 117(3)(a).
  • The application for turning a private company into a public company must be stated in Form No. INC-27 with the fee, as per Rule 33 of the Companies (Incorporation) Rules, 2014. Additionally, the conversion of the company must be recorded in e-Form INC.27 to the relevant ROC, along with any necessary annexures and the applicable fee.
  • The application for turning a private company into a public company must be stated in Form No. INC-27 with the fee, as per Rule 33 of the Companies (Incorporation) Rules, 2014. Additionally, the conversion of the company must be recorded in e-Form INC.27 to the relevant ROC, along with any necessary annexures and the applicable fee.

Documents needed for conversion of private limited into a public limited company

  • A copy of the PAN card for the directors.
  • Director portraits the size of a passport.
  • A copy of your voter ID or Aadhar card.
  • A duplicate of the rental contract.
  • water or electricity bill
  • A copy of the title documents, if any.
  • For supplying the format, thank the landlord’s NOC (No Objection Certificate).

 

Scroll to Top