Private limited companies are so common,all Pvt companies want to turn into Public limited companies, so they can increase their size or scale. A private limited company becomes available for everyone by converting into a public limited company. Pvt Company can raise its capital by offering its shares to more investors. As a result, the company can grow, take on new projects, and deal other businesses with more funding. Public limited company easily raises funds from the public by IPO, IPO/FPO, debentures, deposits etc. and The shares of the company may be listed and traded on an Indian stock exchange.
Therefore, Many private limited companies these days decide to become public limited companies, to list on the stock exchange and grow their businesses.
Requirements to Convert Private Limited to Public Limited
By following requirements, a Private company can be converted in to public company, which are given below:
- Shareholder Approval: Get the approval of current shareholders.This confirms that the conversion and outcomes are acceptable to all shareholders.
- Minimum Directors: Company has minimum 3 Directors.At least one of them being an Indian resident.
- Minimum Shareholder: Company has minimum 7 shareholder/ member.
- DIN of Directors
- DSC of Directors/Shareholders
- The company shouldn't have missed deadlines for completing its annual return and balance sheet, as well as for paying interest, debentures, and deposits.
Pre- Conversion Requirements
Before the Registrar will accept an application to convert into a Public Limited Company, the Companies Act defines a number of requirements that must be fulfilled. These conditions are:
- The company requires share capital.
- The company must have never before converted its status to an unlimited company.
- To become a public company, the company must have changed its name and articles of company as required.
Documents for Private Limited to Public Limited Conversion
You will need the following documents to convert a private limited to a public limited company:
- Board of directors has to approve the ownership change.
- Certificate of Incorporation is a necessary of a Private Limited Company.
- PAN Card of shareholders / Directors of the company.
- TAN and PAN of the company.
- The changes should be update in the MOA and AOA
- A valid passport is required of foreign nationals.
- Address proof like bank statement/ electricity bill/ bank statement of directors and shareholders.
- Need the No Objection Certificate of the owner's registered office.
- Copies of the company's filed financial statements, auditor reports, and income tax returns (ITR)
- For foreign nationals or NRIs, the director(s)' documents need to be certified.
Procedure for Conversion Private Company into Public Company
The procedures that a company needs to follow during the conversion process is described in the Companies Act 2013. In India process of converting a private limited to Public limited is easy and simple to follow-
Step 1: Calling Board Meeting of Director
Call a board meeting to discuss and suggest converting a private company into a public one. The board of directors need to approve the proposal and approve permission for the necessary steps to be taken towards the conversion process.
Step 2: Passing a Special Resolution
A special resolution would be passed from the shareholder/ directors that the private limited company converting into a public limited company must be passed. A resolution that is approved by a majority of at least 75% of the members.
Step 3. Filing with ROC
Submit all the documents to the Registrar of Companies, including Form MGT-14, Form INC-27, the special resolution, the updated MOA and AOA, and others.
Step 4. Get a Conversion Certificate
After submitting all the documents successfully and approved by the government, you will get a new certificate of incorporation. And your private limited successfully converted into public limited.
Step 5. Update the Details in Other Documents
We must apply to update other registrations that the company had previously like PAN, TAN, GST, EPF, and professional tax registrations, and many others.
Post Conversion Requirements
When converting a private firm to a public one, directors and owners must keep important points in mind:
- It has to be apply for a new PAN card.
- company's bank account details have to be updated.
- The new name of the company should be printed on all company letterheads as well as documents.
- Allow the investor to buy and sell the shares, by enabling the shares trading on stock exchange.
- The updated MOA and AOA must be printed earliest.
Advantages of Converting Pvt Ltd into Public Ltd Company
There are following advantages when you change a private limited company to a public limited company, such as:
Transfer of Shares
A public limited company's shareholders can transfer his share freely to anyone without any limitations, providing them with liquidity and a simple way to sell.
No limitations on Members/Shareholders
There is no defined limit on the maximum number of members, a Public Limited company is free to add as many members as it wants. This may allow it to have as many shareholders as its share capital will allow.
Raising capital
By using it to generate money from the general public through shares, you may take advantage of the public limited company. Public limited company easily raises funds from the public by IPO, IPO/FPO, debentures, deposits etc
Easy Acceptance of Deposits
The Companies Act of 2013, Section 76 allows public companies to take deposits from the general public.
Conclusion
Conversion of a private company to a public company has many benefits, like better credit and shareholders can meet its short-term financial goal and simpler access to capital markets. But there are drawbacks as well, like more regulatory compliance, the reduction in the percentage of existing shareholders / ownership in a company when it issues new shares of stock. And also public disclosure requirements.
Before proceeding with the conversion of a private company to a public company, we must know its advantages and disadvantages and ensure that they are fully prepared to comply with the more legal standards. It could be better to get registered as a Public Limited company if you want to be listed on a stock exchange.
Author Bio
