CONVERSION OF PUBLIC COMPANY TO PRIVATE COMPANY
The Companies Act, 2013 was expected to simplify the provisions but on the contrary it brought lot of restrictions on doing business. Therefore, many public companies are converting themselves into private limited company.
Legal Provisions related to Conversion of Public Company into Private Company are given in Section 18 and 14 of the Companies Act, 2013 read with Rule 33 of Companies (Incorporation) Rules, 2014.
As per Section 13 and Section 14 of the Companies Act 2013 read with Rule 33 of Companies (Incorporation) Rules, 2014. A public company can be converted into the private company only after obtaining its shareholders approval by way of passing of special resolution in general meeting.
[As per Second Proviso of Section 14(1)]
For Conversion of Public Company into Private Limited Company foremost requirement is Alteration in Article of Association of Company. According to the Act alteration of article of association of public company cannot be done without previous approval of Tribunal.
But as per General Circular No. 18/2014 dated June 11, 2014 “For Conversion of Public Company into Private Limited Company the corresponding provisions of Companies Act, 1956 shall remain in force till corresponding provisions of Companies Act, 2013 are notified. Power of Central Government will be vest into the ROC.
PROCEDURE/STEPS FOR CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY
|A.||BOARD MEETING||ISSUE NOTICE
In accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors.
Main agenda for this Board meeting would be:
1. Pass a board resolution to get in principal approval of Directors for conversion of a public company into a private company by altering the AOA subject to the approval of Central Government;
2. Fix date, time and place for holding Extraordinary General meeting (EGM) to get approval of shareholders, by way of Special Resolution, for conversion of a public company into a private company.
3. To approve notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013;
4. To authorize the Director or Company Secretary to issue Notice of the Extra-Ordinary General meeting (EGM) as approved by the board.
B.NOTICE OF GENERAL MEETING:
1. Provisions of the Section 101 of the Companies Act 2013 provides for issue of notice of EGM in writing to below mentions at least 21 days before the actual date of the EGM :
· All the Directors.
· Auditors of Company
C.CONVENE A GENERAL MEETING: ·
1. Check the Quorum.
2. Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (As per Section- 146).
3. Pass Special Resolution.[Section-114(2)] to get shareholders’ approval for Conversion of Public Limited Company into Private Limited Company along with alteration in articles of association.
4. Approval of Alteration in MOA & AOA.
D. ROC FORM FILING
For alteration in Article of Association for conversion of public company in Private Company under section 14, few E-forms will be filed with concerned Registrar of Companies at different stages as per the details given below
1. E- Form MGT.14
As per Section 117(3) Copy of this special resolution is required to be filed with concerned ROC through filing of form MGT.14 within 30 days of passing special resolution in the EGM.
i. Notice of EGM along with copy of explanatory statement under section 102;
ii. Certified True copy of Special Resolution;
iii. Altered memorandum of association;
iv. Altered Articles of association
v. Certified True copy of Board Resolution may be attached as an optional attachment.
It is relevant to note that first you have to file form MGT.14 as SRN No. of form MGT.14 will be used in form INC.27
Accordingly, an Application for conversion of a public company into a private company is required to be filed in e-Form INC.27 to the ROC concerned, with all the necessary annexure and with prescribed fee.
i. It is mandatory to attach Minutes of the member’s meeting where approval was given for conversion and altered articles of association.
ii. No need to attach copy of order of Competent Authority.
iii. Altered Articles of Association.
iv. Other information if any can be provided as an optional attachment
Some ROC require following further documents in INC-27.
i. Affidavit from Director or MD or WTD stating following:
ü. That Company was never listed with any stock exchange, never it accepted any deposit;
üi. Letter of no objection have been obtained from all creditors /Debentures holders.
iv. No demand from Sales Tax or Income Tax or Excise is pending
v. Copy of certificate of Commencement of Business.
vi. Certified list of Creditors of the Company as on date of EGM.
iv. Certified list of Members of the Company as on date of EGM.
v. Proof of filing of statutory report with ROC.
vi. List of cases pending before any court of Law where company is a party.
If ROC satisfied then ROC shall close the former registration and issue fresh certificate of incorporation, after registering the documents submitted for change in class of company.