Conversion of public company (PLC) into the private company (PTC)

Apodictic Solution is here with a new Article on procedure to convert public company into the private company.

Before we understand the procedure to convert a Public Limited Company in to Private limited Company, let us first understand the term private company and public company.

Private Company: As per section 2 (68) of the companies Act, 2013 private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them.

Except One person there is requirement of minimum 2 members & 2 directors and maximum 200 members in the company.

Erstwhile there was a requirement of minimum paid up share capital which was abolished with Companies (Amendment) Act, 2015. Now there is no requirement of minimum paid up capital to incorporate a private limited company.

In layman language, private company means a company which has minimum 2 director and 2 members and there is no inclusion of public money.

Public Company: As per section 2 (71) of the companies Act, 2013 public company means which is not private company. Which means the company in which inclusion of public money is permissible. People are entitled to get shares.
Why a Public limited Company require to convert itself in to Private Limited Company?

Private company has less compliance requirement in companies Act 2013. MCA has exempted the Private limited companies from the compliance requirement of various provisions of Companies Act, 2013.

Applicable section & Rule:

Section 13, 14 and 18 of the Companies Act, 2013 and the Companies Incorporation (Fourth Amendment) Rules, 2014.

Section 13: Alteration in Memorandum of Association(MOA): According to this section, alteration of MOA is required for the company by passing special resolution in general meeting.

Section 14: For Alteration in Article of Association (AOA): According to this section, to convert from Private Limited Company into Public Limited Company or From Public Limited Company to Private Limited Company approval of members is required by passing special resolution.

But in case of conversion of PLC to PTC approval of central government is also required.

The Companies Incorporation (Fourth Amendment) Rules, 2018:

MCA on 18th December, 2018 by way of amendment inserted Rule 41 under Companies (Incorporation) Rules, 2014 for conversion of public Companies into Private Companies.

By Rule 41 MCA has assigned its power to Regional Director(RD) for approval of conversion of public companies into private companies and mention detailed documents which required to file RD with application.

It is noted that earlier the power to approve the conversion of PLC to PTC was with tribunal but Ministry of Corporate Affairs issued notification dated 18th December, 2018 to amend the Companies (Incorporation) Rules, 2014 and transfer the power to the Central Government by inserting the second proviso to sub section 1 of section 14 of the Companies Act, 2013.

