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Procedure for conversion of Public Company to Private Limited
A Public company can be converted into Private Limited. Initially National Company Law Tribunal (NCLT) was handling the overall conversion process. Procedure for conversion of Public company to Private limited was time consuming and lengthy process. By virtue of Notification dated 18th December, 2018 the conversion process was handed over to Central Government i. e Regional Director owing to plenty of insolvency cases, it was necessary to reduce some burden of NCLT so that it cab focus on speedy disposal of insolvency cases. The next amendment with this regard was passed on 11th March, 2019.
Amendments for Delegation of power from NCLT to Central Government for Conversion
To reduce burden of NCLT, Government has taken following steps to shift the power of approval of conversion of Public Companies into Private Companies.
1. The Companies (Amendment) Ordinance, 2018:
By inserting second proviso to sub section 1 of section 14 through Ordinance the Government has transfer the power of tribunal regarding approval of conversion of public companies into private companies to central government.
2. Companies (Incorporation) Fourth Amendment, Rules 2018:
On 18th December, 2018 by amendment inserted Rule 41 under Companies (Incorporation) Rules, 2014 for conversion of public Companies into Private Companies
By Rule 41 MCA has assigned its power to Regional Director for approval of conversion of public companies into private companies.
Applicable Rules and Regulations
- Section 13: For alteration in Memorandum of Association of the Company
- Section 14: For alteration in Article of Association of the Company.
- Rule 41 of Companies (Incorporation) Rules, 2014 (inserted by Companies (Incorporation) Fourth Amendment, Rules 2018 on 18.12.2018): Approval of Regional Director for conversion of Public Companies into Private Companies.
E-forms to be Filed with MCA for Conversion from Public to Private Limited
| 1. | Form MGT-14 | Filling of Special Resolution according members approval for Conversion |
| 2. | Form RD-1 | Application of Conversion to be made to Regional Director |
| 3. | Form RD-GNL-5 | To file re-submissions with RD if any |
| 4. | Form INC-28 | To file copy of order of the Tribunal |
Procedure for conversion of Public Company to Private Limited
Following are steps for conversion of Public Company into Private Limited. Every company needs to follow steps as under-
| Step 1: Notice for calling board meeting | Issue notice of board meeting atleast 7 days before meeting to all directors. |
| Step 2: Hold a Board Meeting | The next step for conversion of Public Company into Private Limited is conduct of Board meeting on decided date, time and place and present the agenda for approval. |
| Step 3: Notice for calling EOGM (Extra Ordinary General Meeting) | Issue notice for EOGM atleast 21days before the General Meeting |
| Step 4: Hold EOGM | Hold EOGM on decided date, time and Place and pass the following resolutions-
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| Step 5: File form MGT-14 | The next step is to file form MGT-14 within 30 days from the date of passing of special resolution.
Documents
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| Step 6 : Draft an Application to RD (Regional Director) | An application need to be drafted to Regional Director for conversion of Public Company into Private Limited. |
| Step 7: Publication of Newspaper Advertisement | At least 21 Days before the date of filing of the application advertise in the Form No. 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. |
| Step 8: filling of Form RD-1 | Once petition is drafted, the next step is filling of Form RD-1 within 60 days from the date of passing of special resolution.
Documents
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| Step 9: File Form INC-28 | Once the RD approves the entire conversion process on submission of all relevant documents, it shall issue an order for such conversion. The said order shall be filed in form INC-28 with ROC within 30 days from the date of passing of such order. |
Checklists for other legal provisions in case of conversion of Public company to Private Company
1. Inspection of Documents
List of Creditors shall be submitted with Registrar of Companies and such creditors can any time inspect documents of the company during business hours.
2. Objection if Any Received:
Where any objection of any person whose interest is likely to be affected by the proposed application has been received by the applicant, it shall serve a copy thereof to the Central Government on or before the date of hearing.
3. Where No Objection Is Received:
Where no objection received from any person in response to the advertisement or notice under sub-rule (5) or otherwise, the application may be put up for orders without hearing and the order either approving or rejecting the application shall be passed within 30 days of receipt of the application.
4. Where Objection Is Received:
After checking of application with Annexures the hearing will take place at the Regional Director office and it should be represented by the company or practicing professional or advocate. The Regional Director will make an order confirming the alteration on such terms and conditions, if any, as it thinks fit, and may make such order as to costs as it thinks proper
Post conversion compliance
Once the conversion is Done and the order is filed with ROC, there are few post conversion compliance to be followed.
| 1 | Apply new PAN |
| 2 | Fix new board outside the Registered office of the Company reflecting new name |
| 3 | Update Company Bank account |
| 4 | Intimate all government authorities like GST department, sales tax office, DGFT etc |
| 5 | Update GST certificate |
| 6 | Update IEC if applicable |
