A limited liability company is a legal entity that just one person cannot own, unlike a sole trader. This means they must have a minimum of two shareholders, who may be individuals or other companies. Once you set up a Private Business, you can choose to convert it into a public limited company at any time. However, this article will give you a better understanding of how you can change a Private Business to a public limited company.
What Is the Difference Between a Public Business and a Private Business?
A Private Business is a business that is owned by shareholders and has limited liability. A public limited company is a publicly-traded corporation, which means that shares can be bought or sold on stock exchanges. Private companies are good for when the company wants to maintain its privacy. Public companies have fewer issues with confidentiality than private companies because everything about the company is already in the open
What Are the Requirements to Convert a Private Business to a Public Business?
Procedure for conversion of Private Company Into Public Company can provide some major benefits. You’ll be able to access the capital markets and give your business more financial flexibility. In order to do this, you will need to meet certain requirements. To qualify as a public Business, you’ll need to create at least five shareholders who are unrelated, publicly traded shares on a stock exchange for several years, and need to meet the minimum capital requirements.
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Easy Steps to Convert a Private Business into a Public Business
The steps that need to be followed in order to transform your company into a public Business include filing an application with the Registrar of Companies, filling in the statutory forms, appointing directors and auditors, offering equity shares, and finally, issuing shares.
Setup Board Meeting
You are required to notify board directors about the board meeting at least seven days before it is held. The following items should be included in the agenda:
- Approval from shareholders
- New or amended MOA
- A new or amended AOA
- This meeting will decide who will be an EGM for delivering information to shareholders about the meeting
- The date, time, and place for the EGM should be set
- The company needs to increase the number of directors to three, which is the minimum required for a public Business.
Notify About the EGM and Holding the EGM
Once a board meeting has emerged, anyone nominated as a company secretary is authorised to circulate the notice of an EGM to all of the following:
- Directors
- Shareholders
- Auditors
The notice of EGM has to be given not less than 21 days before the meeting, and if you do, the consent of not less than 95% of the members is needed.
Once this is complete, one must go through the formality of filling it with the Registrar of Companies.
E-Form MGT-14:
If you pass a resolution, your company must file an E-form with the RoC within 30 days. The form must be filed on the MCA portal and includes attachments such as copies of the resolution.
- As per Section 102, an explanatory statement for form EGM must be included.
- A certified copy of a new MOA with the resolutions passes
- New AOA copy
E-Form INC – 27:
Any company that converts from individual to opening a company must fill out this form, which is filed at the Registrar of Companies within 15 days of passing resolutions in an EGM. Share the following documents
- Certified copy of the new AOA
- Certified copy of the new MOA
- A draft of the Minutes of the meeting
- Certified copy of the new resolution(s) passed at the EGM
- Necessary details of the company members
What Types of Documents Need to Be Submitted as Part of the Conversion Process?
Before you can convert your Private Business to a public limited company, you need to submit a form containing the following documents:
- A copy of Digital Signature Certificates (DSC) of all directors
- A copy of the Director Identification Number (DIN) of all directors
- A copy of Identity proof of all directors
- A copy of Address proof of all directors
- Submit the Passport size photographs of all directors.
- A copy of Proof of business address
- A copy of the company premises and the property papers.
- A document showcasing the rental agreement, if necessary
- No Objection Certificate (NOC) from the owner.
- Last three months’ copies of utility bills
- Last three months’ copies of the latest financial statements.
- Copies of the latest Income Tax Return Acknowledgement.
How Long Does It Take for the Conversion Process to Complete?
The process of converting a Private Business to a public limited company is detailed and extensive. It can take anywhere from 6-12 months.
Conclusion
India offers a lot of incentives for converting to a public limited company: https://www.mca.gov.in/MinistryV2/incorporation_company.html. There are many benefits to converting your company, including greater accountability, higher transparency, and more accessible financing with more sources. However, there are also some disadvantages to conversion, such as increased reporting requirements and limiting the number of shareholders.
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