Conversion of Private Limited to Public Limited Company
Growth and expansion are key reasons why businesses choose conversion of Private Limited Company to a Public Limited Company. The most significant difference between these structures is that a Public Limited Company can raise capital from the general public by offering shares, whereas a Private Limited Company has restrictions on share transfers.
By making this transition, a company gains access to a broader investor base, enhanced credibility, and increased financial opportunities through Initial Public Offerings (IPO). However, there are specific legal and procedural requirements that must be met to ensure a smooth conversion process.
Requirements for Conversion of Private Limited to Public Limited Company
Before initiating the procedure for conversion, certain conditions must be fulfilled:
- Board Resolution and Shareholder Approval – The company must obtain approval through a special resolution, requiring at least a 75% majority vote.
- Minimum Number of Directors – The Public Limited Company must have at least three directors.
- DSC (Digital Signature Certificate) and DIN (Director Identification Number) – All directors must possess a valid DSC and DIN.
- Alteration of MOA and AOA – The Memorandum of Association (MOA) and Articles of Association (AOA) must be modified to align with the Public Limited Company structure.
- Name Reservation – The company’s name must be updated to include "Limited" at the end.
Advantages of Converting a Private limited to a Public Limited Company
- Access to Public Funds – Companies can raise capital from the general public by issuing shares.
- Enhanced Market Reputation – Public companies often enjoy better credibility, attracting investors and business opportunities.
- Liquidity for Shareholders – Early investors and shareholders can sell their shares in the stock market, ensuring liquidity.
- Expansion Opportunities – With increased financial resources, businesses can expand operations more effectively.
- Easier Loan Approvals – Public Limited Companies have higher creditworthiness, making it easier to secure bank loans.
Procedure to Convert Private Limited to Public Limited Company
To successfully complete the conversion process, companies must follow these steps:
1. Obtain Board Approval
- Conduct a Board Meeting and pass a resolution approving the conversion.
- Schedule a General Meeting for shareholder approval.
2. Pass Shareholder Resolution
- In the General Meeting, secure a special resolution with at least 75% majority approval.
- File MGT-14 with the Registrar of Companies (ROC) within 30 days.
3. Alter MOA and AOA
- Update the Memorandum of Association (MOA) and Articles of Association (AOA) to reflect the change in company type.
4. File Application with ROC
- Submit Form INC-27 within 30 days of passing the resolution.
- Attach supporting documents, including the General Meeting notice, altered MOA, AOA, and details of directors and subscribers.
5. Receive Certificate of Incorporation
- Once ROC verifies the application, a Certificate of Incorporation (CIN) is issued, officially recognizing the company as a Public Limited Company.
Documents Required to Convert Private Limited to Public Limited Company
To complete the filing of the application, the following documents must be submitted:
- Board Resolution and Special Resolution copies
- Updated MOA and AOA
- List of Directors, Promoters, and Subscribers
- Minutes of General Meeting
- Digital Signature Certificate (DSC) and Director Identification Number (DIN) details
- INC-27 Form and MGT-14 Form
FAQS
FAQs on Conversion of Private Limited to Public Limited Company
To know more about the conversion from Private to Public Limited Company, we have it covered for you:
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How long does it take to convert a Private Limited Company to a Public Limited Company?
The conversion process typically takes 30-60 days, depending on the approval process of the Registrar of Companies (ROC).
- What is the minimum number of shareholders required for a Public Limited Company?
- Is it mandatory to list the company on the stock exchange after conversion?
- What are the compliance requirements after conversion?
- Can a newly incorporated Private Limited Company convert into a Public Limited Company immediately?
- Is there a minimum capital requirement for a Public Limited Company?
- Can a Private Limited Company with two directors convert into a Public Limited Company?
- Do all directors need to have a Director Identification Number (DIN)?
- Is there a requirement for independent directors in a Public Limited Company?
- What is the validity period of the Certificate of Incorporation after conversion?
- Do I need to change the company’s PAN and TAN after conversion?
- Will the company’s tax liabilities change after conversion?
- Is it mandatory to conduct statutory audits after conversion?
- Can a Public Limited Company issue shares to foreign investors?
- Does the conversion process require government approval?
- What happens to existing contracts and agreements after conversion?
- Can a Public Limited Company remain unlisted?
- Do employees' benefits or contracts change after conversion?
- Can a Private Limited Company convert to a Public Limited Company and later revert back?
- Can I transfer my shares freely after conversion?
