To increase the scalability and funding options, every private limited company wishes to convert into public limited company. Furthermore, a public limited company offers multiple benefits which businesses can avail. Learn about the conversion process of private limited company to public limited company through this article.
What is a Private Limited Company?
A private limited company is privately owned by few members. The liability of the members of a private limited company is restricted to the number of shares each of them hold in a particular organization. Moreover, you also cannot trade the shares of a private limited company.
Learn more: Private Limited Company Incorporation
What is a Public Limited Company?
The Public Limited Company on the other hand is a company whose shares are traded on a stock exchange. Anyone can purchase and trade shares. This is also referred to as a publicly held company. The public limited company offers company shares to the general public. The Company Act of 2013, also defines a public limited company as one that has limited liability and also offers company shares to the public. Anyone can buy the stocks of a public limited company. These stocks can either be bought through stock-market trading or via IPOs.
Reasons why should you convert a Private Limited company to a Public Limited company
- Once you convert your company from a private limited company to a Public Limited Company, you will be able to issue shares to the public to raise investments.
- Once the private company gets converted to a Public Company, it will be able to list its shares on a recognised stock exchange. This means that more people will get information about the functions which will thereby increase the visibility of the brand.
- Moreover, a Public limited company will also be able to transfer its shares. This means that a shareholder need not be with the company forever and will be able to sell shares easily for a profit.
- A Public Company will also be able to accept deposits from the public under section 76 of the Companies Act, 2013.
Process of converting a private limited company to a public limited company
A company that is already enrolled in a class might change itself as a company of another class by modifying the memorandum and articles of the company. You have to apply to the registrar. The registrar closes the former registration of the company provided they have adhered to all the rules before closing it. Next, follow the below mentioned steps:
Calling a board meeting
- You will have to first pass a board resolution to get the permission of the board of directors to convert to a public company from a private limited company. This has to be done by altering the AOA(articles of association).
- To get the approval of shareholders, you will have to fix the date, time and place for holding an Extraordinary General meeting (EGM). You can do this with a Special resolution to convert a private limited company into a public one.
- To ensure that the EGM is approved, you will have to submit the agenda and statement along with the notice of the General Meeting, as per section 102(1) of the Companies Act, 2013.
- You will also have to delegate the Director or Company Secretary to issue a Notice of the Extraordinary General meeting (EGM) as recommended by the board under article 1(c).
- Then you have to pass a Board resolution for increasing the number of directors to 3, in cases where the number of directors is less than 3.
The holding of the EGM meeting:
An Extraordinary General meeting is to be conducted on the due date. On this date, the required Special Resolution will be transferred to get the support of the shareholders for the conversion of a private company into a public company.
Alterations of AOA and MOA
To make alterations in the Article of Association for the conversion of a public limited company under section 14, a few E-forms have to be filed and registered with the concerned Registrar of Companies at different stages. You can know more about these forms through contacting our experts at: 8881-069-069.
As per section 18, once the documents for the conversion of a private limited company into a public limited company are received, the ROC shall convince itself that the company complies with the necessary provisions for registering a company. If they are convinced, they will enclose the previous registration and issue a fresh certificate of incorporation, once they register the documents that have been presented for change under the specific class of the company, the public limited company registration will be completed. The process of conversion of a private limited company into a public limited company can be complicated. As a result, our experts are here to assist you. Feel free to contact us anytime.
Also, require any other guidance with respect to Company Formation please feel free to contact our business advisors at 8881-069-069.
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