PRACTICE DETAILS
- Lawyer Mr. Shaman Jain
- Skills Compliance
- CATEGORY Compliances
ABOUT THIS PRACTICE
When a private company is converted into a Public Company it unbolts door of new opportunities, predominantly in the form of fundraising and reach of the market. The company can raise funds via Public Issue and accept deposits too. This structure is suitable for the medium and large scale businesses. The conversion will be followed by the approval from Government and alteration to MoA & AoA.
Additionally , a minimum of 7 members and 3 directors are required for conversion of Pvt Ltd to Public Ltd. The rights, responsibilities ,authorities and constraints remain same for the company even after the conversion. Removing the restriction on transfer from conversion makes the transfer of shares possible .
Why Public Limited Company is a Good Option?
It provides an easy access to Public for raising funds. Public Limited Company is the single corporate form of establishment that is authorised to raise funds from the general public. It is convenient for Public Limited Company to borrow funds. It can issue debentures, secured as well as unsecured, accept deposits from the public, etc. Even the huge financial assistance is easily offered to Public Limited Companies through banking and by financial institutions .
Surprisingly, a closely held Company can operate like a Public Company without weakening promoters’ stake.
High market recognition: Public Limited Companies are better identified in the market in comparison to other business forms and develope belief amongst their stakeholders.
Minimum Requirements Needed for Conversion
- Minimum Authorised Share Capital shall be Rs. 500,000 (INR Five Lac).
- Minimum Paid-up Share Capital shall be Rs. 500,000 (INR Five Lac).
- Minimum 7 Shareholders.
- Minimum 3 Directors. (Same people can act as the directors and shareholders )
- In case the above requirements are not satisfied by the Private Company, then the suitable alterations / changes must be done before conversion.
- DIN (Director Identification Number) for all the Directors.
- DSC (Digital Signature Certificate) for one of the Directors.
Procedure
- Board Meeting.
- Notice of General Meeting.
- Filing of Special Resolution with RoC.
- Filing of Prospectus or Statement in lieu of prospectus.
Documents Required
- PAN Card: PAN Card of directors and shareholders, Foreign nationals may provide passport
- Address Proof: Telephone Bill /Electricity Bill/ Latest Bank Account Statement of Shareholders and Directors
- Photograph: Latest Passport size photograph of all directors and shareholders
- Business Address Proof: Latest Electricity Bill/ Telephone Bill of the registered office address
- NOC from owner: No Objection Certificate to be obtained from the owner of registered office
- Rent Agreement: Rent Agreement of the registered office should be provided, if any
- Income Tax Returns Acknowledgement: ITR filed for the previous financial year to be submitted
- Identity Proof: Voter ID/ Passport/ Driving License of Shareholders and Directors
- Incorporation documents: Certificate of Incorporation, MoA & AoA to be provided
- Financial Statements: Duly certified copy of latest audited Financial Statements
- NOTE: In case of NRI or Foreign National, documents of director(s) must be notarized or apostilled
Advantages of Public Limited Company over Private limited
- Public Limited is capable of generating complete funds required from it through public as per as its Authorized Share Capital only if the company is listed on stock exchange. It enjoys the leverage to issue shares to general public and raise its funds. It can save banking costs and interest cost whereas a Private limited has to necessarily bear these costs in order to raise fund.
- Transfer of shares can be easily done for a public limited company . Any shareholder of the public limited company can conveniently transfer its share simply by filing share transfer form and passing on share certificate to the buyer. On the other hand, transfer of shares of private limited company is a monotonous task.
- Public limited company is required to obey a number of compliances, give disclosures in front of various regulatory authorities and file various forms with different regulatory bodies which in turn increases the reliability of the company. Even though, this procedure is a little tiresome, it definitely adds to trustworthiness of the company for investors.
- Public Limited is competent to raise as much funds as required from public till the limit of its permitted Share Capital provided that the company is listed on stock exchange. It enjoys the autonomy to issue shares to general public to raise its funds. All this can save banking costs and interest cost for a public limited which a Private limited must bear so as to raise funds.
- Public company can opt for a listing of its shares on the stock exchange in accordance with the listing compliances. It makes the shares of the company accessible effortlessly and widely reachable for the general public .
- There is no restriction on number of members in a public limited company, whereas, a private limited company can only have 200 members .
