Overview of Converting Private Limited to Public Limited Company

In the Indian corporate landscape, a Private Limited Company enjoys many of the same advantages as a Public Limited Company. However, when a private company seeks to expand its operations, it faces limitations in raising capital through public offerings of debentures and shares. Converting from a Private Limited to a Public Limited Company unlocks significant opportunities, especially in terms of wider market reach and enhanced fundraising capabilities.

The conversion process is governed by the Companies Act, 2013, and the Companies (Incorporation) Amendment Rules, 2020.

Concept of a Private Limited Company
A Private Limited Company is a business entity owned privately, where the liability of its members is limited to the shares they hold. According to the Companies Act, 2013, a private company must have a minimum of two and a maximum of 200 members. It must also have between two and fifteen directors to manage its operations. Foreign nationals are eligible to be appointed as directors of a Private Limited Company.

Following the Companies (Amendment) Act, 2015, the requirement of a minimum paid-up capital of Rs 1,00,000 for private limited companies was removed.

Concept of a Public Limited Company
A Public Limited Company is a joint-stock company regulated by the Companies Act, 2013. It offers limited liability to its members and has the ability to issue shares to the public for raising capital.

To form a Public Limited Company, a minimum of seven members is required, with no upper limit on the number of members. After incorporation, the company must include the suffix "Public Limited Company" or "PLC" in its name.

Benefits of Converting Private Limited to Public Limited

In India, the conversion of a Private Limited Company to a Public Limited Company offers several advantages, including:

1. Capital Raising: A Public Limited Company can issue shares to the public, enabling it to raise capital more effectively.

2. Stock Exchange Listing: A Public Limited Company has the opportunity to list its shares on a recognized stock exchange, increasing its visibility and brand recognition.

3. Share Transferability: Unlike a Private Limited Company, a Public Limited Company allows its shareholders to transfer their shares easily, providing greater liquidity and flexibility for investors.

4. Public Deposits: A Public Limited Company can accept public deposits as per Section 76 of the Companies Act, 2013, which is not permitted for a Private Limited Company.

Minimum Requirements for Converting a Private Company to a Public Company

The essential requirements for converting a Private Company into a Public Company in India include:

1. Digital Signature Certificate (DSC) for at least one director.
2. Seven shareholders at a minimum.
3. Director Identification Number (DIN) for all directors.
4. Directors and shareholders can be the same individual.
5. A minimum of three directors is required.

Documents Needed for Conversion from Private to Public Company

The documents required for the conversion of a Private Company to a Public Company are:

• PAN card details of shareholders and directors.
• A copy of the passport for foreign nationals.
• Voter ID, Driving License, or Passport as identity proof for shareholders and directors.
• Address proof (e.g., Telephone Bill, Electricity Bill) of shareholders and directors.
• Latest passport-sized photographs of shareholders and directors.
• Utility bill (e.g., Electricity, Telephone, or Water bill) for the registered office.
• No-Objection Certificate (NOC) from the owner of the premises used as the registered office.
• Rent Agreement or Lease Deed for the registered office.
• For foreign nationals, all director documents must be notarized.
• A copy of the company’s incorporation certificate.
• A copy of the company's Memorandum of Association (MOA) and Articles of Association (AOA).
• Copies of the latest audited financial statements.
• A copy of the company’s filed Income Tax Return (ITR).

Regulatory Framework for Converting a Private Company to a Public Company

The legal provisions governing the conversion process in India are:

• Section 2(68) and Section 2(71) of the Companies Act, 2013.
• Section 3 of the Companies Act, 2013.
• Section 18 of the Companies Act, 2013.
• Section 149 of the Companies Act, 2013.
• Section 13 in conjunction with Rule 29 of the Companies (Incorporation) Amendment Rules, 2020 for altering the MOA.
• Section 14 with Rule 33 of the Companies (Incorporation) Amendment Rules, 2020 for altering the AOA.

Forms Required for the Conversion Process

The following forms are involved in the process of converting a Private Company to a Public Company:

1. Form MGT-14

   • Filing Time: Within 30 days of passing the Special Resolution.
   • Attachments:
     • Notice of Extraordinary General Meeting (EGM).
     • Explanatory Statement.
     • Certified copy of the Special Resolution passed in the EGM.
     • Amended AOA and MOA.
     • Consent for Short Notice if the EGM was held at shorter notice.

2. Form INC-27

   • Filing Time: Within 15 days of passing the Special Resolution.
   • Attachments:
     • Certified true copy of the Special Resolution passed in the EGM.
     • Amended AOA and MOA.
     • Consent for Short Notice, if EGM was held at shorter notice.
     • Minutes of the General Meeting.

Procedure for Converting a Private Company to a Public Company

The process for converting a Private Company to a Public Company involves the following steps:

1. Issue Notice for Board Meeting (BM)

   • The directors must send a notice to convene a Board Meeting (BM) at least seven days before the meeting date. The notice should include the proposed agenda for the meeting, which typically covers:
     • Passing a Board Resolution for the conversion.
     • Setting the date, time, and location for the Extraordinary General Meeting (EGM).
     • Approval of the notice to call the EGM, along with the Explanatory Statement.

2. Hold the Board Meeting

   • During the Board Meeting, the directors must approve the following items:
     • Approving the conversion from a Private Company to a Public Company.
     • Finalizing the list of creditors.
     • Approving the draft of the Memorandum of Association (MOA).
     • Approving the draft of the Articles of Association (AOA).
     • Setting the date, time, and venue for the EGM.

3. Send Notice for Extraordinary General Meeting (EGM)

   • The directors must send a notice for the EGM at least 21 days in advance of the meeting date.

4. Convene the EGM

   • During the EGM, shareholders must pass a Special Resolution (SR) authorizing the conversion of the Private Company into a Public Company. They must also approve the drafts of the new MOA and AOA.

5. File Form MGT-14

   • After passing the Special Resolution, the directors need to file Form MGT-14 with the Registrar of Companies (ROC) within 30 days from the date of the EGM.

6. File Form INC-27

   • The directors must also file Form INC-27 with the ROC within 15 days from the date of the EGM.

7. Approval of Forms MGT-14 and INC-27

   • The ROC will review and approve the forms if all requirements are met.

8. Certificate of Incorporation (COI)

   • After approval of Forms MGT-14 and INC-27, the ROC will issue a Certificate of Incorporation (COI), signifying the successful conversion of the Private Company into a Public Company. 

Post-Conversion Requirements

Once the conversion of a Private Limited Company to a Public Limited Company is complete, the following post-conversion steps should be taken:

1. Apply for a new PAN (Permanent Account Number) card.
2. Update all company stationery and business letterheads with the new company name.
3. Update the bank account details of the company.
4. Notify relevant authorities (such as Sales Tax, Excise, etc.) about the name change.
5. Ensure the number of directors is increased to a minimum of three.
6. Print copies of the updated Memorandum of Association (MOA) and Articles of Association (AOA).

Differences Between Private and Public Companies