Conversion of Private Company into Public Company in India:

As the Company grows and specially when it has been incorporated by new age entrepreneur who do not belong to some business back ground soon they realize that the it is more easy to raise funds and get other approvals for a public company and to avail the benefits of public company they convert from private company into public company. The areas covered in the article is:

• 1.       Checklist for conversion from private to public
• 2.       Benefits of conversion
• 3.       Disadvantages of conversion
• 4.        Format of board and shareholders’ resolution
• 5.       Format of statement in lieu of prospectus in schedule III and schedule IV

1.       Checklist for conversion :

1.       Call a board meeting approve the conversion and statement in lieu of prospectus and call extra-ordinary general meeting (EGM) for the taking approval of members on conversion.

2.       Conduct the EGM , pass special resolution for conversion, replacement or amendment of Articles of Association, deletion of word “Private” from the name of the company, amendment of MOA due to conversion.

3.       Within thirty days of passing the special resolution file Form 23 attaching said resolution and Form 62 attaching statement in lieu of prospectus.

4.       Logically company get converted in public limited on the date of passing of special resolution but it shall use the name as public limited only after receiving fresh certificate of incorporation.

5.       Before going for conversion do confirm that there are at least three directors, seven members and the paid –up capital is Rs. 5,00,000 if any of these is not fulfilled first do the respective formalities to meet the criteria of a public company.

6.       On conversion of company from private to public the company need not to obtain certificate of commencement of business.

2.Benefit:

The major benefit of conversion that the Company may raise fund from the public, it may take public deposit, taking loan from banks becomes more easy and the responsibilities of directors becomes more defined which give a short of confidence to the investors or shareholders of the company.

3.Disadvantages:

The major disadvantage is all the privileges given to a private company will be withdrawn or will end such as directors need to take approval before talking loan from company, similarly provisions of remuneration to director, audit committee appointment of MD, non-voting by interested director will become applicable. In short it is considered that your company will not get any more exemptions under the provisions of companies act.

4.Format of Board Resolution:

“RESOLVED THAT pursuant to the provisions of section 44 of the Companies Act, 1956 and subject to the approval of members of the Company, the Company be and is hereby converted from private company to public company.

RESOLVED FURTHER THAT pursuant to the provisions of section 31 of the Companies Act, 1956 and subject to the approval of members and the new set of articles of association as placed before the meeting, initialed by the Chairman for the purpose of identification, be and is hereby approved and adopted as the Articles of Association of the Company in substitution of existing articles.

RESOLVED FURTHER THAT consequent to the above, and pursuant to the provisions of section 21 of the Companies Act, 1956 and subject to the approval of members the word “Private” be and is hereby deleted from the name of the Company and the name of the Company be changed from “ABC Private Limited” to “ABC Limited”.

RESOLVED FURTHER THAT consequent to the above and pursuant to the provisions of section 16 of the Companies Act, 1956 and subject to the approval of members the word “Private” be and is hereby deleted, wherever occurred from the Memorandum of Associations of the Company.

RESOLVED FURTHER THAT pursuant to the provisions of section 44(2) (b) of the Companies Act, 1956 the  statement in lieu of prospectus as placed before the meeting, initialed by the Chairman for the purpose of identification, be and is hereby approved.

RESOLVED FURTHER THAT Mr. A, Director of the Company be and is hereby authorized to sign, submit and file necessary application(s), forms(s) and all other necessary papers and documents with the Registrar of Companies, Maharashtra to give effect to this resolution.”

5.Format of Statement in lieu of prospectus:

Schedule III:

SCHEDULE III

(See section 70)

Form of Statement and Particulars to be contained therein

The Companies Act, 1956

Statement in lieu of Prospectus delivered for registration by

ABC  LIMITED

Pursuant to section 70 of the Companies Act, 1956

Delivered for registration by                          :            Mr. A, Director

The nominal share capital of the company    :           

Divided into                                                   :             equity shares of Rs each

Amount if any of above capital which

Consist of redeemable preference shares      :             

The earliest date on which the company has

Power to redeem these shares                        :            

Names, Addresses descriptions and

Occupations of

a) Directors or proposed Directors                  :          

2) Mr.

3) Mr.

b) Managing Director or proposed

Managing director                                     :             

c) Manager or proposed Manager                   :             N.A.

Any provisions in the article of the  company :              

Or in any contract irrespective of the time

When it was entered into, as to appointment                  

or the Remuneration payable to the persons                  

referred to In (a) (b) and (c) above                                 

and subject to the provisions of section 252

of the Act, the number of directors

(including alternate directors) shall not be less

than three or more than twelve.

If the share capital of the company is divided   :   The share capital of the company

Into different classes of shares, the right of         consists of Equity shares only at

Voting at meetings of the company conferred   present but the company has the

By, and the rights in respect of capital and            power to issue preference shares

Dividends attached to, the several classes of      carrying the right of redemption.

Shares respectively.

