Step by Step Guide for Conversion of an Unlisted Public Company to a Private Limited Company
- CS Akshay Joshi
- Jun 7
- 10 min read
What is Public or a Private Company:
PUBLIC LIMITED COMPANY: As per the Section 2 (71) of The Companies Act, 2013,
“Public Company” means a company which-
(a) Is not a private company and;
(b) Has a minimum paid-up share capital as may be prescribed:
Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles;
PRIVATE LIMITED COMPANY: As per the Section 2 (68) of Companies Act, 2013,
Private Company” means a company having a minimum paid-up share capital as may be prescribed, and which by its articles,—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased,
shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company;
In simple words,
Public Company means, a Company which is a business that is allowed to raise money from the public by selling its shares through the stock market. It is also registered with the government and follows more strict rules and transparency requirements. There is no limit on the number of shareholders, and anyone from the public can buy or sell its shares. It is suitable for large companies looking to grow on a big scale.
AND
Private Company means, a Company which is a business owned by a small group of people, usually family members, friends, or private investors. It is registered with the government, and its shares are not traded on the stock market. The company has a limit on the number of shareholders (up to 200), and the shares cannot be sold to the public without approval. It is commonly used by startups and small businesses.
PROCEDURE FOR CONVERSION OF AN UNLISTED PUBLIC LIMITED COMPANY TO A PRIVATE LIMITED COMPANY
Legal framework
The conversion of a public company into a private company is primarily governed by:
Section 13, 14 of the Companies Act, 2013 – Pertaining to the alteration of Memorandum and Articles of Association.
Rule 41 of the Companies (Incorporation) Rules, 2014 – Prescribes the procedure for such conversion.
Section 18 of Companies Act, 2013– provides for Conversion of Companies which is already registered. Section 18 provides for converting of any class of Company into another class by doing Alteration in MOA and AOA of the Company.
The Companies Incorporation (Fourth Amendment) Rules, 2018– the Conversion of Public Company into Private Company is explained. The Central Government has wide powers to amend the said rules. This Power Delegated to the Regional Director.
DETAILED PROCEDURE FOR CONVERSION
Convene a Meeting of Board of Directors
Issue Notice of Board Meeting to all the Board of Directors of Company, at least 7 days before the date of Board Meeting.
Attach Agenda, Notes to Agenda and Draft Resolutions with the Notice.
Hold a meeting of Board of Directors of the Company to discuss and approve the agenda of conversion of public limited company into a private limited company
Approve the draft notice for convening the General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013
Key matters to be passed through Board Resolution in the board meeting in case of conversion:
for approving proposal of conversion of Public Company into a Private Company, and to recommend the same for approval of members of the company in General Meeting of the Company;
to consider and approve the reduction in the total number of members of the company to a maximum of 200 members;
to fix the day, date, time and venue of the General Meeting;
to approve the draft notice for convening the General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013
to approve the draft new set of Memorandum and Articles of Association meeting the requirements of a Private Company and to recommend the same for approval of Shareholders;
to authorize the Director or Company Secretary (if any) to sign and issue notice of General Meeting and to sign, certify and file the required form with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the proposed conversion.
Prepare and Circulate Draft Minutes of the Board Meeting within 15 days from the conclusion of the Meeting, to all the Directors for their comments.
Convene General Meeting
Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
Notice will be sent to all the Directors, Members, Auditors of Company, Debenture Trustees (if any) and to others who are entitled to receive the notice of the General Meeting.
Notice shall specify the day, date, time and full address of the venue of the Meeting and contain an agenda on the business to be transacted at the Meeting.
Hold the General Meeting and pass a Special Resolution for conversion of Public Company into Private Company and altering the Memorandum of Association and Articles of Association including restrictive provisions as applicable to Private Company.
Prepare the minutes, attendance register, voting result of General Meeting.
3. Filing of Form MGT-14 with ROC
Company shall file Form MGT-14 with ROC within 30 days of passing such resolution along with below given documents
Shorter notice consent (if any) along with copy of the notice of general meeting sent to members
Certified true copies of the special resolutions along with explanatory statement
Copy of the Memorandum of Association and Article of Association marking relevant changes made duly certified by at least two directors of the company
Copy of Minutes of the General Meeting
Copy of Attendance Sheet, voting results (with detailed votes cast in Favor and against the resolutions) of General Meeting
Publication of an Advertisement
The company shall, at least twenty-one days before the date of filing of the application
Advertise in the Form INC-25A, in a vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper, widely circulated in the State in which the Registered Office of the Company is situated
Serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company
Serve, by registered post with acknowledgement due, a notice to the Regional Director and Registrar and to the regulatory body, if the company is regulated under any law for the time being in force.
Draft and File an Application for Conversion of Public Company into Private Company in Form RD-1
An application for the conversion of Public Company into Private Company shall be filed to Regional Director within sixty days from the date of passing of Special Resolution in e-Form RD-1.
