Private To Public Company

Public company is an organization whose ownership is divided amongst general public shareholders through publicly traded stock shares on a stock exchange.
A company is considered public when the company’s securities trade on public markets, and when the company discloses certain business and financial information regularly to the public.
A public company can be listed on a stock exchange (listed company), which allow to trade its shares. When public companies cross over a certain size it must list itself on a stock exchange.

Incorporating a private limited Company has its own advantages and disadvantages. It is apparently the best form of business entity when the Directors and shareholders are closely held and where the Directors have enough funds to arrange it between themselves or their relatives or acquaintances.

When the business starts to grow, at that point every private limited company wishes to turn public to avail its benefits.

Public companies offer the option of Initial Public Offering (IPO). By going public, the company can offer its shares to the general public.
The option of IPO thereby removes the restriction on the transferability of shares, which is one of a characteristic of private limited companies.
There is no limit with regards to the maximum number of members in a public limited company, thereby allowing them to raise and gain easy access to funding. Therefore, growth and flexibility are the main reasons for the conversion from private to public.
Being listed on the stock exchange is another advantage of going public. This helps the companies get easier access to capital and also enables them to scale their operations in an easier way. Companies that are listed also tend to have a lot more work with regard to compliances as they have to keep up with the SEBI regulations as well. Therefore, there is a lot of thought and considerable planning that need to go through while making the decision to go public.

• Digital Signature Certificates (DSC) of all the Directors

• Director Identification Number (DIN) of all the Directors

• Identity proof of all the Directors

• Address proof of all the Directors

• Passport size photo of all the Directors

• Proof of address of registered place of business (electricity bill, property papers)

• No Objection Certificate from the owner (if rented)

• Rent Agreement

• Copy of utility bills (Not older than two months)

• Certified copy of the latest financial statements

• Copy of the latest Income Tax Return Acknowledgement

Procedure for Conversion into a Public Limited Company (pursuant to applicable provisions of the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014):

• BOARD MEETING:

  The Directors are to be issued a notice regarding the agenda of the Board Meeting. This notice has to be issued at their respective registered addresses at least 7 days before the date on which the Board Meeting is to be held. The following matters should be included in the agenda of the Board Meeting for discussion between shareholders regarding the–

  • Approval for amendment in Memorandum of Association (MOA)

  • Approval amendment in Articles of Association (AOA)

  • Approval for conversion of private limited company into a public limited company

  • Approval for conducting an EGM and the authorization of a person to be in charge of circulation of the notice regarding the EGM

  • The decide the date, time and place for the Extraordinary General Meeting

  • Passing of a Board Resolution for the change in the number of directors, as for a public limited company minimum of 3 directors are required as per the provisions under Section 149(1) (a) of the Companies Act 2013.

• ISSUANCE OF EGM NOTICE AND HOLDING THE EGM:

  Once the Board Meeting has taken place, the Director or Company Secretary should be authorized to circulate the notice regarding the Extraordinary General Meeting may issue the notice to all of the following:

  • Directors

  • Shareholders

  • Auditors

  The notice of the EGM has to be issued not less than 21 days prior to the date on which the EGM is to be held. However, a shorter notice period can be given if the consent is given by not less than 95% of the members who are entitled to vote at the meeting. The consent has to be obtained either through Writing or Electronic mode at the Extraordinary General Meeting, the resolutions will be passed subject to the approval of the shareholders.

• FILING OF THE FORMS WITH ROC:

  Once all the resolutions are passed in the Extraordinary General Meeting, the formalities with regard to form filing with the Registrar of Companies have to be completed within the specified time frame.

  1. E-Form MGT – 14: This form has to be filed with the registrar of companies within 30 days of passing the respective resolutions along with the prescribed fees. The form is be filed through the Ministry Of Corporate Affairs Portal, containing the following attachments:

     • Notice of the EGM along with the Explanatory Statement

     • Copy of altered Article of Association (AOA)

     • Copy of altered Memorandum of Association (MOA)

     • Copy of the resolution(s) passed at the Extraordinary General Meeting

  2. E-Form INC – 27: This form is specifically for the application for conversion of a private limited company into a public limited company. This form has to be filed with the registrar of companies within the 15 days after passing of the resolutions in the Extraordinary General Meeting. The following documents are to be attached with the form:

     • Minutes of the meeting

     • Copy of altered Article of Association (AOA)

     • Copy of altered Article of Association (AOA)

     • Copy of the resolution(s) passed at the Extraordinary General Meeting (EGM)

     • List of the members of the company along with the essential details

• Apply for fresh PAN card application.

• Update all signboards, Letter heads, Stamps, Bill Books, Common Seal, visiting cards and other related stationery and documents.

• Update the Bank Account details of the company as per required.

• Intimate the changes to Income Tax authorities, and other related personnel regarding the conversion into public limited company.

• Update the altered copy of Memorandum (MOA) and Articles (AOA) of the Company.

• Raising of capital through public issue of shares
  This is the primary and the main benefit of a public Company that it can raise funds through IPO, Secondary Listing, and Debentures by listing them on exchanges and raising funds thereof.

• No restriction on number of shareholders
  The maximum number of shareholders a private limited Company can have is 200 whereas there is no such limit on number of shareholders in a public limited Company.

• Brand Awareness
  When the brand is doing really good in business then it is generally preferred by the founders and management to go for listing and raise funds from public. This is a great tool for creating brand awareness’ as the particular brands comes under everyone’s notice.

• Limited Liabilities
  The liability of every shareholder is limited to the amount of shares subscribed by them.

• Transferability of shares
  The transferability of shares is limited in case of a private limited Company whereas the shares of a public limited Company are easily transferable among the existing shareholders or even new one.