Number and amount of shares and                    :             

Debentures agreed to be issued as

Fully or partly paid up otherwise than

In cash

The consideration for the intended                        :             

Issue of those shares and debentures

Number, description and amount of any           :             

Shares or debentures which any person

has or is entitled to be given an option to

subscribe for, or to acquire from a person

to whom they have been allotted or agreed

to be allotted with a view to his offering

them for sell.

Period during which option is exercisable          :            

Price to be paid for shares or debentures

Subscribed for or acquired under the option       :              

Consideration for the option or right to              :            

option                                                                                                          

Persons to whom the option or right to               :            

Option was given , or, if given to existing

Shareholders or debentureholders  as such,

the relevant shares or debentures.

Names, occupations and addresses of                              

Vendors of property purchased or acquired,

or proposed to be purchased or acquired by

company except where the contract for its

purchase or acquisition was entered into in

the ordinary course of the business intended

to be carried on by the company or the

amount of the purchase money is not material

Amount (in cash, shares or debentures)                            

Payable to each separate vendor.

Amount paid or payable (in cash, shares                         

or debentures) for each such property

specifying amount( if any) paid or

payable for goodwill.

Short particulars of every transaction                               

Relating to such property which was

Completed within two preceding years

and in which any vendor to company

or any person who is, or was at the

time thereof, a promoter, director

or proposed director of the company

had any interest, direct or indirect

Amount ( if any) paid or payable as                   :            

Commission for subscribing or

Agreeing to subscribe or procuring

Or agreeing to procure subscription

For any shares or debentures in the

Company. or

Rate of commission                                             :           

The number of shares, if any, which

Persons have agreed to subscribe

For a commission

If it is proposed to acquire any business             :            

the amount as certified by the persons by

whom the accounts of the business have

been audited, of the net profits of the

business in respect of each of the five

years immediately preceding the date

of this statement, provided that in the

case of a business which has been carried

on for less than five years and the accounts

of which have only been made in respect

of four years, three years, two years, or

one year, the above requirement shall have

effect as if references to four years, three

years, two years, or one year, as the case

maybe, were substituted for references to

five years and, in any such case the state-

ment shall say how long the business to be

acquired has been carried on.

Where the financial year with respect to             :           

which the accounts of the business have

been made up is greater or less than a year,

references to five years, four years, three

years two years, one year in this paragraph

shall have effect as if references to such

number of financial years as in the aggregate,

cover a period of  not less than five years,

four years, three years, two years or one year,

as the case may be, were substituted for

references to three years, two years

and one year respectively.

Estimated amount of preliminary expenses           :        

By whom those expenses have been paid              :        

or are payable.

Amount paid or intended to be paid to                  :         

Any promoter

Consideration for payment                                 :          

Any benefit given or intended to be given

to any promoter

Consideration for benefit

Dates of, parties to and general nature of ---          :

a) Contract appointing or fixing the remunera-              

tion of Directors, Managing Director or                         

Manager                                                           

b) every other material contract other than        :            

i)contracts entered into in the ordinary course

of the business intended to be carried on by

the company, or

ii) entered into more than two years before

the delivery of this statement.

Time and place at which                                       :          

i)  the contracts or copies thereof            

ii) in the case of a contract not reduced into

writing, a memorandum giving full          

iii) in case of contract wholly or partly in a

language other than English, a copy or a

translation thereof in English or embodying

a translation in English of the parts in the

other language, as the case may be, being

a translation certified in the prescribed

manner to be correct translation, may be

inspected.

Names and addresses of the auditors of                 :        

the company ( if any)                                                      

Full particulars of the nature and extent of             :           

the interest of every director, managing

director, or manager in the promotion of or

in the promotion of or in the property

proposed to be acquired by the company,

or where the interest of such a director

consists in being a partner in a firm, the

nature and extent of the firm, with a

statement of all sums paid or agreed to be

paid to him, or to the firm in cash or

shares , or otherwise, by any person,

either to introduce him to become, or to

qualify him as, a director or otherwise

for services rendered by him or by the

firm in connection with the promotion

or formation of the company

( signature of the persons abovementioned                       -------------------------------

As directors or proposed directors, or of                           -------------------------------

their agent authorized in writing)                                      -------------------------------

Date :

Schedule IV:

SCHEDULE IV

(Section 44 (2) (b))

FORM OF STATEMENT IN LIEU OF PROSPECTUS TO BE DELIVERED TO REGISTRAR OF COMPANIES BY A PRIVATE COMPANY ON BECOMING A PUBLIC COMPANY AND REPORTS TO BE SET OUT THEREIN

PART I

FORM OF STATEMENT AND PARTICULARS TO BE CONTAINED THEREIN

The COMPANIES ACT 1956

Statement in lieu of prospectus delivered for registration by

ABC PRIVATE LIMITED, PURSUANT TO CLAUSE (b) OF SUB-SECTION (2) OF SECTION 44 OF THE COMPANIES ACT, 1956.