Now let us understand the step by step procedure of conversion

Sr. No.	Particular	Particular
	Holding the board Meeting:
a.	Notice	Company give notice to each director at least 7 working days before the date of Board meeting along with agenda and notes to agenda.
b.	As per section 173 of Companies Act, 2013 and applicable Secretarial Standards and other applicable provisions of Companies Act, 2013	In Board Meeting Approve the agenda for conversion of PLC to PTC Approve the alteration of MOA Approve the alteration of AOA Decide the date, time and place of EOGM for member’s approval Approve the draft notice along with Explanatory Statement of the general meeting and to authorise Company Secretary or any other person to issue the Notice of General Meeting as per provisions of Companies Act and Secretarial Standards.
2.	Holding of General Meeting
	Notice Notice contain all the required agenda along with the explanatory statements.	Company has to issue notice before at least 21 clear days from the date of General Meeting.
	In General Meeting pass the special resolution if required quorum is present	Following resolution must be pass in Meeting as per section 13 & 14 of the Companies Act, 2013. Approve the conversion of PLC to PTC. Approve the alteration of MOA to comply with the provision of 2(68) of the Companies Act, 2013. Approve the alteration of AOA to comply with the provision of 2(68) of the Companies Act, 2013.
3.	Filling of E Form MGT-14 with ROC as per provision of section 117(3) of the Companies Act, 2013.	Within 30 days from the date of passing special resolution. Attachment: Signed copy of notice along with explanatory statement. Certified copy of special resolution. Signed and stamped copy of MOA & AOA of the company.
4.	Prepare application and file it to RD within 60 days from the date of passing special resolution.	Detailed required to mention in the application. Basic details of the company. Reason for conversion in to the private company. The date of Board Meeting in which resolution passed for the conversion. The date of General Meeting in which resolution passed for the conversion. Effect of the conversion to the creditors and debenture holder of the company. Details of any conversion made within last five years and outcome thereof along with copy of order.
5.	Advertisement of application in form 25A	At least 21 days before the application filed to RD; – make an advertisement in a vernacular newspaper in vernacular language in the district, and in English newspaper, which is circulated widely in the State in which registered office of the company is situated. serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company; and to the Regional Director and Registrar and to the regulatory body, if the company is regulated under any law for the time being in force. If any objection received from any person by company it shall submit the copy of the same with the RD.
6.	File an application in E-form RD-1 with requisite fees.	Attachment: a draft copy of MOA & AOA. a copy of the minutes of the general meeting held. Copy of Board resolution dated not earlier than 30 days authorising to file application for such conversion. Signed copy of Application. Signed copy of Advertisement. List of creditors and debentures holders should be attached which is not older than 30 days from the date of filling application with following details; the names and address of every creditor and debenture holder of the company; the nature and respective amounts due to them in respect of debts, claims or liabilities; in respect of any contingent or unascertained debt, the value, so far as can be justly estimated of such debt. Provided that the company shall file an affidavit, signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be managing director, where there is one, to the effect that they have made a full enquiry into affairs of the company and, having done so, have formed an opinion that the list of creditors and debenture holders is correct, and that the estimated value as given in the list of the debts or claims payable on contingency or not ascertained are proper estimates of the values of such debts and claims that there are no other debts, or claims against, the company to their knowledge. declaration by a key managerial personnel that, pursuant to the provisions of sub-section (68) of section 2 the company limits the number of its members to two hundred, stating that no deposit has been accepted by the company in violation of the Act and rules made thereunder; there has been no non-compliance of sections 73 to 76A, 177, 178, 185,186 and 188 of the Act and rules made thereunder; no resolution is pending to be filed in terms of sub-section (3) of section 179 and also 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 the applicable rules and regulations laid down by Securities Exchange Board of India: Provided that in case of such companies where no key managerial personnel is required to be appointed, the aforesaid declarations shall be filed any of the director.
7.	After submission of application to the RD	The RD examine the application and demand any further information and/or clarification or intimate company to complete the defect if any within 30 days from the date of the receipt of application.
8.	Resubmission in RD-GNL-5. Maximum of two resubmission is allowed.	The company submit the details required by the RD in GNL-5 within 15 days. In cases where such further information called for has not been provided or the defects or incompleteness has not been rectified to the satisfaction of the Regional Director within the period allowed i.e. 15 days, the Regional Director shall reject the application with reasons within 30 days from the last date up to which resubmission was required to be made or from the date of last re-submission made as the case may be.
9.	Hearing if required by the RD	Where an objection has been received or the RD on examining the application has specific objection under the provisions of Act, the same shall be recorded in writing and the Regional Director shall hold a hearing or hearings within a period thirty days , as required and direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Regional Director shall pass an order either approving or rejecting the application along with reasons within thirty days from the date of hearing, failing which it shall be deemed that application has been approved and approval order shall be automatically issued to the applicant.
9.	Approval of the RD or reject the application	If the RD satisfy with all the submission or no objection is received or all the objection solved and the application is complete in all respects, the same may be put up for orders and the concerned RD shall pass an order approving the application within 30 days from the date of receipt of the application or the date of last resubmission made, as the case may be.
10.	Certified Order	After satisfying with all the details the RD issue the conversion order to the company.
11.	Filling of order in E form INC-28	The certified copy of order shall be file by company in INC-28 within 30 days from the date of receipt of the order.
After conversion		insert the word Private” after the name of the company. make change in PAN, TAN, GST portal, bank account, PF, ESIC etc. inform the all the required authorities. change in the sign board, letterheads, stamp and all the required documents. use the copy of altered MOA & AOA.

The procedure for conversion of PLC to PTC is time consuming and lengthy process.

We at Apodictic solutions have qualified professional, who help you in complete the procedure to convert your Company.

For any queries, you can contact us on Info@apodicticsolution.com.