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Public to Private Limited Company Conversion Process

Are you tired of your company being too big and too open?

There is a way for you to escape it, if you’re willing to accept a downgrade.

Public Limited Company to Private Limited Company conversion is not a common process because it’s not people normally seek. However, the pandemic times have forced people make unconventional choices that might appear to downgrade a business, but can also save its life.

Thus, this article discusses in detail the procedure to convert a public limited company to a private limited company.

Why conversion from a public to Private Limited Company becomes Necessary?

The reasons that you might need to downgrade from a public limited to a private limited company in India:

  1. Less Compliances: Compared to the a Public Limited Company, a Private Limited company requires far less compliances. It makes setting up a private limited company a lot more convenient.
  2. Less legal restrictions: Because a public limited company always stays within the public eye, the restrictions it has to face are more. It has to conduct itself properly because any misstep can cause its downfall. On the other hand, a private limited company keeps most of its in-goings – private. There is a sense of freedom in the way that it operates and thus, it’s the choice for all types of entrepreneurs.
  3. Mandatory conversion is not required: Previously, a private limited company had to convert into a public limited company once it crosses the limit of annual turnover. It’s not the case anymore as there is no limit to the turnover a private limited company can hold. If you were a public limited company that had to convert on a mandatory basis, you now have a chance to go back. Read More: Insurance Broker License

Also Read: FEMA Guidelines: Everything that you need to know

Procedure of conversion of a public limited company to a Private Limited Company

Following are the steps you must take to Convert Public Ltd To Pvt Ltd Company:

  1. Send a notice of Board meeting: First, you must send out a notice a notice of board meeting at least 7 days before organizing it.
  2. Hold the board meeting: Convene the board meeting as per the schedule approve the following points:
    1. Proposal to convert your public limited company to private limited company.
    2. Authorize the Company Secretary to carry out the conversion process.
    3. Make Changes to the memorandum and articles of association
    4. Fix time, date and place of the general meeting
    5. Draft a general statement explaining the purpose of the general body meeting
  3. Hold the general body meeting: Hold a general body meeting and pass the following special resolution:
    1. Conversion of the public limited company to a private limited company
    2. Making changes to the Articles of Association and Memorandum of Association
    3. Approving the changes in the Articles of the company to make them comply with Section 2 (68).
  4. Fill and submit form MGT-14: Fill the form MGT-14 and submit it along with the certified copies of the documents:
    1. Memorandum of Association (Modified)
    2. Articles of Association (Modified)
    3. Notice of General Meeting with statement explaining its purpose
    4. Passed Special Resolution
    5. Board Resolutions
  5. Draft the application for Conversion: Draft the application of conversion including the following details:
    1. The date when alterations to MOA and AOA were approved
    2. Date of general meeting
    3. Details of previous conversions (if any)
    4. Reason behind the conversion
    5. Whether the company is a section 8 public company
  6. File E-Form RD-1: E Form RD-1 is the application of company conversion. File it within 60 days of passing the resolution to convert your company. Enter the following details:
    1. Signed copy of the application form
    2. Altered MOA and AOA
    3. Minutes of Meeting
    4. Board resolution
    5. Scanned copy of advertisements of the conversion
    6. Declaration made by the Key management personnel of the company
  7. Get the order from the Court: The Court will issue the order to initiate the conversion. Submit a copy of it at the office of Registrar of Companies.
  8. RoC will convert your company: Acting upon the court orders, RoC will convert your Public limited company to a private limited company.

Also Read: If you want to have ffmc license in India: Prevent making these mistakes 

Conclusion

The procedure to convert a public limited company to a private limited firm is a difficult one. Thus, you must keep an eye on each step when applying for this conversion.

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