Public to Private Limited Conversion: Fees, Process, & Compliance

A public to private company conversion enables you, as an eligible public company, to transition your corporate structure to become a private one under the Companies Act, 2013. This approach might be relevant if you are interested in building a more closely held organisation, which has comparative simpler governance requirements.

It requires changes to the Articles of Association, shareholder approval on such changes, submission of certain forms to the Registrar of Companies and approvals from the competent authority. Hence, ensure that you go through every step accordingly since the organisation would be subjected to the requirements for being a private company only after the conversion gets formally approved.

Public company to private company conversion is a legal process. It means changing your company into a private company. Your company is not starting from scratch. Its legal status and rules are changed.

When you do this you need to alter the company’s articles to incorporate the characteristics and restrictions private companies should have, for example, like who can own shares and how many people can be part of the company. Company law says what these rules are and you need to follow them.

A company might think about changing its structure when a public structure is not working for its goals anymore. The people who started the company and the shareholders can have a say in what happens inside the company if they own it closely.

Taking a company from public to private can also mean it has to follow rules. However the company should look at who owns its shares, what debts it has and what rules it has to follow before making this change.

Common Reasons for Changing to Private

• The people in charge like owning the company

• The company wants to be in charge of who buys and sells its shares

• Following all the rules for companies is just too much work

• The company does not need to be owned by the public

• The people who started the company want to be, in charge of how it's run

• The company wants to make its daily work easier and simpler

You can benefit a lot from a public company converted to private company, some of the advantages are given below:

Greater Control Over Shareholding

A private company can impose restrictions on the transfer of its shares through its Articles. This can help maintain a controlled ownership structure.

Comparatively Simpler Compliance

Private companies generally have fewer governance requirements than public companies, subject to the company's size, activities, capital structure, and other applicable provisions.

Closely Held Management

You can maintain closer coordination between shareholders and management when ownership remains within a defined group.

Better Suitability for Certain Businesses

If your company no longer requires a broad shareholder base or public-market structure, private status may be more appropriate for your business objectives.

You should review the company’s existing structure and statutory records before you convert public company to private company.

Things you should consider before applying:

• You need to comply with the required provisions of the Companies Act

• Changes that are made to the Articles of Association should be according to law

• Shareholders' approvals is important and it is needed with relevant resolution

• Compliance with relevant filing obligations

• Current records of the Ministry of Corporate Affairs (MCA)

• Correct shareholder and membership distribution

• Valid Digital Signature Certificate

• Compliance with any balancing regulations

The Ministry Of Corporate Affairs(MCA) Administer Companies Act ,2013 and Registrar Of Companies(ROC) Maintains Statutory Records And Processes Applicable Filings.

You Will Have To Follow Applicable Provisions & Prescribed MCA Filing Process For Conversion, It May Also Need Approval From Regional Director Or Competent Authority As Per Applicable Rules.

Generally there are quite a number of documents that you need to keep ready when applying to convert your company from Public to Private Limited.

• Certificate Of Incorporation

• Memorandum Of Association

• Existing Articles Of Association And Proposed Altered Articles

• Board Resolution

• Notice Of General Meeting

• Explanatory Statement

• Special Resolution

• Share Holding Details

• Details Of Directors

• Registered Office Proof

• Latest Financial Statements (If Applicable)

• Relevant Mca Filing Acknowledgement,

• Digital Signature Certificates And Other Documents Prescribed For Application.

Ensure that all relevant details contained in your application are consistent with your existing MCA records.

There are 7 steps that you need to follow for public to private company conversion. Given below are the details:

Step 1: Review Existing Company Records

Review of your Companies Articles, shareholding, Directors, Capital Structure & Statutory Filings/MCA Records.

Step 2: Conduct a Board Meeting

The board considers the proposed conversion & approves the proposal to place before the Shareholders.

Step 3: Issue General Meeting Notice

Issue the notice requiring shareholder action as well as an explanatory statement describing the proposed conversion.

Step 4: Pass the Special Resolution

Shareholders’ approval for alteration of Articles and conversion by passing the requisite special resolution.

Step 5: File the Required MCA Forms

The required resolutions and related conversion documents have been filed via MCA portal as per respective statutory timelines

Step 6: Apply for Approval

In cases where approval from the competent authority is required for such activities, applications shall be submitted with their attendant documentation under this regulation as may be prescribed.

Step 7: Receive Approval and Update Records

After your approval of conversion, we recommend that you update all relevant Articles, statutory registers, corporate documents, websites, letterheads, agreements and other records to reflect the fact that you are now a private company.

The timeline by which you can convert your public company into a private company depends on the articles that you need to update, Shareholder approval, letterhead changing and proper documentation.