A draft copy of Memorandum of Association and Articles of Association, with marking the proposed alterations certified by at least two directors of the company
A copy of the minutes of the General Meeting at which the Special Resolution authorizing such alteration was passed
Copy of Attendance Sheet, voting results (with detailed votes cast in Favor and against the resolutions) of General Meeting
A copy of Board resolution or Power of Attorney dated not earlier than thirty days, authorizing to file application for such conversion
Declaration by a Key Managerial Personnel that pursuant to the provisions of Section 2(68), the Company limits the number of its members to two hundred and also stating that no deposit has been accepted by the Company in violation of the Act and rules made thereunder
Declaration by a Key Managerial Personnel that there has been no non-compliance of sections 73 to 76A, 177 , 178, 185, 186 and 188 of the Act and rules made thereunder
Declaration by a Key Managerial Personnel that no resolution is pending to be filed in terms of sub-section (3) of section 179 and also stating that the Company was never listed in any of the Regional Stock Exchanges and if was so listed, all necessary procedures were complied with in full for complete delisting of the shares in accordance with the applicable rules and regulations laid down by Securities Exchange Board of India. But in case of such Companies where no Key Managerial Personnel is required to be appointed, the aforesaid declarations shall be filed any of the director
Details of MGT-14 filed u/s 179(3)(g) of the Companies Act, 2013 for the last 3 years
Reason for conversion into a private company, effect of such conversion on shareholders, creditors, debenture holders, deposit holders and other related parties.
Details of any conversion made within last five years and outcome thereof along with copy of order.
Details as to whether the company is registered under section 8
List of Creditors, Debenture Holders, of a date not more than 30 Days before the filing of Application with Regional Director, setting forth the following details:
Name and Address of every creditor and debenture holder
Nature and amounts due to them in respect of debts, claims or liabilities
In respect of any contingent or unascertained debt, the value, so far as can be justly estimated of such debt. The company shall file an affidavit, signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be managing director, where there is one, to the effect that they have made a full enquiry into affairs of the company and, having done so, have formed an opinion that the list of creditors and debenture holders is correct, and that the estimated value as given in the list of the debts or claims payable on contingency or not ascertained are proper estimates of the values of such debts and claims that there are no other debts, or claims against, the company to their knowledge.
Proof of notices served to creditors and debenture holders of the company
Affidavit, signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be managing director where there is one, to the effect that they have made a full enquiry into affairs of the company and having done so, have formed an opinion that the list of creditors and debenture holders is correct, and that the estimated value as given in the list debts or claims payable on contingency or not ascertained are proper estimates of values of such debts and claims, where there debts and claims that there are no other debts, or claims against, the company to their knowledge.
Copy of advertisement in the Form INC-25A, in a vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper, widely circulated in the State in which the Registered Office of the Company is situated
Acknowledgement due, individual notice on each debenture holder and creditor of the company.
Acknowledgement due, a notice to the Regional Director and Registrar and to the regulatory body, if the company is regulated under any law for the time being in force.
Approval of Application, in case of No Objections
Where no objection has been received from any person in response to the advertisement or notice referred above and the application is complete in all respects, the same may be put up for orders without hearing and the concerned Regional Director shall pass an order approving the application within thirty days from the date of receipt of the application.
Where the Regional Director on examining the application finds it necessary to call for further information or finds such application to be defective or incomplete in any respect, he shall within thirty days from the date of receipt of the application, give intimation of such information called for or defects or incompleteness, directing the person or the company to furnish such information, to rectify defects or incompleteness and to re-submit such application within a period of Fifteen Days in e-Form RD GNL-5 Maximum of two re-submissions shall be allowed.
In cases where such further information called for has not been provided or the defects or incompleteness has not been rectified to the satisfaction of the Regional Director within the period allowed i.e. Fifteen Days, the Regional Director shall reject the application with reasons within thirty days from the date of filing application or within thirty days from the date of last re-submission made, as the case may be.
Approval of Application of Conversion
On completion of such inquiry inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, conversion shall be allowed and RD will pass the order for approval.
File Form INC-28 with ROC
Company shall file the order conveyed by the Regional Director with the Registrar in Form lNC-28 within fifteen days from the date of receipt of approval.
File Form INC-27 with ROC
Company shall file the copy of order of the Central Government approving the conversion along with,
Altered Memorandum of Association
Altered Articles of Association
Resolution passed in General Meeting
Newspaper advertisement in Form INC-25A
A copy of the minutes of the General Meeting at which the Special Resolution authorizing such alteration was passed
A copy of Attendance Sheet, voting results (with detailed votes cast in Favor and against the resolutions) of General Meeting.
KEY POINTS TO REMEMBER WHILE CONVERSION
While preparing memorandum and articles of association make sure that all the restriction of private limited company are included.
MGT-14 filed u/s 179(3)(g) of the Companies Act, 2013 for the last 3 years.
Statutory registers and minutes books are maintained and updated.
Copy of board resolution dated not earlier than thirty days, as the case may be, authorizing to file application for such conversion.
Disclaimer: This article is intended for educational and informational purpose only. It is recommended to seek the assistance of a Practising Company Secretary or consultant in India for conversion of public limited company to private limited company.