Introduction
A Private Limited Company is a small business which is maintained privately, it is one of the highly recommended businesses in India especially for startups. The registration of the private limited company is governed by The Companies Act 2013 in India. According to the Companies Act, 2013, a minimum of 2 shareholders is needed to begin a private company, while a maximum of 200 members. In case a private limited company undergoes any financial risk, the personal assets of members or shareholders are not subject to sell, i.e. they ought to have limited liability.
A limited company allows limited liability to its proprietors and to its management team. But in the case of a public limited company, a firm can sell shares to investors which are considered as a beneficial act in raising the capital for the business. To establish a Public Limited Company, a minimum of three Directors are required and there is no cap on the maximum number of members. Importantly, it has more strict regulatory requirements when compared to a Private Limited Company.
Public Limited Company is a different type of company but holds most of the characteristics of a private limited company. It enjoys more benefits such as ease of transferability, borrowing capacity, limited liability, and perpetual existence. Like any other companies in India, Public Limited Company is also registered according to the rules and regulations of the Companies Act, 2013.The Private Limited Company conversion follows a properly regulated legal procedure. This procedure is governed by the Companies Act provided by the Ministry Of Corporate Affairs. A private company can convert itself to the limited company by altering its memorandum and articles of association. This is further obtained via all shareholders’ approval, passing of a special resolution in general meeting.
Key Points
- Change of name by passing a special resolution.
- Approval of the Central Government is not required.
- The name needs to be deleted from Private limited company to Public limited company.
- Alter the company’s Articles of Association by deleting prohibitions, restrictions and limitations defining a Private Limited Company.
Checklist requirements for conversion of a Private Limited Company
- Digital Signature Certificate or DSC and Director Identification Number or DIN of two directors.
- Preparation and drafting of MOA or Memorandum of Association and AOA or Articles of Association of the company.
- PAN card and TAN number.
- Find the unique name for the company, application and name reservation.
- CIN or Certificate of Incorporation.
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Features
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Private Limited Company
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Minimum members
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2
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Minimum directors
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2
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Maximum members
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200
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Minimum capital
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1,00,000
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Issue of prospectus
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No
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Invitation to public
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No
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Quorum at AGM
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2 Members
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Certificate for
commencement of business
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No
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A term worked at the
end of the name
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Private limited
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Statutory meeting
(mandatory)
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No
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Managerial
remuneration
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Must not exceed more
than 11% of net profits
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Procedure
The procedure on converting a Private company to a Public company is described in detail below.
Amendment of Articles of Association
As a first step, we must identify the clauses defining a private company as per the Articles of Association and make the necessary changes. Any details that mention or relates to the private limited company must be removed. The word “private limited” must also be dropped from the company’s name.
Board meeting
The Directors are to be formally informed with a notice regarding the agenda of the Board Meeting. This notice has to be sent to the company’s respective registered addresses at least one week or 7 days prior to the date on which the Board Meeting is planned to be held. The mention below matters have to be specified in the agenda of the Board Meeting for discourse:
- Approval of the shareholders or members regarding –
- Adoption of a new and amended MOA or Memorandum of Association.
- Adoption of a new and amended AOA or Articles of Association.
- Conversion of a private limited company into a public limited company.
- Approval for conducting an extraordinary general meeting followed by authorisation of an individual to be in charge of circulation of the notice concerning the EGM.
- The place, date and time for the extraordinary general meeting have to be fixed too.
- Authorizing of a Board Resolution for the increase in the number of members or shareholders or directors, as a public limited company would need a minimum of 3 directors according to the provisions under Section 149(1)(a) of the Companies Act 2013.
Issuing of a notice regarding EGM and declaring the EGM
Once the Board Meeting was done, the Director and Company Secretary who is appointed to circulate the notice regarding the extraordinary general meeting may bring out the notice to all of the following:
Shareholders
Directors
Auditors
The notice of the EGM or extraordinary general meeting has to be issued not less than 21 days prior to the date on which the extraordinary general meeting or EGM is to be held. Moreover, a shorter notice period has to be given if and only the consent is given by not less than 95% of the shareholders or members who are ennobled to vote at the meeting. The consent has to be received either through writing or through Electronic mode such as email, sms etc. At the EGM or extraordinary general meeting, the resolutions will be authorized by the shareholders.
Filing of the form with RoC:
Once the resolutions of the company are passed in the extraordinary general meeting or EGM, form filing formality with the Registrar of Companies has to be completed within the specified time frame.a)E-Form # MGT-14:This E-Form MGT – 14 form is a form which has to be filed with the RoC within the time period of 30 days after passing there solutions along with the specified fees. The form can be filed on the MCA portal, along with the following documents:– Notice of the extraordinary general meeting or EGM with the Explanatory Statement according to Section 102 of the Act.– Certified copies of the company resolutions which are passed in the extraordinary general meeting or EGM.– Copy of the newly drafted MOA.– Copy of the newly drafted AOA.b)E-Form INC – 27:This E-Form INC – 27 form is the application which is used for the conversion of a private limited company into a public limited company. This form can be filed with the RoC within the time period of 15 days after passing of the resolutions in the extraordinary general meeting or EGM. The following documents have to be enclosed with the form:– Minutes of the extraordinary general meeting or EGM.– Copy of the newly drafted AOA.– Copy of the newly drafted MOA.– Copy of the resolution(s) passed at the extraordinary general meeting or EGM. – List of the members or shareholders of the company along with the essential documents.
The Special Resolution
The special resolution must be passed in the general meeting and it must be filed with the registrar attaching the explanatory statement in the e-form no: MGT14 within 30 days of its passing. A copy of the resolution along with a copy of the explanatory statement and the altered articles of association must be attached to the form along with the prescribed fees.
Documentation
Intimation of conversion from a private company to limited company must be executed in form No: INC-27 along with the proof of fees payment with the attachments. It must be filed for future references. The minutes of the members’ meeting and the altered Articles of Association are mandatory attachments to be recorded. The e-forms are to be digitally signed by the managing director /director/manager/secretary of the company and to be duly authorized by the Board of Directors.
Certification & Completion
Form # MGT-14 is to be certified by a Chartered Accountant / Cost Accountant/ Company Secretary in practice by digitally signing the e-form. Small companies and One-Person-Companies are exempt from this certification processing. The registrar of companies will issue a fresh certificate of incorporation in the changed name and on the issue of a fresh incorporation certificate, the change of name will be final and complete.
If the company has less than 3 directors and 7 members, the number of directors and members should be increased to 3 and 7 respectively.
Created & Posted By Sapna Choudhary
Accounts executive at TAXAJ
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