One of the highly recommended small enterprises in India, particularly for startups, is a Private Limited Company, which is run privately. The Companies Act of 2013 governs the registration of private limited companies in India. A private corporation must have a minimum of 2 shareholders and a maximum of 200 members, per the Companies Act of 2013. The personal assets of members or shareholders of a private limited company are not susceptible to sale in the event of financial danger, thus they should have minimal responsibility.
A limited business offers its owners and management team limited responsibility. However, a firm can sell shares to investors in a public limited company, which is regarded as a good act in obtaining funds for the company. A Public Limited Company must have a minimum of three Directors and can have an unlimited number of members. Importantly, compared to a Private Limited Company, it has stricter regulatory requirements.
Although a public limited company is a different kind of business, it shares many traits with a private limited company. More advantages include its ease of transfer, ability to borrow, limited liability, and continuous life. Public Limited Company is registered in India just like any other business, in accordance with the requirements of the Companies Act of 2013.
Comparing private and public limited companies
- A public limited company is a specific kind of corporation whose stocks may be traded by the general public and that can be listed on a recognized stock exchange. A private limited corporation, however, is neither sold to the general public nor is it listed on the stock exchange. It is privately admitted by its affiliates or members.
- The public limited company is required to hold a general body meeting that includes all of its members. A private company, however, is exempt from this requirement.
- A public limited company is required to publish a prospectus or statement. However, this procedure is not in a private company.
- The post-incorporation certificate of beginning is required for a public limited company to begin operating. A private company, however, can begin operations quickly after establishment.
- A public business has a very broad reach because its directors are subject to numerous legal restrictions as well as the ability to obtain funds from the general public. Contrarily, there are fewer members and fewer limitations, hence a private limited company’s scope is constrained.
- Additionally, a Public Limited Company has a stronger regulatory obligation because the public, who are the owners or potential shareholders, must be informed of all pertinent facts.
- A signed written resolution is approved, along with details about private limited company general meetings. In contrast, a public business should choose a corporate secretary to handle all of these tasks.
The paperwork needed to change a private limited company into a public limited company
- A copy of the directors’ PAN cards
- A copy of each director’s voter ID or Aadhar card
- Director portraits the size of a passport.
- The lease for the designated business location.
- Water or electricity bill for the registered business location.
- A copy of the property paperwork is necessary if the office is located in its own location.
- The landlord’s NOC, or No Objection Certificate.
Changing a private limited corporation to a public limited company
In essence, a company that has already signed up for one type of business structure may switch to a different type of business structure by amending the firm’s memorandum and articles. It is necessary to submit an application that complies with the requirements to the registrar of that particular state. After the registrar has verified and is satisfied with all the procedures and the relevant paperwork, the company is formally registered. After the registration procedure, the registrar verifies the documents needed for the conversion; if everything is in order, the registrar will issue a certificate of incorporation. The process for becoming a public limited company.
According to the relevant provisos of the Companies Act of 2013 and the Companies (Incorporation) Rules of 2014, the following procedure must be followed in order to convert a private limited company into a public limited company:
A formal notice outlining the agenda for the board meeting must be given to the directors. This notification must be delivered to each company’s registered address at least a week or seven days before the scheduled date of the board meeting. The following topics must be included in the board meeting’s agenda for discussion:
- Adoption of a new and updated MOA or Memorandum of Association must get the shareholders’ or members’ approval.
- Adoption of newly revised articles of association (AOA).
- Becoming a public limited company from a private limited corporation.
- An individual is given permission to organize an extraordinary general meeting and is then given authority to distribute the notice of the EGM.
- Additionally, the location, timing, and date of the extraordinary general meeting must be determined.
- Approving a Board Resolution to expand the number of shareholders, directors, or members because, in accordance with the requirements of Section 149(1)(a) of the Companies Act 2013, a public limited company must have at least three directors.
Publication of an EGM notice and announcement of the EGM
Following the conclusion of the Board Meeting, the Director and Company Secretary designated to distribute the notice of the extraordinary general meeting may do so to all of the following:
The notice of the EGM or extraordinary general meeting must be published at least 21 days before the EGM or special general meeting is scheduled to take place. Additionally, if and only if not less than 95% of the shareholders or members who are entitled to vote at the meeting consent, a shorter notice time must be granted. The consent must be obtained in writing or electronically, such as through email, SMS, etc. The shareholders will approve the resolutions during the EGM, or extraordinary general meeting.
Filing of FORM ROC
Formalities for filing the form with the Registrar of Companies must be completed within the allotted time period after the company’s resolutions were approved at the extraordinary general meeting or EGM.
a) E-Form MGT – 14: This form, E-Form MGT – 14, must be submitted to the ROC with the required fees within 30 days of receiving their solutions. The notice of the extraordinary general meeting, also known as the EGM, coupled with the Explanatory Statement in accordance with Section 102 of the Act may be filed on the MCA portal with the form.
– Certified copies of the resolutions that the company’s extraordinary general meeting, or EGM, adopted.
Copies of the recently drafted MOA and the recently drafted AOA are provided.
b) E-Form INC – 27: The application for converting a private limited company into a public limited company is made using this E-Form INC – 27 form. Within 15 days of the extraordinary general meeting’s (EGM) resolutions being adopted, this form may be lodged with the RoC. The form must be accompanied by the following documents:
– The minutes from the EGM, or extraordinary general meeting.
– A copy of the most recent AOA draught.
– A copy of the most recent MOA draught.
– A copy of any resolution(s) adopted at the EGM, or extraordinary general meeting. – A list of the company’s shareholders or members, together with copies of the important papers.
Post Requirements for conversion
- The company must apply for a new PAN card.
- The new firm name should be updated on all letterheads and business-related stationery.
- The company’s bank account information has to be updated.
- The tax authorities and any other person who may be affected must be informed of the conversion into a public limited company.
- The earliest possible time should be used to generate printed copies of the freshly drafted MOA and AOA.
- Another benefit of conversion is that the company will also be listed on the stock exchange. Because it makes it easier for the business to scale its operations and raise more capital for the enterprise.
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