Procedure of converting Public Company into Private Company

In this write-up, we have discussed the detailed process for converting a Public company into a Private company.

Features of a Private Company:

- It can have upto 200 shareholders
- It limits the owner’s liability to ownership stake
- It restricts the transfer of shares
- It prohibits the invitation to the public for the subscription of shares and debentures

Applicable Sections/Rules:

- Section 13/14/18 of CA, 2013
- Rule 40 of Companies (Incorporation) Fourth Amendment Rules, 2018

For Converting Public Company into Private Company, a Company has to Pass Special Resolution in General Meeting. 

Steps for converting public company into private company:

1. Convey and hold the Board Meeting.
2. Issue the notice of General Meeting & hold the General Meeting.
3. File MGT-14 within 30 days of passing Special Resolution

Required Documents for MGT-14:

- Certified true copy of SR
- Copy of Notice of Meeting sent to members
- A printed copy of altered copy of MOA/AOA.

4. The Company shall atleast 21 days before the date of filing of application shall:

-  Advertise a notice in Form INC-25A in English and vernacular language in a State where the Company is situated.

-  Serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company, 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.

5.  File e-Form RD-1, within 60 days from the date of passing Special Resolution.

Required documents for e form RD-1:

- Drafter copy of MOA/AOA, supported with the proposed alterations
- Copy of minutes of General Meeting
- Copy of BR/Power of attorney authorizing for filing an application
- Declaration by KMP/Director:

stating the company limits its membership to 200, complied with section 73, 177, 178, 185, 186 & 188 of the Act and the rules made thereunder,

No resolution is filed under section 179(3), Company was not listed in any of the stock exchanges and if listed all required procedure were compiled with as per SEBI Act, 1992

In case of Objection/No Objection

6. If there is no objection with response to the advertisement, the RD may approve the proposal within 30 days of receiving the same.

a. Where the Regional Director on examining the application finds it necessary to call for further information or finds such application to be defective or incomplete in any respect, he shall within thirty days from the date of receipt of the application, give intimation of such information called for or defects or incompleteness, on the last intimated e-mail address of the person or the company, which has filed such application, directing the person or the company to furnish such information, to rectify defects or incompleteness and to re-submit such application within a period of 15 days in e-Form No. RD-GNL-5

b. 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 above mentioned time, the Regional Director shall reject the application with reasons within thirty days from the date of filing application or within thirty days from the date of last re-submission made, as the case may be.

c. Where no order for approval or re-submission or rejection has been explicitly made by the Regional Director within the stipulated period of thirty days, it shall be deemed that the application stands approved and an approval order shall be automatically issued to the applicant.

Maximum 2 re-submissions shall be allowed.

7.  File Form INC-28 to ROC within 30 days of date of receipt of order by RD. After satisfying himself that the provisions required for registration of a company have been compiled with, the Registrar shall close the former registration and issue the COI in the same manner as its first registration.

Now the question is Why a company will change its status from ‘Public’ to ‘Private’ and the answer is the exemptions granted under CA, 2013. Following are the relevant notifications for exemptions:

Notification dated 13-06-2017:
http://www.mca.gov.in/Ministry/pdf/ExemptionPrivateCompanies.pdf

Notification dated 05-06-2015:
http://www.mca.gov.in/Ministry/pdf/Exemptions_to_private_companies_05062015.pdf

The author of this article is a Company Secretary by Profession and he can be reached at csektamaheshwari14@gmail.com.

The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information's provided herein above.