PROC0010 - Taxpublishers.in

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers Conversion of Public Limited Company into a Private Limited Company A. INTRODUCTORY NOTE A private limited company enjoys certain privileges and is subject to certain restrictions under section 3(1)(iii) of the Companies Act, 1956. A public limited company has to undergo compliance of stringent provisions of the Act and has to have large number of shareholders. However, when the public limited company feels that it is not in a position to maintain its character and its shareholding is limited consisting of promoters and his relatives and the company does not want to involve outsiders in management or in shareholding, it can covert itself into a private limited company. For converting itself into a private limited company, the public limited company should think about its present status and also to project for the future. If, the company is a listed company, procedure for delisting has to be adopted by writing to the stock exchange(s). In the following paragraphs, the procedure relating to conversion of a public limited company into a private company is explained. B. BOARD RESOLUTION Pass a Board Resolution for -- (i) Converting the public limited company into a private limited company; (ii) Convening a general meeting for obtaining the consent of the members; (iii) Filing e-Form 1B with RoC; (iv) Authorising a director/secretary/any other officer to comply with all other formalities relating to conversion. C. NOTICE TO MEMBERS FOR GENERAL MEETING Issue a notice 21 days in advance to the eligible members and auditors of the company together with explanatory statement. D. PREPARATION OF NEW SET OF ARTICLES OF ASSOCIATION Since, the Character of the company is being changed, the existing articles of association would no longer be applicable. Therefore, prepare a new set of articles of association applicable to a private limited company.--Ref. : Circular Letter No. 8/32(31)/63-PR, dt. 23-10-1963. E. CONVENING GENERAL MEETING (POSTAL BALLOT) Convene the general meeting on the appointed day and pass a special resolution. (i) for conversion of public limited company into a private limited company; (ii) for alteration of articles of association; and (iii) for incorporation of the essential Characteristics of private company. Note : In case, the existing public limited company is a listed company, the special resolution should be passed by Ballot. F. RECORDING THE MINUTES OF THE GENERAL MEETING After the conclusion of the general meeting, but not later than 30 days from the date of general meeting, minutes should be prepared and recorded for their submission to the RoC with e-Forms. G. ELECTRONIC FILING OF e-FORM 23 WITH RoC File electronically a return in e-Form 23 with RoC through MCA portal, www.mca.gov.in within 30 days of the passing of special resolution. Copy of the altered articles of association should also be attached with e-Form 23. In case, the attachment is of large size, i.e., it exceeds 2.5 MB, it can be sent through Addendum Service available in the MCA portal. H. OBTAINING CONSENT OF MEMBERS AND CREDITORS 1. Obtain consent of members in writing, if the number of members is more than 25. 2. Obtain consent of such creditors, to whom the company owes substantial amounts. I. PUBLISHING OF PUBLIC NOTICE At the instance of the Registrar, the company should publish a public notice in at least two daily newspapers of national level, one of which should be in English and another in Hindi. In addition, the public notice should also be published in a regional daily newspaper. See the specimen of the public notice. J. ELECTRONIC FILING OF e-FORM 1B WITH RoC FOR SEEKING APPROVAL OF CONVERSION File electronically e-Form 1B with RoC through MCA portal, www.mca.gov.in, for seeking approval of conversion. 1. Who can file ? A person duly authorised by the Board of directors such as a managing director, director, manager and secretary of the company. 2. Stamp Duty The declaration in e-Form 1B should be duly stamped in accordance with the stamp duty prevailing in the State in which registered office of the company is situated. 3. Time Limit The e-Form 1B should be filed within 3 months of passing the special resolution. 4. Attachments The following documents should be attached with e-Form 1B : (i) Copy of special resolution passed in the general meeting; (ii) Copy of the minutes of the general meeting of which the special resolution was passed; (iii) Copy of the public notice published in newspaper pointing out conversion of the company into private limited company; (iv) Consent letters obtained from shareholders, where number of members exceeds more than 25; (v) Consent letters from creditors, in case of substantial loans outstanding. 5. How to attach documents ? Note that the documents are to be attached in PDF format. A physical document can be converted into an electronic document through scanning. A soft copy may also be converted into PDF format and used as an attachment. 6. Digital Signatures e-Form 1B should be digitally signed and stamped by an authorised person who name is incorporated in the Articles of Association as managing director, director, manager or secretary of the company. 7. Application and Filing Fee (i) Application fee to be paid as per Companies (Fees and Application) Rules, 1999. (ii) Filing fee should be paid in accordance with Schedule X attached to the Companies Act, 1956. K. MODE OF PAYMENT 1. The fee can be paid through one of the specified modes, viz., remittance in authorised banks, credit cards or through internet banking. In case of online payment, filing process shall be complete immediately. 2. When payment is tendered through authorised bank (Punjab National Bank, State Bank of India, Indian Bank, ICICI Bank and HDFC Bank), a pre-filled challan (GAR-7) containing SRN, date of challan, expiry date, name and designation of user by whom challan is tendered, name and address of the company, particulars of remittance, total amount and head of account shall be generated by the system. The challan should be used for making payment before the date of expiry mentioned therein and the transaction shall be completed by the concerned banks. L. EFFECT OF NON-PAYMENT BEFORE DUE DATE Note, if payment is not made by the date mentioned on the challan, the submission of form shall be treated as incomplete and message through e-mail will be received that form cannot be regarded as filed due to non-payment. Status of application and payment can be verified through MCA portal. M. PHYSICAL SUBMISSION OF DOCUMENTS The documents that have been sent through MCA portal are required to be sent in original (in physical form) duly signed digitally by the authorised person drawing authority from the Board of directors through a resolution. The person signing the document should possess a valid Digital Signature Certificate (DSC). N. PERUSAL OF DOCUMENTS BY RoC Since, the conversion of the company from public limited company into a private limited company involves larger public interest, the RoC, therefore peruses the documents and e-Forms seriously to see that the proposal of conversion is in order as per law and the best interest of the company, its members and the general public. The perusal must point out that the shareholders and substantial creditors are in due concurrence with the proposed conversion. O. APPROVAL BY RoC After being satisfied that the company has complied with the provisions relating to the proposed conversion and there is nothing wrong in the proposed conversion, the RoC would accord necessary approval. And on receipt of RoC's approval, the company proceed to obtain fresh certificate of incorporation. P. OBTAINING FRESH CERTIFICATE OF INCORPORATION After obtaining approve of the RoC, the company shall apply to the RoC for issue of fresh certificate of incorporation, substituting the word 'public' to the word 'private' in its name. This substitution shall be final and conclusive only on issuance of fresh certificate of incorporation by the RoC. Q. LISTING COMPANIES TO COMPLY WITH ADDITIONAL REQUIREMENTS A listed public limited company after its conversion into a private limited company should comply with the following formalities : (i) obtaining approval of shareholders through postal ballot. [Refer to procedure applicable with regard to postal ballot.] (ii) submitting three copies of the notice of the meeting to each of the stock exchanges in which the securities of the companies were being enlisted. (iii) forwarding forthwith a certified copy of minutes of the meeting to each of the concerned stock exchange. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers Conversion of Public Limited Company into a Private Limited Company
A. INTRODUCTORY NOTE

