Conversion of a Private limited Company to Limited Liability Partnership LLP in India

When a company converts from a Private Limited Company to a Public Limited Company in India, it opens up a whole new arena for progress through giving access to new ways of raising funds and getting a hold on the market. A Public Limited Company in India raises funds through public issue of shares as well as by accepting deposits. So, for an ambitious business, going public by converting to a Public Limited Company in India is considered a good business decision.

Additionally, for the conversion of a Private Limited Company to a Public Limited Company in India, there are requirements of having at least 7 members, and 3 directors. The rights, powers, liabilities, and obligations remain the same for the company even after the conversion into the Private Limited Company. At the time of conversion, the restriction on transfer is removed as well.

Advantages of Conversion of Private Limited Company into Public Limited Company in India

• Impetus for Raising Capital – The essential feature of a Public Limited Company in India is the ability to raise shares by listing it on a stock exchange market; an amount that will be much higher than a Private Limited Company in India. This helps the company to raise funds by attracting investors from hedge funds and mutual funds, etc.
• Limited Liability – The liabilities are limited to their shareholding and the personal assets of the shareholders remain protected and untouched.
• Increased Brand Recognition – It is natural that more people get to know about a company when it goes public and gets listed on the Stock Exchange in India, which in turn increases the awareness regarding the brand and opens new business opportunities.
• Shares are Transferable – It is easier to transfer shares in a Public Limited Company than a Private Limited Company in India. It is possible for the shareholders to sell the shares whenever they want to benefit from the liquidity and this lures people in to invest in the company.

Conversion of Private Limited Company to a Public Limited Company in India

Process of conversion of a private limited company in India is a simple and easy process. There are various advantages of transforming a private limited company into a public limited company in India. The company is widely known after conversion and gains reputation legally. Also, companies obtain access to get listed on the stock exchanges in India. The Companies (Incorporation) Amendment Rules, 2020 and the Companies Act, 2013 regulates the process of conversion of private limited company into a private limited company in India.

Public Company

An establishment which is governed and managed by the Companies Act, 2013 provisions’ is known as a public limited company or Private limited companies. However, the former enjoy various benefit which private limited company are deprived of in India such as:

1. Getting listed on the stock exchange: When the private limited company gets converted into a public limited company in India, it can get itself listed on any of the recognized stock exchanges. It is very critical for a company who wants to add more capital to the business.

2. Public investment: When a company gets listed on any stock exchange, it helps the company to raise funds from the public. Companies can issue various types of shares such as equity shares, preference shares, etc. to raise funds from the public.

3. Easy transfer of ownership: After the conversion process of a private company into a public company, the ownership of the company which is in the form of shares are easily transferable which is not possible in the case of a private limited company.

4. Gains popularity: When the company gets listed on the stock exchange after the conversion process from a private company to a public limited company, people start knowing about the company which is not possible for a private company. This helps the company to gain reputation in the market after conversion.

5. Receiving deposits: Under section 76 of the Companies Act, 2013, a public company is permitted to receive deposit.

Pre-requisites for transformation from Private company to a Public limited in India

1. Digital Signature Certificate (DSC): Company should create a digital signature certificate (DSC) for a minimum of one of its directors.

2. Minimum 7 members: While applying for conversion, a private limited company should have a minimum of 7 members in their company and if not, they can increase the number of members by taking appropriate steps given in Section 3(1)(a).

3. Director Identification Number (DIN): Every director of the company must have a director identification number (DIN).

4. At-least 3 directors: Company should have minimum 3 Board of directors and if not, can appoint additional directors by taking proper steps given in Section 149(1)(a).

5. Filing of Annual returns: A company which has defaulted in filing of their financial statements or annual returns or other required documents which are supposed to be submitted with the Registrar is not eligible for conversion to a public limited company as given in Rule 29(1) of Companies (Incorporation) Rules, 2014.

6. Repayment of deposits: Company should have a clean track record in repayment of their matured debentures or deposits or interest on debentures and deposits according to the Rule 29(1) of Companies (Incorporation) Rules, 2014.

Governing body for conversion of a Private Limited Company to Public Limited Company in India

The Registrar of Companies and the Ministry of Corporate Affairs are the key governing authority for transformation of a private limited company into a public limited company. Also, the Companies Act, 2013 and its following rules are applied for the conversion of the company.

