Private Company to Public Company Conversion: Process & Compliance

If you want to expand your business, increase your shareholder base, or get ready for big fundraising, then you might consider a private company to public company conversion. The converting process allows you to retain your business identity.

The conversion process of Private Company to Public Company is regulated by the Companies Act, 2013 and requires amending the Articles of Association, making a resolution by the company, and submission of some documents to the Registrar of Companies.

The conversion of private company into public company refers to the legal procedure that alters the status of the private company to that of a public company. The private company is required to remove the provisions and restrictions of a private company and do the necessary filings with the MCA for the conversion.

It is important to note that the conversion process does not imply the establishment of a new company but rather a change in the legal status of your existing company, as your existing company maintains its identity.

The private company to public company conversion can be useful if you want to expand the ownership structure of your venture or if you want to meet the capital needs of a larger scale. Indeed, going public could provide the necessary structure for businesses planning on larger scale growth.

At the same time, you should be aware that after going through the conversion process you will be required to comply with the additional governance and disclosure requirements that arise in accordance with the Companies Act, 2013.

Key Reasons Are:

• If you desire wider ownership.

• You may seek more leeway in collecting capital.

• The venture might be on its way to a larger expansion.

• You may want to boost your company’s image.

• You may intend to open up capital market access in the future.

• When you want to get rid of the restrictions that come with being a private company.

In case restructuring seems better suited to your interests instead of broadening ownership, it is also necessary to explore Private Limited Company options before deciding if conversion is the right way forward.

There are several structural advantages of public company conversion, there are several benefits, they are:

Wider Fundraising Opportunities

The public entity allows for leeway in raising money, under the rules of applicable corporate and securities regulations. This can be of great help if you are looking for a huge amount of money for your expansion.

Broader Ownership Structure

Once the transformation is complete, the company ceases to abide by the limitations associated with being a private company with respect to ownership structure. This opens up more opportunities as your enterprise grows.

Better Corporate Image

The fact that you are a public company improves your image with banks, investors, suppliers, and other large commercial partners.

Perpetual Succession

The company will continue to exist independently of any changes in its shareholders or directors. The business will retain its separate identity even if there are changes in ownership or management changes.

It is important to understand that if you convert private company to public company, it requires careful scrutiny of the existing structure, Articles, shareholders, directors, share capital, and statutory records of the company. It is also necessary to see that the MCA records of the company are up to date and that there are no pending filings. The requirements may depend on the existing structure of your company and on the changes proposed in the course of the conversion.

There are some important points to essentially keep in mind:

• Valid and approved CIN

• Updated company records

• Compliance with the necessary statutory provisions

• Special resolution approving the conversion

• Changes in the Articles of Association

• Necessary MCA filings

• Valid digital signature certificates

• Compliance with public company requirements

The MCA, or the Ministry of Corporate Affairs, is the government authority which is in charge of administering corporate law and of company registration in India. The Register of Companies is the agency which processes the relevant statutory filings and records the change in the company's status.

For the private company to public company transition, the INC-27 has to be filled.The MCA instruction kit mentions the necessity of a special resolution which

Documents needed for conversion of private limited to public limited usually include:

• Certificate of Incorporation

• Memorandum of Association

• Current Articles of Association

• Amended Articles of Association

• Board Resolution

• Notice of General Meeting

• Explanatory Statement

• Special Resolution

• Minutes of General Meeting

• Details of Shareholders

• Shareholding Details

• Details of Directors

• Registered Office Details

• MCA Filing Acknowledgements

• Digital Signature Certificates

• Any other documents supporting the forms required

You must verify that the information in the conversion form matches the existing MCA records of the company. The INC-27 of MCA also requires company particulars and special resolution information.

There are several steps of private company to public company conversion, they are:

Step 1: Review Company Records

We start by looking at your Company Records. This includes your Company's Articles and shareholding and directors and share capital and registered office and existing MCA records.

Step 2: Conduct Board Meeting

The board of your company looks at the proposal. Approves the idea of converting your Company into a public company. This approval is subject to the shareholders of your Company saying yes.

Step 3: Issue General Meeting Notice

You need to send a notice to all the shareholders of your Company. This notice should have an explanation of why your Company wants to convert into a company.

Step 4: Pass Special Resolution

The shareholders of your company need to approve the conversion of your Company into a company. They do this by passing a resolution. This special resolution also needs to change the Articles of your Company.

Step 5: File MGT-14

You need to file the resolution and other necessary documents with the Registrar. You do this through the MCA filing system.

Step 6: File INC-27

You also need to file INC-27 for the conversion of your company into a public company. The INC-27 form asks for details like your Company's CIN and name and registered office and reason, for conversion and particulars of the resolution.

