Private Limited To Public Limited

Private Limited To Public Limited

Although private entity is a corporate entity and enjoys the benefit of registered corporate but conversion of a private entity into public concern has its reasons, significance and vary accordingly.

A Public Company has seven or more members and can invite public to subscribe to its shares. A subsidiary company of a Public company is deemed to be a Public company.

A Private company is an organization which limits its number of members to 200 and cannot invite public to subscribe to its shares. The Companies Act, 2013 provides for converting a Public Company to a Private Company by altering the MOA and AOA of the company.

The main advantage of Public Company is that it can raise reserves at a large scale without approaching banking system and reducing debt whereas Private Companies which are privately owned, all the reserves are raised by existing members, shareholders and promoters. If a Private company goes public then the risk is also shared among the shareholders. Public companies once recorded, get indirect promotions and support through stock exchange websites where their stocks are recorded.

Benefits of converting private company into public company:

  • Public company is the only corporate form which enjoys inflow of public investments by issuing shares to general public.
  • Public company raises capital from general public and makes itself delicious.
  • Shareholders investing in public company expect something in return of their investment more like ‘give and take’ school of thought.
  • Public limited company enjoys better market recognition and bestows confidence in the stakeholders.

Procedure for Conversion of Private Limited Company into private limited company

  • Board Meeting to take director’s approval for conversion.
  • General Meeting to take member’s approval.
  • Filing of prescribed forms with ROC.
  • Issuance of fresh certificate by ROC.

Requirements for Conversion

There are certain provisions/conditions needs to be fulfilled during conversion of Private Limited To Public Limited.

They are as follows:

  • Adopt new Articles of Association (AOA) and Memorandum of Association (MOA) after conversion.
  • Minimum share capital of the public company will become Rs. 5, 00,000/-
  • Minimum number of directors will become 3 in case of public company.
  • Both the directors of private company will be allotted DIN.
  • A minimum number of shareholders will be 7 in a case of public company.

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