A public company is one that allows the public to subscribe to its shares and has seven or more members. A public company is considered to be a subsidiary company of a public company. A private company cannot allow the general public to subscribe to its shares and has a 200-member limit.
Step 1: Call a Board Meeting to Approve the Conversion
A notice of seven days’ notice must be given to the company’s directors to call a Board Meeting. The deadline for sending this notice is seven days before the meeting. Each director should receive the notice in writing at his registered address, either by hand, via mail, or electronically. The notice ought to include the board meeting’s agenda.
The Board Meeting to convert a private company to public company can be convened with shorter notice to “transact urgent business. “However, at least one independent director must be present at the meeting in order to conduct urgent business at a shorter notice. The decisions made at the meeting will be communicated to all directors if an independent director is absent, but they can only be finalized if at least one independent director, if any, ratifies them.
(b) Pass Resolutions at the Board Meeting
It is essential to keep in mind that a quorum for a Board Meeting is either two directors or one-third of the total number of directors, whichever is higher. Directors may participate via videoconference and audiovisual means.
Step 2: Calling an Extraordinary General Meeting (a) The Board must call an Extraordinary General Meeting for the business.
The Extraordinary General Meeting must first be scheduled for a date, time, and location determined by the Board.
Second, the notice, agenda, and explanation statement must be approved by the Board in accordance with the following requirements: 21-day notice to call an extraordinary general meeting The Board must call an extraordinary general meeting of the company. The deadline for sending this notice is 21 days prior to the meeting date. Every member of the company, the auditor or auditors, and every director of the company should receive the notice in writing or electronically at their registered address, either by hand delivery, post, or electronic means.
(b) Pass Special Resolutions at the Extraordinary General Meeting A public company’s quorum is five shareholders who are personally present if the number of shareholders on the date of the meeting is less than one thousand; Thirty members personally present if the number of members as of the date of the meeting exceeds 5,000; fifteen members personally present if the number of members as of the date of the meeting is less than 5,000.However, the quorum requirements outlined in the Articles of Association will take precedence if any other quorum is specified.
The number of votes cast in favor of a special resolution should be three times higher than the number of votes cast against it in order for it to be approved.
Step 3: Call a Board Meeting to Approve the Conversion
Within thirty days of passing the resolution to change from a public company to a private one, the company must notify the Registrar of Companies. According to the Companies (Registration offices and fees) Rules, 2014, resolutions are submitted to the Registrar on Form MGT-14, along with the required fees. The Registrar should receive the explanatory statement, the resolution, and the notice announcing the extraordinary general meeting.
The Ministry of Corporate Affairs’ website contains Form MGT-14.The instruction kit that came with the form is useful and easy to understand. English or Hindi can be used to fill out the form. The form must be signed digitally and certified by a Chartered Accountant, Company Secretary, or Cost Accountant who has been practicing for a long time.
Step 4: Submit Form INC-27
In accordance with Section 14 of the Companies Act of 2013, the Registrar must be informed of any changes to the articles of association via Form INC-27 in order to facilitate the conversion. In addition, in accordance with Rule 33 of the Companies (Incorporation) Rules, 2014, Form INC-27 must be submitted for a public company to become a private company. The Companies (Fee for Filings with the Registrar of Companies) Rules, 2014 specify that the form and application fees must be submitted to the Registrar of Companies.
The Ministry of Corporate Affairs’ website contains Form INC-27.The instruction kit included with the form is helpful and acts as a guide for filling out the necessary information. The structure can be filled in Hindi and English language.
Step 5: A new certificate of incorporation will be issued by the Registrar of Companies after each application has been submitted
The Registrar will check the documents and register them. After closing the company’s previous registration, the Registrar will issue a new certification of incorporation.
The company’s pre-conversion debts, liabilities, obligations, and contracts will not be affected by the new registration. In the same way that they were before the conversion, they will still be enforceable.
Step 6: Adding the word “Private” to the company’s name
At the time of the conversion, the company will need to add the word “Private” to its name. When the only change to the company’s name is the addition of the word “Private” as a result of the company’s conversion from one class to another, approval from the Central Government is not required.
A company’s life is like a journey: it rises, falls, and, if you’re lucky like Apple Inc., rises again!There is a common misconception that a company’s transition from public to private status indicates that the business is not doing well.A company can convert if it is convinced, both strategically and objectively, that doing so will benefit the business in the long run.