Introduction – Private Limited Company Conversion

Private Limited and Public limited company are considered to be separate legal entities with limited liabilities, given to their shareholders and members. Both forms of firms are incorporated under The Companies Act. Though, both types of companies have a lot of differences. Be it in terms of requirements or legal registrations. To incorporate a public firm you require a minimum of seven members and three directors. However, in the case of a private limited firm you require only two members and two directors to incorporate your own company. There is a difference in the minimum share capital too. There are many other areas where you can notice the difference between these two forms of companies. There are times when you find yourself in complicated situations. Situations such as converting your private limited company or your public limited firm in some other form of company. A similar sort of situation is discussed below. The situation describes the private limited company converted into a public limited firm.

Private limited company conversion follows a proper regulated legal procedure. This procedure is governed by the Companies Act, 2013 given by the MCA or Ministry Of Corporate Affairs.

The private limited company conversion is generally done due to the following reasons:

  • Recognition, and
  • Ease of raising funds.

It is quite understandable that going public or giving the general public a chance to interact with your firm directly, increases the firm’s recognition. Also, due to the public firm’s reliability and big exposure, raising funds is comparatively easy. so, to proceed with private limited company conversion, you have to:

  • Convene a Board meeting. The board of directors should pass a resolution with mutual consent regarding the approval of the company’s conversion.
  • Then, convene a general meeting, including the members, directors, and the auditors of the firm. A special resolution is then passed. This special resolution is made in order to reflect the amendments to Memorandum of Association and Article of Association and also to increase the share capital of the firm. For, a public firm the minimum share capital is rupees five lakhs. So, the resolution should be passed accordingly.
  • Finally, an application is filed along with specified documents. The application is filed by filing form MGT 14 and INC-27 along with the special resolution within 30 days of the passing of the special resolution. Other than that, documents such as an altered document of MOA and AOA, minutes of the board and general meeting, an explanatory statement for conversion, particulars of members(at least seven) and directors(at least three) has to be submitted also.
  • Alternatively, conversion into a public firm can be done online by filling Forms INC-32, INC-33 (MoA) and INC-34 (AoA) through the Simplified Proforma for Incorporating Company Electronically (SPICE).
  • All these documents are submitted to The Registrar of Companies. An application is filed. An acknowledgment slip is obtained. Online filing can give you the liberty to check the progress of your application online.

Finally, after all, the verification, a certificate is issued, hence completing the private limited company conversion.

A new PAN number will be required for the new firm. That is the public firm after the conversion of a private company. An increase in the number of directors and members is obviously mandatory along with the increase in share capital. The conversion may seem like a tedious process. But, it shouldn’t stop you from doing the necessary. We, at LegalRaahi, can help you with the conversion of your private limited company. The conversion will become an easy and quick with us.