What is a Private Company and Public Company?

 In the Companies Act, 2013 there are different classes of companies, from which the most prominent in the corporate world are the private companies as well as the publicly traded companies.

Private Company

A Private Company is defined by Section 2(68) of the Companies Act, 2013. The Company's Articles of Association (AoA) restrict the transferability of its shares, and prevent the general public from subscribing to it. A Private Company differs from a Public Company mainly based on this factor.

An individual company can have up to 200 members (except for a one-person company). This number does not include former employees or current employees. The law has granted several privileges and exemptions to Private Companies as they do not transfer shares freely and have limited interests of members.

Public Company

Public Companies are defined under Section 2(71) of the Companies Act, 2013. They sell all or part of themselves in an initial public offering to the public. They are not Private Companies whose shares cannot be transferred to the public. To raise capital, the public company can sell shares to the public on an open market to expand.

What are the Key considerations for Conversion of Private Company to Public Company?

Conversion of private company to a public company comes with specific rules to follow that need to be considered when the process is taking place. The key points to be taken into account are as follows:

  • In order to convert from a private corporation to a public corporation, the company members must approve the conversion.

  •  A change should be made to the name clause of the Memorandum of Association (MoA) so that the word private is not included.

  •  According to the Companies Act, 2013, Section 3(1) prescribes that a company must have a minimum of seven members before it can be converted.

  • As prescribed by Section 149(1) of the Companies Act, 2013, the number of directors should be increased to 3.

  • It is the responsibility of the company to file all of its annual return or financial statements required to be filed with the Registrar of Companies (RoC).

  • Upon maturity of all deposits, the Company shall pay them according to Rule 29(1) of the Companies (Incorporation) Rules, 2014.

  • If the Company's Permanent Account Number (PAN) needs to be modified, it should be applied for.

  • The company must provide information to the government of the country where it is registered.

  • It is necessary to alter the Articles of Association (AoA) so that Private Limited Companies are no longer restricted and limited.

  • In addition to the Central Government, the Conversion should be approved by them.

What Documents are Required for Conversion of Private Company to Public Company?

Private companies are required to convert into public companies by submitting the following documents:

  • The digital signature certificates (DSCs) of all directors

  • Numbers of all directors' identifications

  • Board member's Permanent Account Number (PAN)

  • A passport-sized photograph of each director

  • Copy of Adhaar Card

  • Copy of the rent agreement (if the property is rented)

  • A bill for electricity or water (if your business is located in a building)

  • Copy of property papers (if owned)

  • Certificate of No Objection (NOC) from the Land Lord

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