, contains two procedures for such a conversion.
Conversion by default
Companies (Amendment) Act,2000, stipulates that the Articles of a
private company shall provide for four restrictions:-
- Restrictions on transfer of shares;
- Restrictions on invitation to public
to subscribe to the shares or debentures of the company;
- Restrictions on the maximum number
of members which should not exceed 50 excluding members who are employees
or ex-employees of the company; and
- Prohibition on any invitation or
acceptance of deposits from persons other than its members, directors
or their relatives.
If default is made by any private company
in complying with any of the above restrictions, such a private company
shall cease to be entitled to the privileges and exemptions conferred
on a private company by the Act and all the provisions which are applicable
to a public company shall apply to such a private company.
However, it is provided that the company
or any person interested may file a petition before the Central Government
along with the requisite fee, to grant relief in committing the default.
The petition shall be accompanied by the following documents:-
- Copy of the Memorandum and Articles
- Copy of the documents showing that
the default has been committed in complying with the conditions laid
down under the Act;
- Affidavit verifying the petition;
- Bank draft evidencing the payment
of requisite application fee;
- Memorandum of appearance with copy
of the Board Resolution or the executed Vakalatnama, as the case may
The Central Government on being satisfied
that the failure to comply with the conditions envisaged under the Act
was accidental or due to inadvertence or due to some other sufficient
cause, or that on other grounds it is just and equitable to grant relief,
may order that the company or any other person interested be relieved
from the consequences of default, on such terms and conditions as seem
to the court just and expedient.
From the date of the order, the company
will again be entitled to all the privileges and exemptions available
to a private company. But during the intervening period, the provisions
of the Act as are applicable to a public company shall apply.
Conversion by an act of
A private company may get itself converted
into a public company voluntarily by following the procedure for conversion:-
- Convene a Board meeting and decide
the time, place an agenda for convening a general meeting to alter the
Articles of Association and consequently, the name, by Special Resolutions.
It is, however, advisable to adopt a new set of Articles applicable
to a public company. This is necessary as there are other Articles like
quorum for general meetings; number of directors and the period of service
of notice of a general meeting, etc. which are also to be changed.
- Send notice for the general meeting
proposing the Special Resolutions along with suitable Explanatory Statements.
- If the quorum of two members personally present
exists, then convene the general meeting and pass the Special Resolution
to the following effect:-
- To delete those articles which
are required to be included in the articles of a private company
only. Such other articles which do not apply to a public company,
should be deleted and those which apply should be inserted.
- Consequent to the above changes,
delete the word "private" from its name.
- To raise the paid-up capital to
minimum Rs. 5 lakhs. In case the authorised capital is less than
Rs. 5 lakhs than it shall also require to be increased.
- To raise the capital from public.
- File either the prospectus in the
Form as prescribed under Schedule II or the Statement in lieu of prospectus
in the Form as prescribed under Schedule IV within thirty days of passing
of the above special resolutions.
- Director's consent to act as such
32 is not required to be filed by a private company converted into
a public company.
- File the Special Resolutions passed
and the Explanatory Statements with the concerned Registrar of Companies(ROC)
23 within thirty days of their passing, along with the requisite
- Apply to the concerned ROC for the
issue of a fresh certificate of incorporation in the changed name i.e.
the existing name with the word "private" deleted. On issue
of such a certificate, the change of name of the converted company shall
be final and complete.
- If the company has less than three
directors, then increase the number of directors to atleast three. If
the company has less then seven members, then increase them to atleast
- Although the company becomes a public
company as soon as the Special Resolution to change the Articles to
make it a public company is passed, the change in its name becomes effective
only on the issue of the fresh Certificate of Incorporation by the concerned
Registrar of Companies(ROC) in the changed name.
- When a private company is converted
into a public company, it is not required to obtain a certificate of
commencement of business.
- A statutory meeting must be held
if such a conversion is before six months of the incorporation of the