Conversion of a Private Limited company into public limited company
The conversion of a private limited company into a public limited company involves several steps and procedures. Here are the general steps involved in the conversion process:
- Check the Articles of Association: The first step is to check the Articles of Association of the private limited company to ensure that they permit conversion into a public limited company.
- Conduct a Board Meeting: A board meeting must be called to discuss the proposed conversion and approve it. The board must pass a resolution approving the conversion and authorize the directors to take all necessary steps to effect the conversion.
- Conduct a General Meeting: A general meeting of the shareholders must be called to pass a special resolution for the conversion. The notice for the meeting must include the proposed resolution and the reasons for the conversion.
- File Form MGT-14: After the special resolution has been passed, Form MGT-14 must be filed with the Registrar of Companies (ROC) within 30 days of the passing of the resolution.
- File Form INC-27: A public limited company must have at least seven shareholders and three directors. If the private limited company does not meet these requirements, additional directors and shareholders must be appointed. Once the necessary changes have been made, Form INC-27 must be filed with the ROC.
- Change of Name: The private limited company must change its name by adding the words "Public Limited Company" at the end of its name. An application for the change of name must be made to the ROC.
- Issue Prospectus: A public limited company can raise capital from the public by issuing a prospectus. The prospectus must comply with the rules and regulations laid down by the Securities and Exchange Board of India (SEBI).
- Obtain Certificate of Commencement: A public limited company cannot start business until it has obtained a Certificate of Commencement of Business from the ROC.
Summary
| Step | Description |
|---|---|
| 1 | Check the Articles of Association |
| 2 | Conduct a Board Meeting |
| 3 | Conduct a General Meeting |
| 4 | File Form MGT-14 |
| 5 | File Form INC-27 |
| 6 | Change of Name |
| 7 | Issue Prospectus |
| 8 | Obtain Certificate of Commencement |
There are several benefits to converting a private limited company into a public limited company:
- Access to Capital: A public limited company can raise capital from the public through the issuance of shares and debentures. This allows the company to access a wider pool of investors and raise more capital than a private limited company.
- Better Valuation: Public companies often have a higher valuation than private companies due to their ability to raise capital from the public and access to a wider pool of investors.
- Increased Transparency: Public limited companies are subject to greater regulatory oversight and reporting requirements. This increases transparency and accountability, which can help to build trust with investors and stakeholders.
- Improved Reputation: Being a public limited company can improve a company's reputation and increase its visibility. This can lead to increased opportunities for partnerships and collaborations with other businesses.
- Increased Credibility: Public limited companies are subject to greater regulatory scrutiny and transparency requirements, which can increase their credibility in the eyes of investors, customers, and stakeholders.
- Greater Market Reach: Public limited companies can reach a larger market of potential customers, partners, and investors due to their increased visibility and public profile.
- Liquidity for Shareholders: The shares of a public limited company can be traded on stock exchanges, providing liquidity for shareholders who can sell their shares easily and quickly.
- Attraction for Top Talent: Public limited companies often have a higher public profile and reputation, which can help them attract top talent for key positions in the company.
Conclusion
In conclusion, the conversion of a private limited company into a public limited company involves several steps and procedures. However, the benefits of such a conversion can be substantial, including access to capital, increased credibility, greater market reach, liquidity for shareholders, attraction for top talent, and higher valuation. It is important to seek professional advice and follow all legal and regulatory requirements to ensure a successful conversion process.
