CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY
Keeping in view the relaxations provided to a Private Company, many public companies have converted into Private Companies or in the process of such conversion. Power of Conversion of Public Company into Private Company has been transferred to NCLT. The procedure for conversion from one company to the other is expounded within the Act with certain statutory requirements such as alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) of the company. The Act sets out regulatory provisions under various sections, i.e., Section 13, 14, and 18, which are required for the purpose of conversion.
MANDATORY REQUIREMENTS
FOLLOWING PROCEDURE IS TO BE FOLLOWED:
1. Convene a Meeting of Board of Directors [As per Section 173 & Secretarial Standard-1 (SS-1)]
1) Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. Shorter notice can be issued in case of urgent business.
2) Attach Agenda, Notes to Agenda, and Draft Resolution with the Notice.
3) Hold a meeting of the Board of Directors of the Company to discuss and approve the agenda of conversion
4) Pass Board Resolution
5). Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments.
2. Entries in the Register of Members (Section 88 read with Rule 5(1) of the Companies (Management and Administration) Rules, 2014
Companies whose shares are held in physical form shall make entries in the Register of Members in the Form MGT-1 within seven days after the Board of Directors approved the transfer of shares to reduce the number of members to a maximum of 200.
o Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety-five percent of such part of the paid-up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
o Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees, and to others who are entitled to receive the notice of the General Meeting.
o Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
o Hold the General Meeting on a fixed day and pass a Special Resolution for conversion of Public Company into Private Company and altering the Memorandum of Association and Articles of Association including insertion of restrictive provisions as applicable to Private Company. Also, check the Quorum and check whether an auditor is present, if not. Then Leave of absence is Granted or Not.
o Prepare the minutes of the General Meeting, get them signed, and compile accordingly. [Procedure for Preparation and Signing of Minutes of General Meeting].
3. Filing of forms with ROC [Section 117]
4. Publication of an Advertisement [Rule 41(5) of the Companies (Incorporation) Rules, 2014]
The company shall, at least twenty-one days before the date of filing of the application advertise in the Form INC-25A, in a vernacular newspaper in the principal vernacular language in the district and in the English language in an English newspaper, widely circulated in the State in which the Registered Office of the Company is situated
5. Draft and File an Application for Conversion of Public Company into Private Company [Rule 41(1) and 41(3) of the Companies (Incorporation) Rules, 2014]
An application for the conversion of Public Company into Private Company shall be drafted and to be filed to Regional Director within sixty days from the date of passing of Special Resolution in e-Form RD-l along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014
6. Approval of Application, in case of No Objections [Rule 41(6)(a) of the Companies (Incorporation) Rules, 2014
7. Submission of Further Information as demanded by Regional Director [Rule 41(6) of the Companies (Incorporation) Rules, 2014]
8. Submission of Copy of Objection with Regional Director [Rule 41(7) of the Companies (Incorporation) Rules, 2014
9. Approval of Application of Conversion [Rule 41(9) of the Companies (Incorporation) Rules, 2014]
On completion of such inquiry inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, conversion shall be allowed
10. File Form INC-28 with ROC [Rule 41(9) of the Companies (Incorporation) Rules, 2014]
The company shall file the order conveyed by the Regional Director with the Registrar in Form INC-28 within fifteen days from the date of receipt of approval along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.
11. File Form INC 27 with ROC [Section 14(2) read with Rule 33(2) of the Companies (Incorporation) Rules, 2014]
The company shall file the copy of the order of the Central Government approving the alteration of the article along with the printed copy of altered articles with the Registrar in Form INC -27 with fee together within fifteen days from the date of receipt of the order.
12. On Being satisfied the ROC will register the conversion and issue a new certificate of incorporation.
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