Delivered for registration by: ABC Limited
The Nominal Share Capital of the Company : Divided into
Amount (if any) of above capital which consists of redeemable preference shares
The earliest date on which the Company has power to redeem these shares
Name, addresses, descriptions and occupations of:-
(a)directors or proposed directors (b) managing director or proposed managing director (c)manager or proposed manager Any provision in the articles of the Company, or in any contract irrespective of the time when it was entered into, as to the appointment of and remuneration payable to the persons referred to in (a), (b) and (c) above
Amount of shares issued
Amount of commission paid or payable in connection therewith
Amount of discount if any allowed on the issue of any shares, or so much thereof as has not been written off at the date of the statement
Unless more than two years have elapsed since the date on which the Company was entitled to commence business:- Amount of Preliminary expenses: By whom these expenses have been paid or are payable
Amount paid or intended to be paid to any promoter Consideration for the payment Any other benefit given or intended to be given to any promoter Consideration for the benefit
If the share capital of the company is divided into different classes of shares, the right of voting at meetings of the company conferred by , and the rights in respect of capital and dividends attached to, the several classes of shares respectively.
Number, description and amount of shares and debentures issued within the two years preceding the date of that statement as fully paid or partly paid-up otherwise than for cash or agreed to be issued at the date of this statement Consideration for the issue of those shares or debentures

Number, description and amount of any shares or debentures which any person has or is entitled to be given an option to subscribe for, or to acquire from, a person to whom they have been allotted with a view to offering them or sale. Period during which option is exercisable Price to be paid for shares or debentures subscribed for or acquired under the option. Consideration for the option or right to option Persons to whom the option or the right to option was given or, if given to existing shareholders or debenture holders as such, the relevant shares or debentures.
Names, addresses and descriptions and occupations of vendors of property (1) purchased or acquired by the Company within the two years preceding the date of this statement or (2) agreed or proposed to be purchased or acquired by the Company, except where the contract for its purchase  or acquisition was entered into in the ordinary course of business and there is no connection between the transaction and the Company ceasing to be a private company or where the amount of the purchase money is not material. Amount (in cash, shares or debentures ) paid or payable to each separate vendor Amount paid or payable in cash, shares or debentures for each such property, specifying the amount paid or payable for goodwill.
Short particulars of every transaction relating to each such property which was completed within the two preceding years and in which any vendor to the company to any person who is or was at the time thereof a promoter, director or proposed director of the company had any interest, direct or indirect.
Amount (if any) paid or payable as commission for subscribing or agreeing to subscribe or procuring or agree to procure subscriptions for any shares or debentures in the company or rate of commission The number of shares, if any, which persons have agreed to subscribe for a commission
If it is proposed to acquire any business, the amount, as certified by the persons by whom the accounts of the business have been audited, of the net profits of the business in respect of each five years immediately preceding the date of this statement, provided that in case of the business which has been carried on for less than five years, and the accounts of which have only been made up in respect of four years, three years, two years or one year, as the case may be, were substituted for references to five years and in any such case, the statement shall say how long the business to be acquired has been carried on. Where the financial year with respect to which the accounts of the business have been made up is greater or less than a year, references to five years, four years, three years, two years, one year in this paragraph shall have effect as if references to such financial years as, in the aggregate, cover a period of not less than five years, four years, three years, two years, or one year as the case may be, were substituted for references to three years, two years and one year respectively.
Date of, parties to, and general nature of – (a)    Contract appointing or fixing remuneration of director, managing director, manager; and (b)   Every other material contract [other than (i) contracts entered into in the ordinary course of business intended to be carried on by the Company or (ii) entered into more than two years before the delivery of this statement] Time and place at which (1) the contracts or copies thereof; or (2) (i) in the case of a contract not reduced in the writing, a memorandum giving full particulars thereof, and (ii) in case of a contract wholly or partially in a language other than in English, a copy of translation thereof in English or embodying a translation in English of the parts in other language, as the case may, being a translation certified in the prescribed manner to be corrected translation may be inspected.
Name and addresses of the auditors of the Company
Full particulars of the nature of interest of every director, managing director or manager, in any property purchased or acquired by the Company within the two years preceding the date of this statement or proposed to be purchased or acquired by the Company or, where the interest of such director consist in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed to be paid to him or to the firm in cash or shares, or otherwise by any person either to induce him to become or to qualify him, as a director or otherwise for the services rendered or to be rendered to the Company by him or by the firm.
Rates of the dividend (if any) paid by the Company in respect of each class of shares in the Company in each of the five financial years immediately preceding the date of this statement or since the incorporation of the Company, whichever period is shorter.
Particulars of the cases in which no dividends have been paid in respect of any class of shares in any of these years.

• The information given in this blog is the personal understanding of the writer and shall not be used as a conclusive material. The content stated/mentioned here is subject to changes by respective government/authorities in the applicable laws.

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