The transfer of shares is restricted by a private company’s Articles of Association (AoA).It is against the law for a private company to solicit public subscriptions for its shares. A public company, on the other hand, does not have any such restrictions regarding the transferability of its shares or the invitation to the general public to subscribe for its shares. Each company has advantages and disadvantages. In this article, we will talk about how to change a private company into a public company if the applicant wants to change the type of business. The Companies Act of 2013’s relevant provisions for converting a private company into a public company are discussed in this article.
What distinguishes public and private businesses?
It is essential to keep in mind that the Companies Act of 2013 provides various classes of companies, the most common of which are Private and Public Companies. The following requirements are present in these businesses:
A private company is one with articles of association (AoA) that restrict the transferability of its shares and prevent the general public from purchasing its shares, as stated in Section 2(68) of the Companies Act of 2013.This is one of the distinguishing characteristics of a Private Company, which is the primary distinction between a Public Company and a Private Company.
Except for one-person businesses, private companies can only have up to 200 members. Any employees who have previously worked for the company are not included in this limit. The law does not allow shareholders to freely transfer their shares, so the private company has many privileges and exemptions because the members’ interests are limited and the law has granted these corporations many privileges and exemptions.
Public Company Section 2(71) of the Companies Act of 2013 provides a definition of a public company. A Private to Public Limited Company sells all or part of itself to the public during its initial public offering. This is not a private business in which shares cannot be sold to the public. Public companies can sell their shares to the public on an open market to raise capital for expansion.
What are the most important considerations when converting a private company to a public one?
We need to take into consideration a number of rules and regulations that need to be adhered to in order to transform a pvt company registration into a public one.
The members of the company must give their approval to the process of converting the business from a private to a public one.
The word “private” needs to be removed from the name clause in the Memorandum of Association (MoA).
Section 3(1) of the Companies Act of 2013 stipulates that there must be seven members of the company prior to conversion.
The number of directors will be increased from two to three in accordance with Section 149(1) of the Companies Act of 2013.
The Registrar of Companies (RoC) must receive all annual returns and financial statements in order to maintain compliance with the requirement.
In accordance with Rule 29(1) of the Companies (Incorporation) Rules, 2014, the company is required to pay all matured deposits.
You need to fill out an application if you want to change a company’s Permanent Account Number (PAN).
The company must report its activities to the Federal Government in the jurisdiction where it is registered.
The Articles of Association (AoA) should be updated to meet the requirements of a Private Limited Company.
Additionally, the Central Government ought to approve the Conversion.