A company may amend its articles by special resolution, including amendments that result in the conversion of a public company into a private company, according to the requirements of the Companies Act 2013 and any restrictions set forth in its memorandum, if any. Any modification that results in the conversion of a public company into a private company must first receive approval from the central Government in the Form of an order, which must be issued in accordance with any applicable regulations. This is stated as per Section 14(1) of the Companies Act, 2013.
On December 18, 2018, the MCA added rule 41 for the conversion of public companies into private companies, and its authority to approve this conversion was delegated to the regional director of the Companies (Incorporation) Rules, 2014.
Conditions for Applying Conversion
- The term “Private” must be added to the name clause of the memorandum by removing the word “Public” from it.
- The Company’s Articles must be appropriately tailored to include any limiting clauses that apply to Private Companies. Adopting new articles that are appropriate for a private company is advised.
- It should also be ensured that the Company has not missed a deadline for completing any required paperwork with the Registrar, including annual returns and financial statements as required by the Companies (Incorporation) Rules, 2014, Rule 29(1).
- Lastly, they need to ensure that the Company hasn’t fallen behind on paying interest on deposits or debentures, as stated in the Companies (Incorporation) Rules, 2014, Rule 29(1).
Checklist for Conversion of a Private Limited Company
Here is a complete and accurate list of everything required for converting a private limited company:
Procedure for Conversion of a Public Company into a Private Company
1. Call a Board of Directors Meeting in accordance with Section 173 and Secretarial Standard-1 (SS-1)
a. All directors must be notified at least seven days before the board meeting at the addresses on file with the Company. Short notice may be given in the event of an urgent matter.
b. Include the following:
- Notice’s Agenda, Notice’s Notes, and
- Draft Notice’son.
- CalNotice’s song of the Company’s board to debate the Company’s conundrum.
- Adopt the board resolution
- for accepting the plan to convert to a private company and recommending that the shareholders of the Company’s general Company approve it.
- To the Company, the place, and the general meeting date
- to accept the proposed notice for the General Meeting, as well as the explanatory statement attached to the notice, in accordance with Section 102 of the Companies Act of 2013,
- to accept the draft of a new set of articles of association that satisfies the requirements for a private company and to suggest that shareholders approve them.
- The director or company secretary must approve the signing and issuance of the notice of general meeting. The Special Resolution for the Company’s conversion to a Company and the ensuing amendment to the Company’s Memorandum must also be included in the notice of the general meeting.
- To provide permission to the company secretary or any director to sign, certify, and submit the requisite Form with the Registrar of Companies, as well as to carry out any other registrations that may be required to give effect to the proposed conversion.
- Draft minutes should be prepared and distributed to all directors for feedback within 15 days following the conclusion of the board meeting via hand delivery, speed post, registered mail, courier, or email.
2. Entries in the Members’ Register of the Members ‘ (Mana) Rules, 2014, read with Rule 5(1)
Within seven days following the Board of Directors’ approval of which shares are held in physical Form, the directors must enter information in the Register of Members using Form MGT-1 to limit the number of members to no more than 200.
3. Call a general meeting in accordance with Section 96, Section 100, and Secretarial Standard 2 (SS-2).
- Written notice of a general meeting must be delivered at least 21 days prior to the meeting’s actual date, whether it be by:
- meeting’sular mail,
- eeting’sularmail,
- registered mail,
- courier,
- fax,
- email,
- another electronic method or
- A shorter method. With the approval of at least a majority in number and 95% of the paid-up share capital of the firm granting a right to vote at such a meeting in line with Section 101, notice may be given.
- All directors, members, the Company’s directors, secretarial and trust companies, and anyone else entitled to notice of the general meeting shall receive notice.
- The notice must include a statement about the business to be discussed at the meeting, as well as the day, time, and complete address of the meeting’s locatmeeting’s the general meeting on the designated day and adopt a special resolution to change the ComCompany’satuCompany’sblic to privateCompany’she Company’s articles of association, and add restrictive clauses appropriate for private companies. Check the Quorum as well, and if not, see if the auditor is present. A leave of absence is thereafter either denied or approved.
