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Conversion of ltd company to Pvt ltd company

Gopal (CEO) (89 Points)

30 January 2010

I have a company which was incorporatred as limited company i n the year 2007. But till today we have not obtained business commenvemnet certificate. No business is carried out. Now we want this company to be converted to private limited company. Can we do now and if so what rae the procedures. Please can any one let me know the details as it is very urgent.

Gopal

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3 Replies

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 30 January 2010

GENERAL NOTES
The power to approve conversion of public company into private company has been
delegated to Registrar of Companies.
In considering an application for conversion, the guiding criterion is whether a
proposal would be in the best interests of the company itself and whether there is a large
measure of agreement among the shareholders to the proposed conversion. In particular,
an attempt is made to ascertain if the proposal is prompted merely by a desire to
overcome the restrictions imposed by some of the provisions of the Companies Act,
which apply only to public companies e.g. sections 295 and 372A, etc. or if the
conversion is generally needed for carrying on business of the company more efficiently.
[Sixth Annual Report of the Department]
A resolution to convert a public company into a private company if bona fide and in
the interest of the company as a whole and consistent with the objects in the
memorandum, binds the dissentient shareholders. [Bai Rambha v Master Silk Mills AIR
1955 NOC 997 (Sau)]
Under section 31 of the Companies Act, 1956, any alteration made in the Articles
which has the effect of converting a public company into a private company shall not
have effect unless such alteration has been approved by the Central Government. (powers
delegated to the Registrar of Companies)
Conversion of status of company from public to private would become effective
from the date of receipt of the approval of the Registrar though the change of name would
become effective on the issue of fresh certificate of incorporation. [Section 23(1)]
The Act does not contemplate new articles of association, and where it purports to be
so, it is nothing more than a special resolution and as such does not require to be
stamped. [New Egerton Woollen Mills (1900) ILR 22 ALL 131]
PROCEDURE
1. The Board of directors of the public company shall consider the proposal of
conversion at a meeting and would resolve by means of a resolution that subject
to necessary approvals u/s 31, the company shall be converted into a private
limited company and will include the word "Private" before the word "Limited"
in its name.
2. While altering the articles, ensure that it contains a clause prohibiting any one
from the public to subscribe for any shares in, or debentures of, the company
and prohibits any invitation or acceptance of deposits from person other than its
members, directors or their relatives.

3. If the company requires any approval or permission for alterations of articles
such as SEBI, RBI, FIs, banks, etc., the resolution should state that it is subject
to such approval/permission.
4. Confirm that the numbers of members are not exceeding fifty.
5. Give notice in newspapers once in English and local language, where the
registered office of the company is situated for conversion of company into
private limited for providing opportunity to raise objections, if any, before the
Registrar with a copy to the company within a period of 21 days from the date of
notice and a copy of the notice be produced before the Registrar alongwith the
application.
6. Give notice to all the creditors having secured or unsecured liabilities in excess
of Rs.1.00 Lacs by Registered post and proof of delivery of such notice is
required to be produced before the Registrar alongwith the application.
7. The Board of directors will authorise calling a general meeting of members by
giving notice of at least 25 days before the meeting and will also approve draft
notice to be sent to the members enclosing with the Explanatory statement under
section 172 of Companies Act, 1956.
8. Forward promptly three copies of the notice and a copy of the proceedings of the
general meeting to the stock exchange(s) where the company's shares are listed.
Also forward six copies (one of which will be certified) of the amendments
made in the Articles immediately after they are adopted by the general meeting.
9. The Board of directors will authorise a director and/or the secretary to move an
application in e-Form 1B to the concerned ROC for approval after the proposal
of conversion is approved at the general meeting of the shareholders by means
of a special resolution.
10. Certified copy of the special resolution along with Explanatory Statements and
amended copy of the Memorandum and Articles shall be filed with the ROC
within 30 days of passing of the resolution in terms of section 192 in e-Form 23.
11. Make an application in e-Form 1B within a period of 30 days from the date of
resolution passed by the members, to the ROC concerned, attaching the
following documents with the application alongwith the fee prescribed under
Companies (Fees on Applications) Rules, 19991 as amended.
(a) Copy of the special resolution passed for alteration of articles for
conversion of status.
(b) Copy of minutes of the meeting of members where resolution has been
passed.
(c) Copy of the notice of general meeting alongwith explanatory statement.
(d) Copy of the notice given to the creditors having liability exceeding Rs. One
Lacs alongwith evidence for dispatch of notice.
(e) Copy of the general public notice given in newspaper.
(f) Copy of any approval order obtained from the concerned authorities (such
as, RBI, IRDA, SEBI, RBI etc.) or the concerned department
12. Change the name in all documents of the company by inserting "Private" before
the word "Limited".
13. Notify the change to the bankers, customers, Government and other statutory
authorities and others wherever necessary.