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CONVERSION OF PUBLIC COMPANY INTO PRIVATE LIMITED COMPANY

Changing a Business Type:
Conversion of a Public Company into a Private Company

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Under the Companies Act (Section31), all public companies, whether originally incorporated as a public limited company or at any time converted into a public limited company (under section 44 of the Act), may be converted into a private limited company, if the members so desire. The essential conditions for such a conversion are:-
  • The company must not be listed on any recognised stock exchange. In case of a listed company,it will have to wait for atleast one year after its delisting.


  • Shareholders' approval by special resolution for alteration of Articles of Association for incorporation of the definition of a private company. The Articles shall be suitably amended to include the basic restrictions applicable on a private company and other provisions necessary thereto.


  • No resolution amending the Articles, which has the effect of converting a public company into a private company, shall be effective unless it has been approved by the Central Government.


  • After the alteration has been approved, a printed copy of the Article shall be filed with the Registrar of Companies within one month of the date of receipt of the order of approval.


  • The name of the company shall be amended to include the word 'private' on all its documents.
The Companies Act contains the following procedure for the conversion:-
  • Convene a Board meeting for consideration of the proposal of conversion of the company into a private company.


  • Prepare the proposal for alteration of Articles of Association or prepare a new set of Articles of Association meeting the requirements of a private limited company.


  • Hold the Board meeting and get approval of the Board for the proposal, fix up the day, date and time of holding the general meeting of the company, approve notice and explanatory statement and authority to sign notice.


  • Hold the general meeting on the fixed day and pass the special resolution.


  • Fill e-Form 23 with the copy of special resolution, explanatory statement and Memorandum and Articles (before and after alteration).


  • Pay the requisite application fee.


  • Publish a newspaper notice in two widely circulated dailies of the State where the Regd. Office of the company is situated.


  • Get a no objection letter from major unsecured creditors and all secured creditors.


  • Apply to the Central Government in e-Form 1B.
Documents to be attached with the application are:-
  • Notice of extra-ordinary general meeting.


  • Minutes of extra-ordinary general meeting.


  • Copy of special resolution.


  • Copy of newspaper advertisement.


  • Affidavit that the company is not listed on any stock exchange.


  • Reference number, date of passing and date of filing the e-Form 23.


  • Payment of requisite application fee.


  • One copy each of the annual reports for the last three financial years.


  • Copy of the last annual return.


  • Altered Memorandum and Articles of Association.


  • No objection letters from major unsecured and all secured creditors supported by an Affidavit.


  • Reasons for conversion.


  • Terms of appointment of all managerial personnel.


  • Power of attorney in favour of the authorised representative.

On receipt of application, the Registrar of Companies(ROC) shall examine:-

  • Whether the interest of the public and particularly that of the creditors will be adversely affected.


  • Whether the company is listed.


  • Capital contribution by members.


  • Whether e-Form 23 has been passed and taken on record.


  • Whether the reasons for conversion are just and sufficient.


  • How many members voted for the resolution.


  • Whether any complaint against the company is pending.


  • Whether any show cause letter has been issued to the company or its Directors.


  • If there is any objection from members and creditors.

If the ROC approves the application, he refers it to Technical Section and Prosecution Section for their report. The Technical Section reports on whether the relevant e-Form23and the last years annual report and annual return has been filed and passed/taken on record. The Prosecution Section reports on whether any complaint is pending from anybody against the company. If during the scrutiny any adverse point arises, that has to be looked into and the authorised representative should take the initiative to make good the default or defect. If the reports are satisfactory, the ROC will issue a letter granting its approval for conversion of a public company into a private company. The concerned ROC then issues fresh certificates of incorporation consequent upon change of name after conversion of the company from 'Public Company' to 'Private Company