Our Expertise | Conversion of Public Company into a Private Company

Conversion of Public Company into a Private Company

Let’s understand “WHAT IS A PUBLIC COMPANY?” A public company is also acknowledged as a Publicly Traded Company. Public companies trade their stocks on the public exchange market. Ownership of a public company is not limited to that of a private company and the shares are distributed among general public shareholders. Moreover, a Public company is also required to disclose its financial and business information to the public. Whereas when we talk about Private company.

We must know that “WHAT IS A PRIVATE COMPANY?” A Private Company is owned by a limited number of shareholders and it does not offer its stocks to the general Public for shareholding. Private companies are also known as privately-owned companies or limited liability companies as the liability towards the shareholders is limited.


What are the differences between private and public company?


Public Company

Private Company

What are the advantages of conversion from a Public Company into Private Company?

The advantages are:

  1. The minimum number of members will be 2 as compared to 7 as required in Public Company.
  2. The minimum number of Directors required will be 2 as compared to a minimum number of 3 directors.
  3. Issuance of prospectus and Statement in Lieu of Prospectus is not mandatory.
  4. There will be no obligation to disclose its financial records.
  5. Statutory meetings are optional in the case of a Private Company. Thus, if a Public Company converts into a Private Company then it does not have to necessarily hold Statutory Meetings quarterly and annually as required in the case of a Private Company.
  6. Appointment of Audit Committee and Vigil mechanism is not mandatory.


What are the procedure for conversion of Public Limited Company into Private Limited Company?

Section 173 and Secretarial Standard-1 (SS-1) explains the issuance of Notice for Board Meeting.

(a). Issuance of Notice for Board Meeting to all the Directors of the Company at their respective addresses which is registered with the company. Such notice should be given at least 7 days prior to the holding of the Board Meeting.

(b). Agenda for the Board meeting, Notes of Agenda and Draft Resolution should be attached with the Notice.

  • Entries in the Register of Members according to Section 88 read with Rule 5(1) of the Companies (Management and Administration) Rules, 2014, in case the shares are held in physical form, in the Form MGT-1 within 7 days after the Board of Directors have approved the transfer of shares to be reduced to a maximum number of 200 members.
  • General meeting to be held according to Section 96 and 100 of the Companies Act, 2013 and Secretarial Standard-2 (SS-2). The Notice of the General Meeting shall be given at least 21 days before the actual date of the General Meeting in writing. It is mandatorily required that the Notice should declare the date, time, date and full address of the venue of the meeting.
  • The Company should file Form MGT-14 with the Registration of Companies (ROC) within 30 days from passing of the resolution along with required documents. The documents are:

(c). Copy of the Notice of meeting sent to the members along with all the annexures.

(d). Copy of the Memorandum of Association(MOA) and Article of Association(AOA).

(e). Copy of Attendance Sheet of General Meeting.

(f). Certified True Copies of Special resolutions.

  • Publication of advertisement under Rule 41(5) of the Companies Incorporation Rules, 2014. Accordingly, the company shall at least 21 days prior to the date of filing of Application advertise in the Form INC-25A, in a vernacular newspaper in the vernacular language in the district and also in the English language in an English newspaper. Such should be served through registered post with acknowledgment to each debenture holder, a creditor of the company, Regional Director, Registrar and Regulatory body if the company is regulated under any law for the time being in force.
  • Draft and file an application for conversion of Public Company into private company according to Rule 41(1) and 41(3) of the Companies Incorporation Rules, 2014.E-form RD-1 is to be filed within 60 daysfrom the date of passing special resolution and shall be accompanied bythe following documents:

(g). Copy of Memorandum of Association and Articles of Association, with proposed alterations.

(h). Copy of the minutes of the general meeting at which the special resolution authorizing such alteration was passed along with details of votes in favor and against with names of dissenters;

(i). Copy of Board resolution or Power of authorizing to file an application for such conversion;

(j). Declaration by key managerial personnel that the company limits the number of its members to two hundred;

(k). Declaration by key managerial personnel 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;

(l). Declaration by key managerial personnel that no resolution is pending to be filed in terms of sub-section (3) of section 179;

(m). Declaration by key managerial personnel stating that the company was never listed in any of the Regional Stock Exchanges and if was so listed, all necessary procedures were complied with in full for complete delisting of the shares in accordance with Securities Exchange Board of India

(n). list of creditors and debenture holders;

(o). list of creditors and debenture holders;

(p). affidavit verifying list of creditors and debenture holders;

(q). certified true copy of the notice calling a general meeting of the members of the company;

(r). certified true copy of the minutes and attendance sheet for the general meeting of the members of the company;

(s). Copy of newspaper advertisement.

  1. Approval of application when there is no objection according to 41(6)(a) of the Companies Incorporation Rules 2014.
  2. Submission of further documents and information if required by Regional Director under Rule 41 (6) of the Companies Incorporation Rules 2014.
  3. Submission of a copy of objections, if any, with Regional Director under Rule 41(7) of the Companies Incorporation Rules, 2014.
  4. Approval of Application of conversion from Public Company to Private Company in accordance to Rule 41(9) of the Companies Incorporation Rules, 2014.
  5. Filing of Form INC-28 with Registration of Companies(ROC) as per Rule 41(9) of the Companies Incorporation Rules, 2014.
  6. Filing of Form INC-27 with Registration of Companies(ROC) as per Section 14(2) read with Rule 33(2) of the Companies Incorporation Rules, 2014.

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