If you're considering converting your private limited company to a public limited company, you will find here advice on what would happen during the process and why it's worth it. You will read in depth of this article under which section a private company can be automatically converted into a public company.
How to Convert a Private Limited Company
If you are thinking about converting a private limited company to a public limited company, follow some steps :
- Under the companies act 2013 and the companies (Incorporation) rules, 2014, you will need to set up a board meeting to ensure that all the directors and shareholders are informed of this change, the conversion documents are correct, and any tax implications are taken into account.
- Contact your bank and request information about the costs and procedures involved in the conversion. They may require you to provide detailed financial projections and signed forms from all of the shareholders confirming their consent to the conversion.
- Adopt a new MOA and AOA and file your conversion with the Registrar of Companies. It can take up to six months for the process to complete.
- Get an Issuance of EGM and inform the same to the directors, shareholders, and auditors
What Are the Steps for Converting a Private Limited Company to a Public Limited Company?
A few steps need to be taken to convert a private company into a public company:
- The company must undergo an Annual General Meeting where it is decided whether or not to transform the company
- The company must file Articles of Association with the Registrar of Companies and set up a board of directors
- The company must appoint an accountant and publish a notice under, The Companies Act 2013.
Benefits of Converting from a Private Limited Company
There are many benefits to converting a private company to a public company. The main reason for this is that when a private company becomes public, the company can issue more shares and pay more dividends. This can be beneficial for shareholders, as it means they receive a larger share of the profits made by the company. Additionally, becoming public can also help a private company attract more investment, as it becomes easier for investors to understand and trade the company’s securities. Another advantage of converting from a private company to a public limited is that it can provide the company with additional protection from liability. When a public limited is registered with the government, specific legal protections are typically given. This means that the company cannot be sued for any actions that it takes while carrying out its business. However, if a private company were to convert to a public limited without first registering with the government, then it would not have these same legal protections. This could potentially lead to more significant risks for the company, as it would open it up to lawsuits from third parties.
Finally, becoming public can also help a private company expand its reach beyond its home country or region by listing its shares on exchanges.
Considerations for Your company
There are a few things to consider when converting your private limited company into a public limited company:
- The company’s name. You will need to change the company’s registered name, which can be tricky and expensive. Choose an available name that doesn’t infringe on any other company’s rights.
- The company’s registration details. Ensure the public limited is registered with the correct registry and that all the appropriate documents are in place, such as an annual report and articles of association.
- The share structure. If you want to sell shares, you will need to set up a share capital account and register the share transfer document with the registrar of corporations. You will also need to amend the articles of association to include this new share structure.
How to Start the Process
If you have decided that it is time to convert your private limited company into a public limited company, the following article will outline the steps involved.
- The first step is to register your intention to make the conversion with the Registrar of Companies. Once you have filed the E-Form MGT – 14, you will need to submit evidence of EGM and an explanatory statement according to sec 102 of the Companies Act 2013
- This includes a statutory declaration from each shareholder stating that they hold their shares free and clear of any encumbrances
- Another requirement is that you appoint an accountant to prepare a transfer notice, which will specify the proceeds of sale and differences between the value of the assets and liabilities of the company on the date of conversion. You will also need to submit this document to the Registrar of Companies
- After converting a private company to a public limited, a fresh PAN has to be applied along with all business heads and stationary and intimate the tax office on the conversion.
In conclusion, when you decide to convert a private limited company to a public company, these are a few things that you need to take into account. First and foremost, you will need to ensure that your company has the required assets and shareholder base to become public. Additionally, it would be best to consider the implications of being a public company, such as increased oversight and regulations.