The Process By Which One Can Convert a Public Company Into a Private Company

In this blog, we will discuss how one can convert a public company into a private company. But first, it is vital to choose the correct form of your business. Out of many business forms, a private limited company is very preferable among entrepreneurs. 

This is why you should carry out the private limited company registration in India. This can be done with required documents under the companies act, 2013.

Characteristics of a private company;

– It can have a maximum of 200 shareholders.

– It restricts the liability of the owners to ownership stake.

– It limits the transfer of shares.

– It proscribes the invitation to subscription of shares and debentures to the public.

Concerning rules and sections;

– Section 13/14//18 of companies act, 2013.

– Rule 40 from the Companies (incorporation) 4th amendment rules, 2019.

To convert the public company into a private company, a company will have to pass the GM’s special resolution (general meeting).

Step-by-step guidelines to convert the public company into a private company.

1. Arrange and hold the board meeting.
2. Issuance of notice related to the general meeting and hold the general meeting.
3. Submit MGT-14 within thirty days of passing the special resolution.

Documents that are needed for MGT-14.

– SR’s certified true copy.

– Notice of the meeting’s copy delivered to the members.

– A physical copy of a modified copy of AoA/MoA.

The company will have to a minimum of 21 days before the date of submission of application should;

– Advertisement of the notice in the form INC-25A in English and other vernacular languages of the state where the company is located.

-Through the registered post with acknowledgment due, Serve, separate notice to the company’s every debenture holder and creditor, the registrar, and the regional director and to a regulatory body, if the company is governed under any law for the stipulated time in force.

Submit E-form RD-1 within the stipulated time of 60 days from the date of passing of the special resolution.

Documents that are needed for E-form RD-1;

– The drafter copies of AoA and MoA with subscribers during the company incorporation along with the proposed alterations.

– Copy of points of the general meeting.

– BR/power of attorney’s copy sanctioning for submitting an application.

– Director/KMP’s declaration.

Mentioning the company restricts its membership to 200, adhered to section 177, 73, 185, 178, 186 and 188 of the act and the rules specified thereunder. No resolution will be submitted under section 179(3) if it is not listed in any stock exchanges. If listed, all needed procedures were adhered to according to the SEBI act, 1992.

What if there is an objection or no objection?

If no objection arises concerning to the advertisement, the RD might sanction the proposal within the stipulated time of 30 days of receiving the same.

• When the regional director, while inspecting the application, identifies something and want further information or locates any incomplete or defective information in the application, then he/she should, within 30 days from the application receipt’s date, provide an intimation of such information called for incompleteness or defective, on the intimated person’s E-mail ID or the company, that has submitted such application, commanding the company or the person to present such information, to correct incompleteness or defects and to re-file such application within 15 days of the period in E-form no. RD-GNL-5.
• Where such further information called has not been produced, or the incompleteness or defects has not been corrected to satisfy the regional director within the above mentioned stipulated time, the regional director should abandon the application with mentioning reasons within 30 days from the submitting the application or within 30 days from the date of the last re-filing made.
• In a case where the regional director has directly given no order for sanction or re-filing or rejection within the 30 days of the period, it should be considered that the application is sanctioned, and an approval order has to be automatically issued to the applicant.

Maximum two re-submission has been permitted.

Submit form INC-28 to ROC within thirty days of the order’s receipt by the RD. After satisfying himself/herself that the provisions needed for registration of the company have been adhered to, the registrar should close the previous registration and issue the COI in an equal manner as its first registration.

The question arises: why would the company change its status from public to private? And the answer to that question is that the exemption is given under the companies act, 2013. You can find those exemptions on the Ministry of corporate affairs’ official website.