Many a times, operating a public limited company may gets cumbersome at times due to its strict regulatory requirements. Public companies whether listed or unlisted have to follow numerous regulations related to administration, management and day to day working.

Often a public limited company recourse to convert itself into private limited company to retain the control in hand of few people and to easily manage the company with lesser compliances.

"Private company" means a company 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;

1. Reduced Regulatory Load: Public limited companies are subject to having more regulatory compliance requirement as compare to private limited company. Converting to a private limited company can reduce the administrative and regulatory compliance load and associated costs of compliance with these regulations.

2. More Privacy: a public company is required to disclose so many things to the general public and regulatory authorities from time to time. Contrary to this, Private Company enjoy more privacy and confidentiality as there are lesser disclosure required to be made;

3. Enhanced Control: a public limited companies are having larger shareholder(s) due to which company control over the company is extended to large number of shareholders and directors, on the contrary, private limited companies are having lesser shareholders advantage of which it enhance control over the company business operations and decision making.

4. Cost Reduction: A public limited companies do have higher regulatory compliance, shareholder communication and other administrative cost as compare to private companies, which lead to save cost in these areas.

1. Any director or person authorised by the Board will dispatch a notice to call for Board Meeting to consider the proposal of conversion of private company into public company.

2. Notice shall be given as per section 173 of Companies Act, 2013 read with secretarial standard 1 on Board Meetings.

3. Conduct Board Meeting to consider the feasibility of conversion and after assertion of the Board Members, call for a general meeting for approval of members to alter the Article of Association and Memorandum of Association.

4. Dispatch notices for calling an Extra Ordinary General Meeting (EGM)/ Annual General Meeting (AGM) to all the members in accordance with provisions section 101 of Companies Act,2013 read with secretarial standard 2 on General Meetings

4. Dispatch notices for calling an Extra Ordinary General Meeting (EGM)/ Annual General Meeting (AGM) to all the members in accordance with provisions section 101 of Companies Act,2013 read with secretarial standard 2 on General Meetings

5. Accord approval of Members through Special Resolution at Extra Ordinary General Meeting (EGM)/Annual General Meeting (AGM) for conversion of private company into public company.

6. File E form MGT-14 to submit special resolution with the Registrar of Companies.

7. File E form RD-1 within 60 days of passing special resolution to file documents like minutes of general meeting, board resolution etc.

8. At least 21 days prior to filing RD-1 Company should seek objection from any person who is likely to get effected by such conversion: If no objection is received by the Company within 14 days and if the application is complete in all respect then the concerned the Regional Director can pass the order within 30 days of filing application. If any objection is received the Regional Director shall hold a hearing and direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Regional Director shall pass an order either approving or rejecting the application.

9. File E form INC 28 within fifteen days from the date of receipt of approval.

10. File E form NC 27 with the Registrar of Companies within fifteen days from the date of receipt of the order

11. The Registrar shall after considering the details filed in the form, approves the Form and issue certificate of incorporation reflecting new name by inserting the word “Private” from the name of the Company.

1. Preparation of documents

2. Certified True copy of Board resolution

3. Certified True Copy of EGM

4. Notice of EGM

5. Amended MOA & AOA

6. Filing of Forms with ROC

7. Certificate of incorporation

8. Filing of conversion form

9. Laisioning with department

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1. What is benefits of conversion of public company into private company?

• Less compliances • No public interference • Management by limited persons • Easy control over operations of the Company

2. What is the basic difference in private and public company?

Apart from the difference as set out in its definition given under Companies Act, 2013 the basic difference is given below: • As per section 149 of Companies Act, 2013, Private Company is required to have 2 directors whereas public company should have 3 directors in the Board of the Company • As per section 3 of Companies Act, 2013, seven or more persons, can form a public company whereas two or more persons, are required to form a private company. • A private company should end its name with “Private limited company” and public company should mention “limited” or “public limited” company.

3. How Article of Association gets altered upon conversion of public to private company?

Article of Association has to mandatorily incorporate the restriction in its article of association, to reflect the prime feature of a private company: (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

4. What are the compliances post conversion of Company from public to private?

Below given are some additional requirements needs to be complied post conversion: 1. Printing of New Memorandum of Association and Article of Association to reflect the word “Private” in the name of the Company. 2. Change in Sign Board, Letter head, stationary and other items where old name used to be displayed. 3. Application to update name in PAN. 4. Intimation and application to other authorities where Company is registered i.e. GST, EPF, ESI etc. 5. Intimation to various suppliers and parties with whom Company has business. 6. Intimation to banks where Company is maintaining bank accounts.

5. If the public Company has any pending litigations, can a Company opt for conversion?

No, Conversion shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.

6. Can a listed public company converts itself into private company?

A listed company should delist itself and complete all formalities with stock exchange then only it can convert into a private company.

7. What are the prohibition on conversion of public into private company?

if company has not complied with sections 73 to 76A, 777, 178,185,186 and 188 of the Companies Act, 2013 and rules made thereunder the Company is prohibited for conversion.