CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AS PER COMPANIES ACT 2013
According to the Companies Act of 2013, a company that is listed on a stock exchange and is able to offer its securities to the general public is referred to as a public company. The company must launch an IPO in order to become publicly traded. A company that is publicly traded allows its shareholders to easily sell shares on a stock exchange. A publicly-traded company must make its annual report accessible to all stakeholders. In order to grow, a public company must issue more shares to the general public.
According to Section 2(71) of the Companies (Amendment) Act, 2015 public company’ means:
(i) A company which is not a private company.
(ii) has a minimum paid up capital as may be prescribed.
A company which is a subsidiary of a company, not being a private company, shall be deemed to be a Public Company for the purposes of this Act even where such subsidiary continues to be a private company in its articles.
Thus, a public company may be said to be an association consisting of not a Private Company within the meaning of the Act. The shares and debentures of a Public Company may be listed on a Stock Exchange and are offered to public for sale.
PROCEDURE FOR CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY
The Conversion of Public Company into Private Company is mentioned in the Companies Act, 2013, and Incorporation of Companies Rules, 2014. The Private Company has less compliance as compared to Public Company to be followed under the Companies Act, 2013. The need for less compliance leads to increase Conversion of Public Company into Private Company. Earlier, the National Company Law Tribunal (NCLT) has the power for the Conversion of Public Company into Private Company now the power has moved to Regional Director.
The detailed procedure is as follows:
1. Board resolution for approval for conversion and alteration of memorandum & articles of association with restrictions applicable to a private company u/s 2(68) and appointment of Attorney.
2. Special resolution for approval for conversion, alteration of memorandum & articles of association and change of name to add word “Private” in the name.
3. eForm MGT-14 for filing the resolution within 30 days of passing of resolution with Registrar alongwith:
- (a) Special resolution along with explanatory statement
- (b) Consent to shorter notice (if applicable)
- (c) Altered memorandum & articles of association
4. Company shall at least before 21 days of filing of the application
- (a) advertise the application in Form INC 25A.
- (b) serve individual notice by registered post with acknowledgement due to each of the Creditors and debenture holders and
- (c) serve a notice to RD, Registrar and Regulatory Body by registered post acknowledgement due, if the Company is regulated by any other law
5. Application in e-Form No. RD-1 with Regional Director(“RD”) within 60 days from passing of Special Resolution with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 along with following attachments:
- (a) Copy of the memorandum and articles of association
- (b) Copy of minutes of General Meeting
- (c) Copy of Board Resolution of Power of Attorney not earlier than 30 days to authorise to file application to RD.
- (d) Declaration by a Key Managerial Personnel (“KMP) pursuant to section 2(68)
- (e) Declaration by a KMP that there has been no non-compliance of sections 73 to76A, 177, 178, 185, 186 and 188 of the Act
- (f) Declaration by a KMP that no resolution is pending to be filed pursuant to section 179(3) and also stating that the company was never listed in any of the Regional Stock Exchanges and if was so listed, all necessary procedures were complied as laid down by Securities Exchange Board of India.
6. Duly authenticated copy of the list of creditors and debenture holders to be kept at the Registered Office for inspection if any.
7. In case no objection received for the advertisement or notice and application is complete then RD shall without hearing pass an approval order within 30 days of receipt of the application.
8. In case of defective/incomplete application, RD shall intimate the Company within 30 days from the receipt of the application where Company shall rectify the application and resubmit within 15 days of in eForm RD-GNL-5.
9. In case of no resubmission of defects or non-satisfaction of RD, RD shall reject the application within 30 days from the date of filling application or within 30 days from the date of last re-submission made, as the case may be.
10. Where an objection is received for conversion or RD has specific objection, then RD shall hold hearing within 30 days and direct company to file affidavit to record consensus at the hearing Receipt of order of NCLT post Hearing and approval of Fam MGT-14 by Registrar for conversion.
11. In case no consensus is received within 60 days of filing of application, RD shall re the application within stipulated period of 60 days.
12. A Company shall file certified copy of the order passed by the RD in Form INC-21 within 15 days of receipt of approval.
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