1. Definition of a private limited company is given under Section 2(68) of the Companies Act, 2013 in which it states that these companies cannot transfer their ownership according to the companies’ article of association. On the other hand, Section 2(71) of the Companies Act, 2013 defines a public limited company which can list their shares on the stock exchange, and it can easily transfer.

2. According to the Section 3 of the Companies Act, 2013, ‘Object’ clause of the company is present in their Memorandum of Association (MOA). The company needs to remove the term Private from the name of the company which is mentioned in the MOA for the conversion process.

3. Section 18 of the Companies Act, 2013 states that a company can be converted into a public limited company from a private limited company. This conversion can be done by making certain changes in Articles of Association and Memorandum of Association of the company as per the Act.

4. A private limited company has a lesser number of directors compared to a public limited company in India. So, the Section 149 of the Companies Act, 2013 lays down the process of appointment of additional directors in the company before conversion of the company.

5. Rule 29 of the Companies (Incorporation) Amendment Rules, 2020 along with Section 13 of the Companies Act, 2013 states that alternation needs to be made in MOA while converting a private limited company into a public limited company.

6. Rule 33 of the Companies (Incorporation) Amendment Rules, 2020 along with Section 14 of the Companies Act, 2013 states that alternation needs to be made in AOA while converting a private limited company into a public limited company.

Process of Converting Private Limited Company into a Public Limited Company in India

• Fill the forms – The first step requires you to fill out the questionnaires and submit the required documents.
• Application for DSC – The next step is to apply for the Digital Signature Certificate of the new directors.
• Drafting of alteration of MoA, AoA – The next step is drafting the alteration of the MoA, AoA and a few other resolutions and affidavits. After that, we file an online form for the alteration of AoA and MoA.
• Application for Conversion – The next step is to file an application for the conversion of the Private Limited Company into a Public Limited Company.

This entire procedure will take around 20-25 working days with Seedup.in’s assistance. Let us understand these steps taken for converting a private limited company into a public limited company in India in detail

1. Intimation of a Board Meeting: According to the Section 173(3) of the Companies Act, 2013, intimation must be sent to every directors of the company at their registered address to hold a meeting for considering the plan of transformation into a public limited company. This notice should be given minimum 7 days before the meeting. In case of a critical business, a shorter notification period can be given. Agenda should be mentioned in the notice along with the draft resolution.

2. Conduct Board Meeting: The main agenda of the meeting is:

i. The meeting with the Board of Directors is conducted to pass the proposal of converting the private limited company into a public limited company. This resolution of conversion should be passed by the approval of the directors.

ii. Any director or the Company Secretary is authorized to sign, validate, and submit the necessary forms to the Registrar of the companies and must perform all such activities which are required to get in effect the decision of converting the company into a public limited company.

iii. Date, time, and venue is fixed for conducting Extraordinary General meeting (EGM) to get the proposal approved by special resolution from the shareholders.

iv. New drafts of Memorandum and Article of Association prepared with all the specifications regarding the public limited company must be approved in this meeting.

v. The draft for the notification of the general meeting should be prepared in accordance with the guidelines given in the Section 102 of the Companies Act, 2013. This draft should include the agenda of converting the company into a public limited company and this draft notice should be approved by the directors in the board meeting.

vi. The Director or the Company Secretary is authorised to sign and release the notification of the general meeting.

3. Send minutes of the meeting: The draft minutes are prepared and circulated to the directors within 15days of the meeting through Speed Post/ hand/Courier/Registered post or emails for their comments.

4. Send the notification of the EGM: According to the Section 101 of the Companies Act, 2013, notification of the Extra-ordinary General Meeting (EGM) should be sent at-least 21days before the meeting to all the shareholders, auditors, directors and all the others designated parties required to attend the meeting. Notification can be sent via any mode of communication like email, speed-post, hand delivery, courier, etc. If the notification must be issued in less than 21 days, then written consent must be taken by at-least 95% of the members who are designated to vote in the meeting.

