Conversion of Public company into private company
A Public Company can convert itself into a Private Company only after the approval of National Company Law Tribunal (NCLT).
Such (NCLT) approval is require for converting a Public Company into a Private Company because public company enjoys the benefits of raising funds from the Public. Shareholders are the owners of the Company and they make the company wealthy, therefore a public company is accountable to their shareholders, creditors, investors, and employees, so when it comes to conversion, legal Status of Public company changes altogether. Company gets the benefit and exemptions of Private Limited Company. Therefore to protect the interests of the stakeholders Public Company requires approval of National Company Law Tribunal (NCLT) to convert itself into a private Limited Company.
Public companies are further subject to several legal and regulatory compliance requirements. Converting to private company increases flexibility reduces various legal and ROC filing compliance requirements.
Section 13, 14, 15 & 18 of Companies Act, 2013, Rule 33(2) Companies (Incorporation) Rules, 2014 and Rule 68-National Company Law Tribunal Rules, 2016 deals with the conversion of public Company into Private Limited Company.
Following is the detailed procedure for converting a Public Company into a Private Company:
1. Calling of Board Meeting with following Agenda:
- To approve the conversion subject to approval of National Company Law Tribunal (NCLT)
- To fix date, time and place for holding Extraordinary General meeting (EGM) to get approval of shareholders, by way of Special Resolution
- To authorize Director or Company Secretary to issue notice of Extra Ordinary General Meeting
- To Authorize advocate to appear before Tribunal
2. Holding of Extra Ordinary General Meeting
- To pass Special Resolution to get shareholders’ approval for Conversion of Public company into a Private company.
- To approve alteration in Articles of Association under Section 14 for such conversion.
3. Filing of Form MGT-14
- After getting approval of shareholders, Company requires to file form MGT-14 with concerned ROC within thirty (30) days of passing Special Resolution along with the following documents:
i. Certified True copy of Special Resolution
ii. Certified True copy of Board Resolution
iii Notice of EGM along with explanatory statement
iv. Copy of altered MOA
v. Copy of altered AOA
4. Filing of Petition to NCLT in form NCLT-1
- Petition for conversion of Public Company into Private Company shall be made within three (3) months from the date of passing of Special Resolution.
- petition shall be made in form NCLT-1 along with the following annexure:
i. Copy of Memorandum of Association
ii. Copy of Article of association
iii. Affidavit verifying the petition.
iv. Bank draft evidencing payment of application fee.
v. Memorandum of appearance with copy of the Board Resolution or the executed Vakalatnama, as the case may be.
- A list of creditors and debenture holders up to the latest practicable date preceding the date of filing of petition by not more than two (2) months, setting forth the following details, namely:
- The names and address of every creditor and debenture holder of the company.
- The nature and respective amounts due to them in respect of debts, claims or liabilities
- Affidavit verifying List of Creditors and Debenture holders.
5. Publication of notice
The company shall at least 14 days before the date of hearing:
- Advertise the petition(as per Rule 35 of NCLT Rules, 2016) in Form NCLT-3Aat least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situate, and at least once in English newspaper circulating in that district.
- Place the advertisement on the website of the company, if any.
- Serve, by registered post with acknowledgment due, individual notice in Form NCLT. No. 3Bon each debenture-holder and creditor of the company
- Serve, by registered post with acknowledgment due, a notice together with the copy of the petition to the Central Government, ROC and to the regulatory body, if the company is regulated under any other law.
6. Hearing by tribunal
- Tribunal shall hear all the parties if they have raised any objections. It will also take note of the observations/ objections, if any, received from the statutory authorities.
- After hearing all the Parties, if it is satisfied, that the conversion would be in the interest of the company or is not being made with a view to contravene or to avoid complying with the provisions of the Act, NCLT will allow the conversion.
7. Filing of E-Form INC-27 with concerned ROC
After receiving of order Company will file Form INC-27 along with copy of the order of the Tribunal along with below mentioned attachment within 15 days.
i. Copy of Order of Tribunal
ii. Minutes, CTC of Special Resolution, Notice & explanatory statement of General Meeting
iii. Altered copy of MOA & AOA
iv. List of Creditor
v. Affidavit from the Director or MD or WTD affirming letter of no objection is obtained from the all creditors and debenture holders.
8. Filing of E-Form INC-27 with concerned ROC
On being satisfied that all the information and documents are submitted and all requirements under the Act are complied with, ROC shall issue a new certificate of incorporation of the Company on the basis of which company can apply for new PAN