Company Conversion Public Private | Companies Act 2013 |

Check out Conversion A Private Company To A Public Company and Conversion of A Public Company into A Private Company under the Companies Act 2013. Section 14 (1) states that subject to the provisions of this Act and the conditions contained in its memorandum,  if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of—   (a) a private company into a public company; or (b) a public company into a private company. Also Read our earlier posts on Promoter, Investment Company India and Public Company IndiaFor more Information About Companies Act 2013 Click here.

Conversion of A Private Company into A Public Company

Private Company ceases to be private company on alteration of articles removing the restrictions required under Section 2(68) [Proviso to Section 14(1)].

When a company being a private company alters its articles in such a manner that they no longer include any of the three restrictions and limitations which are required to be included in the articles of a private company under section 2(68), the company shall, as from the date of such alteration, cease to be a private company.

It also ceases to have the privileges and exemptions conferred on it by the Act as a private company. It becomes a public company and all the provisions of the Act applicable to such companies become applicable to it.

Note:

As per section 2(68) Private Company should

  • Have a minimum paid up capital of one lakh;
  • Should by its Articles
    1. Restrict the right to transfer its shares
    2. Limits the number of members to two hundred
    3. Prohibits any invitation to public to subscribe for securities of the company

Conversion of A public Company into A private Company

Conversion of a public Company into a private Company- Requires approval of National Company Law Tribunal. The second proviso to Section 14(1) states that any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal which shall make such order as it may deem fit.

Section 14(2) states that every alteration of the articles under this section and a copy of the order of the Tribunal approving the alteration as per sub-section (1) shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the same.

Note: Please note that second proviso to Section 14(1) and section 14(2) are yet to be notified.

Rule 33 of Companies (Incorporation) Rules 2014

(1) For effecting the conversion of a private company into a public company or vice versa, the application shall be filed in Form No.INC.27 with fee.

(2) A copy of order of the competent authority approving the alteration shall be filed with the Registrar in Form No. INC.27 with fee together with the printed copy of the altered articles within fifteen days of the receipt of the order from the Central Government.

Note: Conversion of Private Company to public company and vice versa requires Special Resolution as it results in alteration of Articles of Association.

Private Company Deemed to be a Public Company

Private Company ( Which is a Subsidiary of Public company) Deemed to be a Public Company. Under proviso to section 2(71) of the Companies Act, 2013, a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles.

Thus, it has been clearly provided that a subsidiary of public company shall be deemed to be public company even if it continues to be private company in its Articles. It places such a ‘private company’ at the same level as that of a public company and thereby demarcates between a private company and a private company which is not a subsidiary of a public company.

Conversion of Companies Already Registered 

Section 18(1) of the Companies Act, 2013 provides that a company of any class registered under this Act may convert itself as a company of other class under this Act by alteration of memorandum and articles of the company in accordance with the provisions of Chapter II of the Act.

Where the conversion is required to be done under this section, the Registrar shall on an application made by the company, after satisfying himself that the provisions of this Chapter applicable for registration of companies have been complied with, close the former registration of the company and after registering the documents referred to in section 18(1), issue a certificate of incorporation in the same manner as its first registration. [Section 18(2)].

The registration of a company under section 18 shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations and contracts may be enforced in the manner as if such registration had not been done. [Section 18(3)].