5. Conduct the Extra-ordinary General Meeting (EGM):

i. The EGM should be held on the decided date.

ii. According to Section 146, it needs to inspect whether the auditor is attending the meeting or not, and if the auditor is not attending whether the permission for absence is provided or not.

iii. Approval from the shareholders is taken by passing a Special resolution for converting the private limited company into a public limited company, it should have 3/4th of the majority according to the Section 114 (2)(a).

iv. According to Section 14, approval should be taken for alterations in Memorandum and Article of Association.

v. Minutes of the General Meeting should be accordingly prepared, signed, and accordingly complied.

6. Form INC-27 filing with Registrar: According to Section 14(2) and Rule 33 of the Companies (Incorporation) Rules, 2014, Form INC-27 is filed to put in effect the process of Conversion. So, it is required to file the Form INC-27 with the Registrar of the Company within 15 days of the meeting for converting a private company into a public limited company along with all the required documents and fees charged for the same. Following are the mandatory documents required with the form:

i. The most important document is the minutes of the General meeting in which the special resolution has been passed of conversion of the company.

ii. Memorandum of Association in which alterations have been done.

iii. Article of Association in which alterations have been done.

iv. Duly stamped and signed copy of Special resolution.

v. Other required documents.

7. Form MGT.14 filing with Registrar: According to Section 117(3)(a), this form is filed with the registrar within 30days of special resolution passed in the general meeting for making alterations in the Article of Association.

i. Explanatory notes along with duly stamped and signed copy of Special resolution.

ii. Notification’s copy of EGM which was sent to all the members as per Section 102.

iii. Attendance sheet of the General meeting

iv. Memorandum of Association in which alterations have been done.

v. Article of Association in which alterations have been done.

8. Registrar of Companies verifies the document: According to the Section 18 of the Companies Act, 2013, ROC verifies all the documents submitted by the Company for the process of conversion. After verification, if all the submitted documents are found correct and all the eligibility criteria are fulfilled, then ROC issues them a New Certificate of Incorporation along with the new name of the company.

Document required for conversion into a Public Limited Company from a Private Limited Company in India

1. Shareholders and directors’ Pan Card
2. Directors and shareholders’ Identity Proof
3. Shareholders and directors’ Address Proof
4. Formal photographs of directors and shareholders
5. Address proof of the company
6. NOC or No-objection Certificate from shareholders
7. Documents should be notarized if directors are Foreign National or NRI
8. Document of Incorporation
9. Attested copy of all financial statements
10. Previous year’s income tax return

Formalities after the conversion of Private Limited to Public Limited Company in India

1. Company must inform about their conversion and name change to all the concerned authorities, member, shareholders, and all other related parties to the business.

2. All the copies of the Memorandum of Association and Article of Association should incorporate all the changes made in MOA and AOA at the time of conversion.

3. Company must print new MOA and AOA along with the fresh copy of Certificate of incorporation.

4. All the stationary and the rubber stamp of the companies must be printed with the new name.

5. New Name of the company must be painted on all the buildings and offices of the company.

6. Business letters, bill heads, letterheads, receipt forms, invoice and all other office documents must be changed with the new name of the company.

7. Banks must be informed with whom a business account is operated and make necessary changes by submitting the required documents.

8. New application for Permanent Account Number (PAN) and Tax deduction and Collection Account Number (TAN) must be made to the Income tax department.

9. New name of the company must be updated with all the service providers like electricity, internet, and telephone.

10. Other companies like insurance companies, or the company in which investments have been done, or take loans from, etc. must be informed about the name change.

Criteria for Conversion of a Private Limited Company into a Public Limited Company in India

• Minimum 7 shareholders and 3 directors.
• The minimum authorised capital of the company is prescribed to Rs 5 lakhs instead of Rs. 1 lakh.

Documents Required for conversion of Private Limited Company into a Public Limited Company in India

• PAN Card, Aadhar Card, Voter ID, of all the directors and shareholders.
• Passport (in case of foreign nationals or NRIs)
• Passport size photos of all the directors and shareholders.
• Telephone/Electricity Bill of all the shareholders and directors.
• Latest bank account statement of all the directors and shareholders.
• Electricity/Water Bill of the registered place of business.
• NOC from the landlord of registered place of business (in case of rented property)
• Rent Agreement of registered place of business (in case of rented property)
• Certified copy of latest audited financial statements.
• MoA, AoA, Certificate of Incorporation.
• ITR filed for the prior year.

Please note that for Foreign Nationals or NRIs, all the concerned documents have to be notarized.