Conversion of the status of the company from public to private would become effective form the date of receipt of the approval of the Registrar by means of issuing a new certificate of Incorporation.
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 regulate the conversion of public Company into Private Limited Company.
As per Section 13 & 14 of the Companies Act, 2013 read with Rule 33 of Companies (Incorporation) Rules, 2014. A public limited company can be converted into the private limited company only after attaining its shareholders’ approval by the way of passing of special resolution (SR) in general meeting. (SBEC, 2018-19)
For the process of conversion of Public Limited Company into Private Limited Company primary requirement is Alteration in Article of Association (AOA) of Company. According to the Act, any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal (NCLT) which shall make such order as it may deem fit. [As per the Second Proviso of Section 14(1)] (ICSI, 2018-19)
At the time of Conversion Company have to make several alterations. Some of them are mentioned below:
Steps for Conversion of a Public Limited Company into a Private Limited Company
First Step: Holding of Board Meeting
Company will convey a Board Meeting as per provisions of Section 173 and Secretarial Standard 1 to meet with primary requirement for such conversion. General matters for discussion in board meeting are like:
- Approval of Conversion of Company subject to the approval of Tribunal
- Authorize any Director, Company Secretary of the Company for completing the necessary
compliances, formalities, Issue of Notice of General Meeting (As per SS 2) etc.
- Authorizing professional or legal practitioner/ advocate to appear before Tribunal
- To fix the date, time and place for holding Extraordinary General meeting (EGM) to get the approval of shareholders, by way of Special Resolution, for the conversion of a public company into a private company
1.Holding of General Meeting
Company will convey the General meeting to pass a special resolution for alteration in AOA & MOA of the Company for the purpose of conversion of the Company.
2. Filing of MGT-14 with ROC
As per Section 117(3) Copy of this special resolution is required to be filed with concerned ROC through the filing of form MGT.14 within 30 days of passing a special resolution in the EGM.
Second Step: Preparation of Petition
The petition under the second provision of Section 14(1) for the approval of the conversion of a public company into a private company shall be filed with the Tribunal (NCLT). The petition shall be filed in form No. NCLT-1.
Time Period of Filing of Petition
The petition shall be filed with the Tribunal not less than 3 months from the date of passing of Special Resolution.
Particulars of Petition in NCLT-1
As per Rule 68(2) of National Company Law Tribunal Rules, 2016 every petition filed under NCLT-1 shall set out the following particulars:
(i) The date of the Board meeting at which the proposal for the alteration of Articles was approved;
(ii) The date of the general meeting at which the proposed alteration was approved;
(iii) State at which the registered office of the company was situated;
(iv) Number of members in the company, the number of members attended the meeting and number of members of voted for and against;
(v) Reason for conversion into a private company, the effect of such conversion on shareholders, creditors, debenture holders and other related parties.
(vi) Listed or unlisted public company;
(vii) The nature of the company, that is, a company limited by shares, a company limited by guarantee (having share capital or not having share capital) and unlimited company.
Third Step: Preparation of Documents to be filed with Petition in NCLT-1
Details of Creditors & Debenture Holders
There shall be attached to the application (NCLT-1),
- List of creditors and
- List of debenture holders,
List of Creditors and debentures holders should not be older than 2 months from the date of filing of the application with Tribunal.
The list should conation the following details, namely
(i) The names and address of each & every creditor and debenture holder of the company on the date of conversion;
(ii) The nature and particular amounts due to them in respect of debts, claims or liabilities;
(iii) In respect of any contingent debt or any such claim acceptable to proof in winding up of the company, the value, so far as can be justly estimated of such debt or claim.
Affidavit verifying the List of Creditors/ Debenture Holders
Company shall file a duly notarized copy of the affidavit signed by the company secretary of the company, if any, and at least two directors of the company, one of whom shall be a managing director (MD), where there is one, to the effect that they have made a full enquiry into the affairs of the company and, having done so, have made an opinion that the list of creditors at the time of such conversion is correct, and that the assessed value as given in the list of the debts or claims payable on a contingency or not ascertained are proper approximations of the values of such debts and claims and that there are no other debts of, or claims against, the company to their knowledge.
Inspection of List of Creditors/ Debenture Holders
A duly authenticated copy of the list of creditors shall be kept at the registered office of the company and any person desirous of inspecting the same may, at any time during the ordinary hours of business, inspect and take extracts from the same on payment of the sum of rupees ten per page to the company
Affidavit of Acknowledgement of Issue of Advertisement and service of Notice
An affidavit shall be filed to the Tribunal, not less than three days before the date fixed for hearing, stating whether the petition has been advertised in accordance with this rule 35 and whether the notices, if any, have been duly served upon the persons required to be served.
Fourth Step: Publication and Service of application
Publication of Advertisement
The Company shall at least 14 days before the date of hearing advertise the petition in accordance with Rule 35. The application will be advertising in form NCLT 3A. As per rule 35 following are the provisions regarding the advertisement of the petition:
- To be published at least once in a vernacular (language is spoken by the ordinary people) newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and at least once in an English newspaper circulating in that
Details to be mentioned in the Advertisement
Every such advertisement shall state; –
(i) the date on which the application, petition or reference was presented;
(ii) the name and address of the applicant, petitioner and his authorised representative, if any;
(iii) the nature and substance of the application, petition or reference;
(iv) the date fixed for the hearing;
(v) a statement to the effect that any person whose interest is likely to be affected by the proposed petition or who intends either to oppose or support the petition or reference at the hearing shall send a notice of his intention to the concerned Bench and the petitioner or his authorized representative, if any, indicating the nature of interest and grounds of opposition so as to reach him not later than two days previous to the day fixed for hearing.
Publication on Website of the Company
Where the advertisement is being given by the company, then the same advertisement may also be placed on the official website of the company, if any.
Notice to Creditors/ Debenture Holders
The Company shall at least 14 days before the date of hearing serve, by registered post with acknowledgment due, individual notice in Form No. NCLT-3B to each debenture-holder and creditor of the company.
Notice to Authorities
The Company shall at least 14 days before the date of hearing, serve, notice together with the copy of the petition to the Central Government, Registrar of Companies and to the Securities and Exchange Board of India, by registered post with acknowledgment due, in the case of companies listed on a stock exchange and to the regulatory body, if the company is controlled by any other Act.
Objections
Where any protestation of any person whose interest is expected to be affected by the proposed petition has been received by the petitioner, it shall serve a copy thereof to the ROC on or before the date of hearing.
Fifth Step: Hearing by Tribunal
Tribunal shall hear the Company and all the parties that have raised objections and are desirous of being heard. 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, having regard to all the circumstances of the case, 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, allow the conversion.
Sixth Step: Filing of Form with ROC
After receiving of order from NCLT, Converting Company will file Form INC-27 along with a copy of the order of the NCLT along with the below-mentioned attachment within 15 days.
- Copy of Order of Tribunal
- Minutes, Certified True Copy of Special Resolution, Notice & explanatory statement of General Meeting
- Altered copy of MOA & AOA
- List of Creditor
- An affidavit from the Director or Managing Director or Whole Time Director affirming letter of no objection is obtained from all creditors and debenture holders.
Seventh Step: New Certificate of Incorporation from ROC
After full satisfaction by all the information and documents are submitted and all requirements under the Act are complied with, Registrar shall issue a new certificate of incorporation of the Company after regarding all the documents and information.
References
ICSI, T. (2018-19). SBEC. New Delhi: The Institute of Companies Secretaries of India.
Very nice and informative