A private limited company enjoys certain privileges and is subject to certain restrictions under section 3(1)(iii) of the Companies Act, 1956. A public limited company has to undergo compliance of stringent provisions of the Act and has to have large number of shareholders. However, when the public limited company feels that it is not in a position to maintain its character and its shareholding is limited consisting of promoters and his relatives and the company does not want to involve outsiders in management or in shareholding, it can covert itself into a private limited company. For converting itself into a private limited company, the public limited company should think about its present status and also to project for the future. If, the company is a listed company, procedure for delisting has to be adopted by writing to the stock exchange(s). In the following paragraphs, the procedure relating to conversion of a public limited company into a private company is explained.

B. BOARD RESOLUTION

Pass a Board Resolution for --

(i) Converting the public limited company into a private limited company;

(ii) Convening a general meeting for obtaining the consent of the members;

(iii) Filing e-Form 1B with RoC;

(iv) Authorising a director/secretary/any other officer to comply with all other formalities relating to conversion.

C. NOTICE TO MEMBERS FOR GENERAL MEETING

Issue a notice 21 days in advance to the eligible members and auditors of the company together with explanatory statement.

D. PREPARATION OF NEW SET OF ARTICLES OF ASSOCIATION

Since, the Character of the company is being changed, the existing articles of association would no longer be applicable. Therefore, prepare a new set of articles of association applicable to a private limited company.--Ref. : Circular Letter No. 8/32(31)/63-PR, dt. 23-10-1963.

E. CONVENING GENERAL MEETING (POSTAL BALLOT)

Convene the general meeting on the appointed day and pass a special resolution.

(i) for conversion of public limited company into a private limited company;

(ii) for alteration of articles of association; and

(iii) for incorporation of the essential Characteristics of private company.

Note : In case, the existing public limited company is a listed company, the special resolution should be passed by Ballot.

F. RECORDING THE MINUTES OF THE GENERAL MEETING

After the conclusion of the general meeting, but not later than 30 days from the date of general meeting, minutes should be prepared and recorded for their submission to the RoC with e-Forms.

G. ELECTRONIC FILING OF e-FORM 23 WITH RoC

File electronically a return in e-Form 23 with RoC through MCA portal, www.mca.gov.in within 30 days of the passing of special resolution. Copy of the altered articles of association should also be attached with e-Form 23. In case, the attachment is of large size, i.e., it exceeds 2.5 MB, it can be sent through Addendum Service available in the MCA portal.