4. Form filing with the ROC as per Section 117
The Company must submit MGT-14 to the ROC along with company-provided papers within 30 days of reaching such a resolution.
- Copy of the extraordinary resolutions that have been certified as being true, together with an explanation
- Members received a copy of the meeting notice and every annexure.
- a printed copy of the articles of association and memorandum
- a copy of the attendance list of people who attended the general meeting
Consent for a shorter notice, if any.
5. Advertisement publication as per Rule 41(5) of the 2014 Companies (Incorporation) Rules
At least twenty-one days before the application, the firm must
- application’s FapplicatioFapplication ‘snar newspaper published in the area’s primary area ‘sular d in an area’s Ethelish area ‘sper langarea ‘sularhe State where the Companarea ‘sperCompanRegisCompany ‘sice.
- The notices to the creditors were served by registered mail with the required acknowledgment.
- If the firm is currently subject to any legal regulations, send a notice by registered mail with the required acknowledgment from the regional director, the Registrar, and the regulatory agency.
6. Create and register the Company Conversion Application in accordance with Rules 41(1) and 41(3) of the 2014 Companies (Incorporation) Rules.
Within 60 days of the passing of the Special Resolution, a Regional Director must receive an application for the conversion of a Public Company into a Private Company in e-Form RD-l along with the fee specified in the Companies (Registration Offices and Fees) Rules, 2014, and the documents required for the conversion listed below:
- A draft of the articles of association, including the amendments made in accordance with section 2(68), and the memorandum of association.
- A copy of the minutes from the general meeting that approved the special resolution approving the change, including the names of the dissenters and the number of votes cast in favor or against.
- A copy of the Board resolution or Power of Attorney, as applicable, that authorizes the application for the conversion and is dated no earlier than thirty days prior.
- A statement from a key managerial employee declaring that the Company has restricted the number of its members to 200 in accordance with Section 2(68) and that the Company has taken Company deposits in contravention of the Company rules imposed thereunder.
- a statement from a key managerial employee stating that the provisions of sections
- 73 to 76A,
- 177,
- 178,
- 185,
- 186, and
- One hundred eighty-eight of the Act and the rules issued thereunder have all been followed.
The Company is not listed on any regional stock exchanges. If Companyen is listed there, all necessary procedures were followed to completely delist the shares in accordance with the rules and regulations set forth by the Securities Exchange Board of India. A key managerial employee made this declaration in accordance with sub-section (3) of section 179. However, the statements above must be made by any director in the event of such Companies where no Key Managerial Personnel is required to be hired.
- A list of Debenture Holders and Creditors as of a date that was not more than 30 days before the application’s date, including the information below:
- Every creditor’s
- Types of creditors owed to them, as well as the quantities
- The value, to the extent that it may be reasonably assessed, of any contingent or unascertained debt.
- The Company filed a company affidavit stating that it has conducted a thorough investigation into the Company and has concluded that the list of creditors and debenture holders is accurate and that the estimated value stated in the list of debts or claims payable on contingent payments is accurate. The Company’s Salary: The salary of the Company’s directors, one of whom must be the managing director, if there is one.
7. In the Company’s objections, approval of the application as per Companies (Incorporation) Rules, 2014, Rule 41(6)(a)
The concerned Regional Director shall pass an order approving the application within thirty days of the date of receipt if no objection has been received from any person in response to the advertisement or notice referred to above and the application is complete in all material respects.
8. Compliance with the Regional Director’s RequDirectoAdditionaln Rule 41(6) of the 2014 Companies (Incorporation) Rules
When the Regional Director reviews an application and determines that additional information is required or that the application is defective or incomplete in any way, he must notify the applicant within 30 days of the application’s rapplication’s additional iapplication’sqiapplication’squestedincompleteness, instructing them to provide the requested information, correct the defects or incompleteness, and resubmit the application. A maximum of two revisions is permitted.
