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Overview

Converting a private limited company to a public limited company is a simple and straightforward process. What needs to be done is that to pass the resolution in the board meeting and the general meeting for the same. A special resolution is required for this process. A special resolution would include more than three quarters or majority of vote of the members.

There is a question which generally comes across “Why Go Public”? Reason is that there are many benefits of converting a private limited company to a public limited company.:

  • The company would be more reputed in the eyes of law.
  • Apart from this, the company can also register its shares in a recognized stock exchange.

The process of converting a private limited company to a public limited company is governed by the Companies Act, 2013 and the Companies (Incorporation) Amendment Rules, 2020. Let us have a brief understanding of what is private and public limited company.

Private Limited Company: A company that is privately held for small businesses. The liability of the members of a private limited company is restricted to the number of shares respectively held by them. The shares of a private limited company can’t be traded.

Public Limited Company; A company whose shares are traded on a stock exchange and can be purchased and traded by anyone. It is also called a publicly held company. As the name suggests, a public limited company is a company that offers company shares to the general public. The Company’s Act 2013 also defines a public limited company as one that has limited liability and offers company shares to the public. Anyone can acquire the stocks of such a company either through stock-market trading or via IPOs (Initial Public Offerings).

Checklist

  • DSC (Digital Signature Certificate) and DIN (Director Identification Number) of two directors.
  • Preparation of MOA (Memorandum of Association) and AOA (Articles of Association).
  • PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) card.
  • Name search, application and name reservation.
  • CIN (Certificate of Incorporation).

Procedure

The following process and procedure has to be considered for conversion of private limited to public limited company:

  • Notice for Board Meeting
  • Hold the Board Meeting
  • Provide the Notice to Hold the EGM
  • Hold the EGM
  • File MGT-14 with the respective authority
  • File INC-27 with the respective authority
  • Approval of MGT-14 and INC-27
  • Provide Certificate of Incorporation

Notice for Board Meeting- A notice must be provided by the directors of the private company to hold a board meeting. The notice must be provided seven days before the meeting. The agenda of the meeting must be decided in this notice. The following items must be considered in the agenda of the board meeting:

  • Resolution which has to be passed in the board meeting
  • Time and Requirements to Hold an Extraordinary General Meeting
  • An approval of the EGM.

Hold the Board Meeting – In the next step the company has to hold the board meeting. In the board meeting the following has to be approved:

  • Prepare the resolution of conversion of private limited to public limited company
  • Finalise the list of creditors of the company
  • Approve the drafts of the Memorandum of Association and Articles of Association
  • Consider to fix the time and place for holding the EGM.

Provide the Notice to Hold EGM-

In the next step of the board meeting, the directors have to provide notice to all the shareholders to hold the Extra-ordinary general meeting (EGM) at least 21 days before the meeting. For calculating the period, 21 clear days notice is required to be provided.

Hold the EGM-

In the next step, an EGM must be held by the company. Here a special resolution which requires the vote of the majority must be considered to be passed. Along with this the approved MOA and AOA must be considered by the directors of the meeting.

File MGT -14 with the Respective authority-

his form has to be filed with the RoC within 30 days of passing the respective resolutions along with the prescribed fees. The form is be filed on the MCA portal, with the following attachments:

  • Notice of the EGM along with the Explanatory Statement as per Section 102 of the Act.
  • Certified copies of the resolutions which are passed in the EGM. – Copy of the new MOA.
  • Copy of the new AOA.

File INC -27 with the Respective Authority-

This form is specifically for the application for conversion of a private limited company into a public limited company. This form has to be filed with the RoC within 15 days after passing of the resolutions in the EGM. The following documents are to be enclosed along with the form:

  • Minutes of the meeting.
  • Copy of the new AOA.
  • Copy of the new MOA.
  • Copy of the resolution(s) passed at the EGM.
  • List of the members of the company along with the essential details

Approve MGT-14 and INC-27-

In the next step, the ROC will verify whether the particulars related to the MGT and INC have been carried out as per the requirements of the Companies Act, 2013. If there are no issues with this then the ROC will approve the forms.

Provide Certificate of Incorporation-

After the process of approval, the ROC will provide the Certificate of Incorporation to the newly formed company.

Post Conversion Requirements

After conversion of Private Company into a Public Company kindly take care of the following points:

  • Intimate all the concerned authorities like Excise and sales tax etc. about the status change.
  • Arrange new PAN No. of the company. Update company bank account details.
  • Arrange new stationary with new name of the Company.
  • Analyze your newly adopted AOA and MOA and remove all things which are in contradiction with the conditions of AOA.
  • Raise the paid-up capital to minimum Rs. 5 lakhs, if the same is less than Rs. 5 lakhs.
  • Increase Number of Director to minimum 3 Directors.
  • Printed copies of the new MOA and AOA have to be made at the earliest.

Documents

The following documents are required for conversion of private limited to public limited company:

  • PAN details of the shareholders
  • If the shareholder is a foreign national, then the copy of the passport of the foreign national must be provided
  • Identification documents of the shareholders and directors- PAN, Aadhaar Card, Voter ID
  • Utility Bill- Electricity, Water and Other bills
  • NOC from the owner of the registered office (No –Objection Certificate)
  • Rental Agreement and other documents of the registered office
  • If the individual is a foreign national, then all the documents must be notarised by the requisite authority.
  • MOA and AOA
  • Copy of the Certificate of Incorporation of the company
  • Income Tax Returns of the company
  • Latest Audited Financial Statements of the Company

Forms

The following forms are required for conversion of private limited to public limited company:

  • Form MGT 14- This has to be filed with the Registrar of Companies. Along with this information such as the notice of the EGM, Amended AOA, Amended MOA, Statements with Explanations, Resolutions taken in the EGM must be provided to the ROC.
  • Form INC 27- This has to be filed with the Registrar of Companies. Along with this information such as the notice of the EGM, Amended AOA, Amended MOA, Statements with Explanations, Resolutions taken in the EGM must be provided to the ROC. Along with this the minutes of the meeting must be provided to the ROC.

Benefits

Listing of Shares: Through conversion of private limited to public limited company, the business can list its shares in a recognized stock exchange. It would be crucial for a company that wants to raise funds.

Raise Investment through the Public: By listing the shares in a stock exchange the company can raise investment through the public. Different forms of shares can be utilized for this purpose. The company can raise investment though preference shares, equity shares or other forms of shares.

Shares can be transferred: By going for the process of conversion of private limited to public limited company; the shares can be easily transferred from one shareholder to another shareholder. This would not be possible if the company is registered as a private limited company.

Increase in Reputation: Conversion of 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.

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