PUBLIC INTO PRIVATE COMPANY
| Basic | Advance |
|---|---|
| ✔ Roc Filing | ✔ Roc Filing |
| ✔ Documentation | |
| ✔ Professional Consultancy |
Public into Private Company in India
Converting a Public Company to a Private Company in India
Introduction
Converting a public company into a private company in India involves several legal and procedural steps, as outlined by the Companies Act, 2013, and the Companies (Incorporation) Rules, 2014. This conversion allows a public company to enjoy the benefits of less stringent regulatory requirements, greater operational flexibility, and more privacy. Here is a detailed overview of the process:
Step-by-Step Process
1. Board Meeting
The first step involves convening a Board Meeting to approve the agenda for conversion, including the alteration of the Memorandum of Association (MoA) and Articles of Association (AoA) to reflect the company’s new status as a private company. The board also decides on the date, time, and venue for the General Meeting where the special resolution for conversion will be passed.
2. General Meeting
A General Meeting is then held to pass a special resolution for the conversion of the company from public to private. This includes amending the MoA and AoA to incorporate the restrictions applicable to a private company, such as restrictions on the transfer of shares and the maximum number of members (200).
3. Filing with the Registrar of Companies (RoC)
After the special resolution is passed, the company must file Form MGT-14 with the RoC within 30 days, along with the altered MoA and AoA, and a copy of the special resolution passed.
4. Application to the Regional Director (RD)
The company must then draft an application to the Regional Director (RD) in Form RD-1 within 60 days of passing the special resolution. This application includes a draft copy of the altered MoA and AoA, minutes of the General Meeting, a declaration by a Key Managerial Personnel (KMP) or director, and a detailed application setting out the reasons for conversion, the effect on shareholders, creditors, and other related parties.
5. Advertisement and Notice
At least 21 days before filing the application with the RD, the company must advertise the proposed conversion in Form INC-25A in a widely circulated newspaper and serve individual notices to creditors and debenture holders. Notices must also be sent to the RD, RoC, and other regulatory authorities.
6. Filing of E-Form RD-1
An application in E-Form RD-1, along with the necessary documents, should be filed with the RD. If any objections are received, they must be addressed. The RD, after reviewing the application and ensuring compliance with all requirements, will issue an approval for the conversion.
7. Final Steps
Upon receiving approval from the RD, the company must file the RD’s order with the RoC in Form INC-27 and INC-28 within 15 days. Once the RoC registers these documents, the conversion process is complete, and the public company officially becomes a private company.
Advantages of Conversion
- Less Regulatory Paperwork
Private companies face fewer regulatory requirements, saving time and resources.
- No Public Disclosure
Private companies are not required to disclose financial information to the public, allowing for more privacy and strategic flexibility.
- Retain Control
By going private, company owners can retain control without having to answer to public shareholders, financial regulators, government officials, or the general public.
- Focus on Long-Term Growth
Private companies can focus on long-term growth without the pressure of meeting quarterly earnings expectations from public shareholders.
Disadvantages of Conversion
- Limited Access to Capital
Private companies may find it harder to raise capital as they do not have access to public equity markets.
- Potential Buyout Costs
The company needs to buy back shares from public shareholders, often at a premium, which can be costly.
Conclusion
Converting a public company to a private company in India involves meticulous adherence to legal guidelines and timely submissions of all necessary documents. It is advisable for companies undergoing this conversion to seek professional assistance to ensure compliance and a smooth transition.
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Company Annual Filing Pvt vs LLP
| FEATURES | Pvt | LLP |
|---|---|---|
| DOCUMENTS | Appointment of Auditor - ADT 01, INC 20 A form filing, DIR 3 KYC (For 2 directors), Accounting & Bookeeping(Upto 100 transactions), Financial statement preparation, Accounting software (1-year license), AOC 4, MGT 7 & ADT filing, Annual filing(Upto turnover of 20 lakhs), Facilitation of Annual General Meeting, Preparation of Minutes & Filing of AGM Report, GST Returns Filings (12 Months), One Year Income Tax filing(Upto turnover of 20 lakhs), Statutory regulations PF, ESI, TDS*, Payroll, PF & ESI filing (Up to 5 employees). | Form 8 & 11 filing(One year), DIR 3 KYC (For 2 directors), Accounting & Bookeeping(Upto 100 transactions), Financial statement preparation, Accounting software (1-year license), GST Returns Filings (12 Months), One Year Income Tax filing(Upto turnover of 20 lakhs), Statutory regulations PF, ESI, TDS*, Payroll, PF & ESI filing (Up to 5 employees). |
| Time | 7-9 working days | 7-9 working days |
Documents Required for Public into Private Company in India
To convert a public limited company into a private limited company in India, the following documents are required:
- Notice of Board Meeting: A notice of the board meeting must be issued to all the directors of the company, specifying the agenda and the proposal for conversion.
- Altered Memorandum of Association (MOA): The MOA of the company must be altered to reflect the changes in the company’s status from public to private.
- Altered Articles of Association (AOA): The AOA of the company must be altered to reflect the changes in the company’s status from public to private.
- Special Resolution: A special resolution must be passed by the shareholders of the company, approving the conversion and alterations to the MOA and AOA.
- Notice of General Meeting: A notice of the general meeting must be issued to all the shareholders of the company, specifying the agenda and the proposal for conversion.
- Details of Directors and Promoters: Details of the directors and promoters of the company must be submitted to the Registrar of Companies (ROC) along with the application for conversion.
- Certificate of Incorporation: A fresh certificate of incorporation will be issued by the ROC, recognizing the company as a private limited company.
It is important to note that the process of conversion can take anywhere between three to six months, depending on various factors. Additionally, a private limited company must have a minimum paid-up capital of one lakh and a minimum of two shareholders and two directors. It is mandatory for a private limited company to appoint a company secretary if the paid-up capital exceeds five lakhs.
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Public into Private Company FAQ’s
hat is the difference between a private company and a public company?
Why would a company want to go from public to private?
A company might want to go from public to private for several reasons, such as avoiding regulatory scrutiny, retaining control, focusing on long-term growth, or escaping the pressures of meeting quarterly earnings expectations.
How does a company go from public to private?
The process of going from public to private typically involves obtaining shareholder approval, reaching a merger or acquisition agreement with a private equity firm or another private company, filing paperwork with regulatory agencies, delisting shares from public stock exchanges, and buying back shares from public shareholders.
What are the advantages of going from public to private?
The advantages of going from public to private include avoiding regulatory paperwork and hurdles, retaining control, focusing on long-term growth, and not having to disclose financial information to the public.
What are the disadvantages of going from public to private?
The disadvantages of going from public to private include potentially higher costs associated with the buyout, loss of access to public capital markets, and reduced liquidity for shareholders.
Private companies are owned by a small group of shareholders, and their shares are not traded on public stock exchanges. Public companies, on the other hand, are owned by a large number of shareholders, and their shares are traded on public stock exchanges.