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PRIVATE LIMITED COMPANY

A minimum of two directors and shareholders are needed in order to register a private limited company. In India, Private Limited Company is the most popular and popular type of legal entity. Registration of a Private Limited Company will be governed by The Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014. A natural person can be both director and a shareholder while a corporate legal entity can only be a shareholder. Ability to raise equity funds, limited liability protection to shareholders and perpetuity of existence are the unique privileges of a private limited company making it the most desirable type of business entity for small to medium sizes, professionally managed corporations. Permission to be Shareholders and/or Directors of a company with Foreign Direct Investments are given for NRI’s, Foreign Nationals and Foreign Corporate Entities making it a suitable choice for foreign promoters.


PUBLIC LIMITED COMPANY

For large and medium sized businesses that intended to raise capital from the public, Public Limited Company type of corporate entity is the ideal preference.

Public limited company has several more stringent regulatory requirements with most of the features of a Private Limited Company in comparison to Private Limited Company. For establishing a PLC, a minimum of three directors are required. Being a Public Company will allow a firm to sell shares to investors which is beneficial in raising capital. Limited liability is provided to its owners and management in a Public Limited Company. In a PLC, the minimum number of members is seven and there is no limit for capacity for maximum number of members. Shares, number of shares, formation, meetings, number, directors, number of members, management, etc. are the identifying marks of a Public Limited Company. More transparency and ease in transfer of shareholding, ability to have any number of members and all the benefits of Private Limited Company are available in a Public Limited Company.


Benefits of registering a Limited Company

Separate Legal Entity

Established under the Act, a company is a legal unit and an authorized person. Therefore, it has a range of legal abilities like incurring of liability and owning of property. for debts incurred by the company, Creditors of a company will not have any liability from the members (Shareholders/Directors).

Easy Transferability

Shares of the company are transferable from a shareholder to any other person as company has limited number of shares. They can be transferred easily by filing, signing a share transfer form and handing over the shares to the buyer along with share certificate.

Owning Property

A company being an unauthorized person can obtain, own, buy and sell property, on its name. As far as the company is an ongoing consent, Shareholders cannot make a claim upon the property of a company.

Uninterrupted Existence

A company has ‘perpetual succession’ which means, it remains to be in constant existence until it is legally dissolved. Regardless of the modifications in the membership, a company being a separate legal person, is unaltered by the departure or demise of any member but will continue to exist.

Borrowing Capacity

Better avenues are enjoyed by the company for borrowing of funds. It can also issue debentures (secured /unsecured) and it also accepts deposits from the public. Instead of providing financial assistance to proprietary concerns or partnership firms, Banks and Financial institutions provide financial assistance to a company.


Conversion from Private Limited to Public Limited Company

A company which is involved in one class can transform to other class by having modifications in the AOA and MOA. Pertaining to this regard, an application must be made to the Registrar. When it complies with the required steps, former registration of the company shall be closed.  When all documents related to conversion are registered, a Certificate of incorporation will be issued by the Registrar.

The changes encountered in the MOA and AOA in a private limited company are supposed to be modified in an effective manner which will no longer involve the constraints required in the articles of private limited company. i.e, transfer of shares, minimum and maximum number of members, number of directors, quorum of the general meeting, etc.

From the date of the mentioned alternation, a company ceases to be a private company.

For the transformation, any obligations, claim, liabilities and debts are not assumed by the company. Such debts, liabilities and contracts can be accomplished and executed in regards with no such exchange.


Procedure for Conversion of a Private Company into a Public Company

1) Calling of Board Meeting

For the conversion of Private limited company into a public company, discussions and to get in-principal approval of Directors is required by transforming the AOA and fixing place, time and date for holding of the general meeting to get share-holders approval.

2) Issue of Notice of General Meeting:

Notice of the General meeting will be issued to all the Auditors, Directors and Members of the firm in accordance with the provisions of 101-Section of the Companies Act, 2013 and Secretarial standards.

3) Holding of General Meeting:

In order to get the shareholder’s approval for conversion of private limited company into public limited company, by passing the required Special resolution along with the changes in the AOA under section 14. The Holding of General Meeting will be scheduled with this regard accordingly with the provisions of 101-Section of the Companies Act, 2013 and Secretarial Standards-2.

4) Filling of e-Forms:

For conversion of private Company into a public company and in alteration of AOA under section-14, concerned Registrar of Companies should file E-forms at varied stages according to the details which are mentioned below.

A. E-form MGT-14


For filing special resolution with ROC, passed for conversion of Private Company into a Public company.

In case of modification of AOA for the conversion of Private Limited Company into a Public Limited Company, A Special resolution needs to be passed under section 14. As per section 117(3)(a), special resolution copy is needed to be filed with the concerned ROC who directs the filing of E-form MGT-14 within 30 days of special resolution passage in general meeting on that account.


Attachments of E-form M GT-14:

a) Altered AOA and MOA
b) Certified true copy of special resolution and board resolution which can be attached as an optional attachment.
c) Along with copy of explanatory statement under 102-section, resolution of members is required.

   

B. E-form INC-27


Application for conversion of a private company into a public company

To enable the conversion of private limited company into public limited company and vice versa, as per the Rule 33 of Companies (Incorporation) Rules, 2014, the application shall be filed in E-form No. INC-27 with fee. Simultaneously, with required annexures and prescribed fee, an application for conversion of a private limited company into a public limited company needs to be filed in E-form INC-27 to the ROC consent.


Attachments of E-form INC-27:

a) Altered AOA.
b) In case of any additional information, an optional attachment can be provided.
c) Certified true copy of board resolution may be attached as an optional attachment.
d) Minutes of the member are meeting where approval was given for conversion and altered AOA.

The Registrar in accordance with the provisions of Chapter II of the Companies Act, 2013, on successful application by the company issue a certificate of incorporation in the same manner as its first registration and shall close the former registration of the company and by registering the documents.