The overall cost of conversion depends on the professional fees that will be charged to handle your documentation, application and other registration-related work. Along with that you may need to pay government charges, stamp duty, regulatory approval charges.

Note: For latest fees you can contact companyregister.co.in

Penalties for Non-compliance: If you fail to make prescribed filings or don’t meet required conditions of applicability provisions, you may be subjected to further charges, fines, or penalties according to the provisions of the Companies Act.

So do not try to consider your business as a private company even after approval of the process because until the official conversion process is completed and officially recorded your company will still have the obligations associated with being a publicly traded entity.

The Registrar shall update the legal status of the company in MCA’s records on a successful conversion. While the company will continue using their current corporate identity, they will change their legal status from being Public Limited to Private Limited.

Also, make sure that you keep the approved application along with amended articles, resolutions, filed forms and others related documentation as per the requirements for maintaining corporate records permanently.

The conversion does not have a fixed expiry date. Once your organisation has been converted into a private company legally, its status as a private company persists, subject to carrying out another permitted conversion.

You need to keep continuing compliance with the provisions relevant to private companies by completing all necessary annual and event based filings.

After you are done with public company to private company conversion, you need to comply with the laws and regulations as per the law of the state.

These may include:

• Annual return filing

• Filing of financial statements

• Maintenance of statutory registers
  Books of accounts

• Statutory audit

• Board meetings

• Shareholder meetings

• Director-related filings

• Event based MCA filings

• Maintenance of shareholder records

Depending upon the size (turnover and capital), nature of activities of your company and applicable exemptions these are the list of compliances you would need to maintain for the company post conversion.

After conversion, you are free to make some permitted changes about the company’s registered office, directors, share capital, Articles, shareholders, and others as long as you get the required corporate approvals & complete MCA filings based upon the nature of amendment being proposed.

Also, note that all such amendments must be reflected in the company's statutory books too.

There’s no requirement to separately renew your private-company status after you’ve been approved for that change, once your conversion is approved, your firm will remain private unless you subsequently elect to convert into some other form of corporate structure that’s also recognized as permissible under law.

Annual and event-based compliance are still things you’ll have to maintain, though, and there could be various kinds of business licences and registrations whose respective terms might require them to undergo their own kind of renewal processes. It’s up to you to figure out whether these exist in your particular line of trade.

Finally, you are advised that there is no application form to renew the conversion of the business house/branch. However, you may have to file the annual return as well as other required forms along with the yearly financial statement of your concern before the Registrar of Company (ROC).

In addition, you need to take care about all kinds of compliances when there is some kind of change in Directors, Shareholders, Registered Office, Share Capital or Articles respectively.

You can’t simply surrender your status of being a private company. However if you wish to shut down your operations as a private company then there are certain routes open for you. You have to decide which one applies to your situation based on your company’s specific circumstances.

You will need to resolve all pending liabilities and fulfill statutory requirements before you go ahead with closure.

Common reasons for your application can be rejected including the below mentioned points.

• Incorrect Company Information

• Incomplete Supporting Documents

• Mismatched Records in MCA

• Improperly Drafted Articles

• Lack of Shareholder Approval

• Incorrect Filing Information

• Pending Statutory Filings

• Invalid Digital Signature Certificates

• Failure To Provide Clarification Within Prescribed Period

• Non-Compliance With Applicable Conversion Requirements

Before you file the application, make sure you have reviewed your company’s full MCA record. This will help to reduce the chances that there are procedural objections.

We offer help in converting private companies into public ones in multiple states, including Delhi, Maharashtra, Karnataka, Gujarat, Tamil Nadu, Telangana, Uttar Pradesh, Haryana, Rajasthan, Punjab and West Bengal, among others.

Even if company conversion is largely determined by central corporate law, the location of your registered office does matter, since it influences necessary paperwork, stamp duties, as well as the Compliance Report of the procedure. We check requirements of both types of law based on the place where your company is registered.

We work with companies from all industries, including

• Manufacturing

• IT

• Healthcare

• Education

• E-commerce

• Trading

• Transport

• Real estate

• Infrastructure

• Consulting

• Professional services

In general, you will have to check your existing industry-specific licenses and permits separately, since it is impossible to cancel or renew all sector-specific permissions with mere legal status change.

Our professionals help you with end to end assistance for public company to private company conversion. At Companyregister.co.in we provide assessment of the eligibility of your organisation, followed by document preparation, resolution passing, filing at MCA & keeping everything up to date even after the conversion. With our experts on board, we will guide you while reviewing the existing records of the company, preparing documents, filing all statutory formalities, updating the corporate records as well as providing assistance regarding ROC Records after the conversion of a public limited company.