As per section 14 of Companies Act 2013, a public company can convert to a private company by taking approval of its shareholders and by taking the approval of the central government. Over the years, the compliances for public company have increased so, they are getting themselves converted into a private limited company. Private companies provide limited liability and minimal statutory compliance. It offers free and easy transferability of shares. It is the most easy form of business in terms of compliance. The power to pass order for conversion of public company to private company has been delegated to Regional Director(RD) which has made conversion more easy and less unwieldy. In this article, we shall discuss about applicable sections, procedure, timeline, and documents to be filled.
·Applicable section: Section 14 of the Companies Act, 2014.
·Procedure of conversion of public company into private company:
- Company has to send notice to the directors along with the agenda to convene board meeting at least seven days before the meeting to be held.
- The company has to convene board meeting for the approval of the following:
·To take into consideration the proposal of converting the public company into private company.
·To finalise the date, day, time and place of the Extra Ordinary General Meeting (EOGM).
·To approve the draft to convene the EOGM.
·To finalise the draft list of the creditors and debenture holders with name, stress and amount due.
·To approve the amendment of articles associated with the company subject.
·To authorize director or any other eligible person on behalf of the company.
·To approve the draft memorandum of association.
- The Company has to then, send notice to members for convening General Meeting and to pass special resolution to take shareholders approval about conversion of the public company into private company.
- The company has to file e-form MGT-14 working 30 days of passing special resolution with Certified True Copy(CTC), CTC of altered Memorandum Of Associations(MOA)ans CTC of altered Articles Of Associations(ATA) attached to the documents.
- Then, preparation of list of creditors and debenture holders which has to be attached to the application.
- The company shall send notice to the creditors, Regional Directors(RD), Registrar of Companies(RoC), or any other regulator authority at least 21 days before the date of filling the application in form RD-1.
- Draft the application that has to be filed with RD and get it signed.
- File the application with RD in form RD-1 within 60 days from the date of passing of the special resolution.
- When there is no objection received by any person and the application is complete in all aspects, the same may be put up for orders without hearing and the concerned Regional Director shall pass an order approving the application within thirty days.
- Certified copy of order approving conversion of public company into private company as received from RD shall be filled with ROC within 15 days from the date of receipt of approval in form INC-28.
·Documents to be filed to Regional Directors with application:
A. List of date of general meeting and extra ordinary general meeting in which the resolution for conversion of public company into private company was passed.
B. Altered copy of Memorandum of Association(MOA) and Articles of Association(AOA).
C. A copy of Power of Attorney dated not earlier than thirty days.
D. Declaration that the company limits the number of its members to two hundred.
E. Declaration that the company has not accepted any deposit till date.
F. Declaration that there has been no non-compliance of sections 73 to 76A, 177, 178, 185, 186 and 188 of the Act and rules made thereunder.
G. Declaration that no enquiry, investigation or inspection is going on against the company.
H. List of creditors and debenture holders with details such as name, address, nature of amount due and total amount due.
I. An affidavit verifying the list of creditors and debenture holders shall be attached.
J. Copy of newspaper advertisement.