A Public Limited Company is a company whose shares are publicly traded and available for purchase by the general public. Private Limited Companies often aim to convert into Public Limited Companies in order to enhance scalability and attract public investment.
To convert a private limited company into a public limited company, the following criteria must be met:
- Change in Articles: The company must pass a special resolution under Section 14 of the Companies Act to amend its articles, removing the restrictions associated with a private company.
- Change in Name: Another special resolution under Section 13 is required to change the company’s name, specifically removing the word “Private” from its name.
- Increase in Members and Directors: If the number of members is less than 7, steps must be taken to increase the membership to at least seven. Similarly, if there are only 2 directors, the number of directors must be increased to at least 3.
Once the special resolution under Section 14 is passed, the company becomes a public limited company. However, the change in name by removing the term “Private” becomes effective only when the Registrar of Companies issues a new certificate of incorporation.
It is important to follow the legal procedures and consult with professionals or experts to ensure compliance with the Companies Act and other applicable regulations during the conversion process.
Advantages of Converting a Private Limited Company to a Public Limited Company:
- Access to Public Funding: By becoming a public limited company, the option of an Initial Public Offering (IPO) becomes available. This means the company can sell its shares to the general public, allowing for potential significant capital infusion and access to public funding.
- Share Transferability: Public limited companies have more flexibility in terms of share transferability. Unlike private limited firms, there are no restrictions on the transfer of shares in a public limited company. This can make it easier for investors to buy and sell shares, enhancing liquidity and attracting more investors.
- Capital Raising Opportunities: Public limited companies have the advantage of being able to raise capital more easily. There is no restriction on the maximum number of members in a public limited company, which means they can attract a larger number of shareholders and raise capital from a wider pool of investors.
- Enhanced Credibility: Public limited companies are subject to stricter regulatory requirements. They are required to disclose their audited financial statements, report any structural changes to regulatory agencies, and hold annual general body meetings for all shareholders. These compliance processes enhance the company’s credibility and instill trust among investors and stakeholders.
Converting from a private limited company to a public limited company provides growth opportunities, easier access to capital, and increased credibility, making it an attractive option for companies looking to expand their operations and attract public investments.
Checklist/Requirements for Converting Pvt Ltd to Public Limited:
- DSC and DIN: Obtain Digital Signature Certificates (DSC) and Director Identification Numbers (DIN) for at least two directors.
- MOA and AOA: Prepare the Memorandum of Association (MOA) and Articles of Association (AOA) in compliance with the Companies Act.
- PAN and TAN: Ensure you have a valid Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) card for the company.
- Name Search and Reservation: Conduct a name search, submit an application, and reserve a suitable name for the new public limited company.
- CIN: After completing the conversion process and meeting all requirements, obtain the Certificate of Incorporation (CIN) from the Registrar of Companies.
It is advisable to consult with professionals or experts to ensure compliance with all legal and regulatory procedures throughout the conversion process.
Process of Converting Pvt Ltd to Public Limited:
- Board Meeting: Conduct a board meeting to discuss and approve the conversion of the private limited company to a public limited company.
- Extraordinary General Meeting (EGM): Issue a notice for an EGM and hold the meeting where shareholders will vote on the conversion. Obtain approval through a special resolution passed by the shareholders.
- Filing with RoC: File the necessary forms and documents with the Registrar of Companies (RoC) to notify them about the conversion. This includes submitting the required forms and providing relevant information about the company.
It is important to follow the legal procedures and consult with professionals or experts to ensure compliance with the Companies Act and other applicable regulations during the conversion process.
Key Deliverables for Conversion of Pvt Ltd to Public Limited:
- New Incorporation Certificate: After successfully converting the private limited company to a public limited company, you will receive a new Incorporation Certificate. This certificate indicates the change in the company’s status from private to public.
- New MOA and AOA: As part of the conversion process, the Memorandum of Association (MOA) and Articles of Association (AOA) of the company will be updated. You will receive new versions of these documents that reflect the conversion to a public limited company.
- New PAN: Along with the conversion, there will be a need to update the Permanent Account Number (PAN) of the company. You will receive a new PAN card that reflects the updated status as a public limited company.
These key deliverables signify the successful conversion of the private limited company to a public limited company and provide updated legal documents and identification reflecting the new status.
What do you want to know?
Shareholders own a public limited company, but they elect a board of directors to govern and make decisions on its behalf.
A public company is a company that is listed in the well-known stock exchange and can be traded freely. Where a private limited company is not listed on a stock exchange and it is held privately by the member of the company.
A Private Company is Prohibited under Section 2(68) to issue shares to the public by way of Public Issue. In addition to this even Section 23 does not allow Private Companies to offer shares by way of Public Issue.
Yes, minimum number of 7 directors are required.