H. OBTAINING CONSENT OF MEMBERS AND CREDITORS

1. Obtain consent of members in writing, if the number of members is more than 25.

2. Obtain consent of such creditors, to whom the company owes substantial amounts.

I. PUBLISHING OF PUBLIC NOTICE

At the instance of the Registrar, the company should publish a public notice in at least two daily newspapers of national level, one of which should be in English and another in Hindi. In addition, the public notice should also be published in a regional daily newspaper. See the specimen of the public notice.

J. ELECTRONIC FILING OF e-FORM 1B WITH RoC FOR SEEKING APPROVAL OF CONVERSION

File electronically e-Form 1B with RoC through MCA portal, www.mca.gov.in, for seeking approval of conversion.

1. Who can file ?

A person duly authorised by the Board of directors such as a managing director, director, manager and secretary of the company.

2. Stamp Duty

The declaration in e-Form 1B should be duly stamped in accordance with the stamp duty prevailing in the State in which registered office of the company is situated.

3. Time Limit

The e-Form 1B should be filed within 3 months of passing the special resolution.

4. Attachments

The following documents should be attached with e-Form 1B :

(i) Copy of special resolution passed in the general meeting;

(ii) Copy of the minutes of the general meeting of which the special resolution was passed;

(iii) Copy of the public notice published in newspaper pointing out conversion of the company into private limited company;

(iv) Consent letters obtained from shareholders, where number of members exceeds more than 25;

(v) Consent letters from creditors, in case of substantial loans outstanding.

5. How to attach documents ?

Note that the documents are to be attached in PDF format. A physical document can be converted into an electronic document through scanning. A soft copy may also be converted into PDF format and used as an attachment.

6. Digital Signatures

e-Form 1B should be digitally signed and stamped by an authorised person who name is incorporated in the Articles of Association as managing director, director, manager or secretary of the company.

7. Application and Filing Fee

(i) Application fee to be paid as per Companies (Fees and Application) Rules, 1999.

(ii) Filing fee should be paid in accordance with Schedule X attached to the Companies Act, 1956.

K. MODE OF PAYMENT

1. The fee can be paid through one of the specified modes, viz., remittance in authorised banks, credit cards or through internet banking. In case of online payment, filing process shall be complete immediately.

2. When payment is tendered through authorised bank (Punjab National Bank, State Bank of India, Indian Bank, ICICI Bank and HDFC Bank), a pre-filled challan (GAR-7) containing SRN, date of challan, expiry date, name and designation of user by whom challan is tendered, name and address of the company, particulars of remittance, total amount and head of account shall be generated by the system. The challan should be used for making payment before the date of expiry mentioned therein and the transaction shall be completed by the concerned banks.

L. EFFECT OF NON-PAYMENT BEFORE DUE DATE

Note, if payment is not made by the date mentioned on the challan, the submission of form shall be treated as incomplete and message through e-mail will be received that form cannot be regarded as filed due to non-payment. Status of application and payment can be verified through MCA portal.

M. PHYSICAL SUBMISSION OF DOCUMENTS

The documents that have been sent through MCA portal are required to be sent in original (in physical form) duly signed digitally by the authorised person drawing authority from the Board of directors through a resolution. The person signing the document should possess a valid Digital Signature Certificate (DSC).

N. PERUSAL OF DOCUMENTS BY RoC

Since, the conversion of the company from public limited company into a private limited company involves larger public interest, the RoC, therefore peruses the documents and e-Forms seriously to see that the proposal of conversion is in order as per law and the best interest of the company, its members and the general public. The perusal must point out that the shareholders and substantial creditors are in due concurrence with the proposed conversion.

O. APPROVAL BY RoC

After being satisfied that the company has complied with the provisions relating to the proposed conversion and there is nothing wrong in the proposed conversion, the RoC would accord necessary approval. And on receipt of RoC's approval, the company proceed to obtain fresh certificate of incorporation.

P. OBTAINING FRESH CERTIFICATE OF INCORPORATION

After obtaining approve of the RoC, the company shall apply to the RoC for issue of fresh certificate of incorporation, substituting the word 'public' to the word 'private' in its name. This substitution shall be final and conclusive only on issuance of fresh certificate of incorporation by the RoC.

Q. LISTING COMPANIES TO COMPLY WITH ADDITIONAL REQUIREMENTS

A listed public limited company after its conversion into a private limited company should comply with the following formalities :

(i) obtaining approval of shareholders through postal ballot. [Refer to procedure applicable with regard to postal ballot.]

(ii) submitting three copies of the notice of the meeting to each of the stock exchanges in which the securities of the companies were being enlisted.

(iii) forwarding forthwith a certified copy of minutes of the meeting to each of the concerned stock exchange.