Step 7: Update Company Records

After your company gets approval you should update your Company's Articles and statutory records and business documents and website and letterheads and agreements and other records. This is to show that your Company is now a company. You need to update all the Company Records to reflect the public status of your Company.

The time taken to get approval depends on the preparation of the documents, shareholder formalities and MCA processing time.

The cost of the conversion of a private to public company depends on professional and government charges.

Note: Apart from the professional fees you may also have to pay MCA government fees, stamp duty and other duties like certification charges. For latest fees you can contact companyregister.co.in

After your company conversion is done, you have to follow the rules that apply to public companies. If you do not file things on time or if you do not keep the records you might have to pay extra fees or face other legal problems.

You should make sure your compliance calendar is up to date soon as you become a public company. This means you need to file things on time and keep records. If you do this you can avoid a lot of trouble.

When the process of becoming a company is finished the Registrar updates the company's status, in the MCA system. The company is still the company but its legal status has changed.

You should keep all the papers related to the conversion including the papers you filed with the MCA and any changes you made to your company's rules. You might need these papers when you do your taxes, sign contracts or do business. You should also keep them for audits and any other business you might do in the future.

When you convert your company to a public company, a valid licence does not have a fixed time period after which it expires. The Licence for your company remains valid unless you decide to make another change to your company's status.

The Licence for your company stays valid as long as you follow the rules that apply to public companies. You have to keep filing the papers every year and when something important happens to your public company after the conversion.

After your private company to public company conversion, you have to do what the law says public companies must do.

This includes things like:

• Filing returns with the Registrar of Companies

• Filing financial statements for your public company

• Keeping the records for your public company

• Keeping account books for your company

• Having audits done for your company

• Holding meetings with the board of directors and shareholders of your company

• Filing the forms when something important happens to your public company

• Keeping records of the people who own shares in your company and the directors of your public company

Once you’ve converted, you can make applicable changes to your business information at any time. These can include changes to your business name, registered office, directors, shareholding, Articles, etc.

Depending on the change, you may require board/shareholder approvals along with requisite filings with the MCA. You need to check if all approved changes find their way into the company’s statutory records.

There is no requirement for periodic renewal of the company’s public status. After your conversion is approved, no renewal of conversion is needed.

However, you must keep filing annual returns, and other compliance requirements for keeping your company active and compliant. Some licenses and registrations obtained for your business activities might have separate renewal processes.

Renewal Fees

There is no fixed renewal fee for the public company status. The reason being, the company does not need to undergo periodic renewal of its public status. However, it must continue meeting yearly compliance requirements like filing the relevant returns and financials with the ROC.

You also have to check for event-based compliance whenever there is a change in directors, registered office, shareholding, shareholders’ information, etc. you may have to pay professional fees and applicable government charges for annual compliance.

If you want to close the company after it is converted you can look into the process of closing the company or striking it off under the Companies Act, 2013.You have to do this after the company is converted.

Before you apply to close the company you should take care of any pending things, like compliances and liabilities and other things that the law says you have to do. The way you close the company depends on the company’s circumstances and if you are allowed to do it.

Your private to public company conversion may not be accepted or you may have to send it again because of these reasons:

• Incomplete documents

• information in the forms you have to fill out for the MCA

• The information you give does not match the records of your company

• You do not have a resolution

• Your Articles are not correct or complete

• Your Digital Signature Certificate is not valid

• You do not have the details of the MGT-14 filing

• The information in INC-27 is not correct

• You have not taken care of the pending MCA filings

• You did not answer a question from the MCA

• Your supporting documents are not correct

The MCA may need some things to be correct like a CIN, the right digital signatures, an approved SRN for the MGT-14 and the right supporting documents for the INC-27 filing.

We provide assistance for conversion of companies in Delhi, Maharashtra, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh, Haryana, Rajasthan, Punjab, Bihar, Jharkhand, Odisha, West Bengal and many other states.

The conversion of a company is governed by the law of the country, but the location of the registered office may determine the unforeseen consequences of stamp duty and documentation requirements. Therefore, we check your business details before applying for conversion.

We assist companies from different industries in converting private companies into public companies, including:

• Manufacturing & Production

• Information Technology

• Health care

• Infrastructure

• Finance

• Trade and Distribution

• E-Commerce

• Logistics

• Education

• Professional Services

Companyregister.co.in is an organization that provides complete assistance in the change of status from private company to public company. They offer services for document scrutiny, board and shareholders’ resolutions, modification of Articles of Association, MCA registrations, and compliance after conversion.

Our team will ensure that every step from assessment to filing and record keeping is smoothly done. We also offer post-conversion assistance that can help you deal with the Compliance Report that is required from time to time.