Suppose no agreement is reached as described above. In that case, the Regional Director may approve the conversion if, after considering all the relevant facts, he is satisfied that it would not be contrary to the Company’s law, or avoid doing so, with written justification that the Company must provide.
The Regional Director shall reject the application with reasons within thirty days of the date of applying or within thirty days of the date of the last re-submission made, as applicable, in cases where the additional information requested has not been provided or the defects or incompleteness has not been corrected to the satisfaction of the Regional Director within the period allowed, i.e., Fifteen Days.
9. A copy of the objection must be submitted to the regional director in accordance with Rule 41(7) of the 2014 Companies (Incorporation) Rules
The Regional Director shall hold a hearing or hearings within thirty days as necessary and direct the Company to file an affidavit to record the consensus reached at the hearing. Upon the affidavit, the Regional Director shall pass an order either approving or rejecting the application in the event that an objection has been received or the Regional Director, upon reviewing the application, has specific objections under the provisions of the Act.
10. Application for Conversion Approval as per the Rule 41(9) of the 2014 Companies (Incorporation) Rules
Conversion is permitted following the conclusion of any inquiry, inspection, or investigation for which no prosecution is planned or ongoing.
11. According to Rule 41(9) of the 2014 Companies (Incorporation) Rules, submit Form INC-28 to the ROC.
Within fifteen days of receiving approval, the Company must submit to the Registrar a copy of its document under the 201 Companies (Registration Offices and Fees) Rules.
Company’s Form INC 27 to ROC as per Section 14(2) of the Companies (Incorporation) Rules, 2014, read with Rule 33(2)
Within fifteen days of receiving the order, the Company must inform the Central Government along with a copy of the Government’s article’s alteration.
13. File the Necessary Amendment Application under the following Acts
- Goods and Services Act
- Shops & Establishment Act
- Factories Act
- Inter-State Migrant Workmen Act
- Private Security Agency Act
- EPF
- ESI
- Other Labour Laws
- Industry-Specific Laws
14. After a public company is converted to a private company, the following steps must be taken:
- Every modification to the Company’s shall be made in every copy, depending on the circumstances, Section 15(1).
- Print new copies of the amended articles of association and bylaws, together with a new certificate of incorporation.
- Set up new rubber stamps bearing the new name of the Company.
- If the new name has already been printed on the Company Share Certificates sample, replace it.
- On the outside of every office, building, etc., the new company name has been painted beside the previous name that was altered as per Section 12(3)(a) and Section 12(3)’s First Proviso.
- Establish a seal with the new name inscribed on it and adopt it at the Board of Directors meeting (Common Seal is optional now) as per Section 12(3)(b)
- Get the new name printed alongside the old name on all of your Company’s forms, receipt forms, and other official publications as per Companies Act 3 (c) and Section 12(3)’s First Proviso.
- Bills of change exchange promissory notes, coins, notes, and documents with the organization’s new name, as an organization’s government agencies, including the Chief Inspector of Factories, the Regional Provident Fund Commissioner, the Central Excise Authorities, the Customs Authorities, the Sales Tax Authorities, the Service Tax Department, etc., about the conversion of the cCompany.
- IICompany is the bank where the Company has a Company account for the Company and the Company’s paperwork, as needed by the bank, regarding the Company’s account holder’s department (TAN) will arrange a holder’s permanent account PAN number (PAN and collection account number.
- Please update the new company name to include the names of utility service providers, such as those for electricity, telephone, and internet connections.
- Inform all other businesses with which the Company has contractual agreements, including taking out a loan, purchasing insurance, or investing, as well as all stakeholders.
Converting a public company into a private company requires time and adherence to the many requirements outlined in the 2013 Companies Act. Less compliance is a benefit of the private Company over other companies, as there are concerns about the conversion at times. Still, if all the shareholders agree, the Company’s business will be smooth and easy. The conversion process takes a very long time.
