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PUBLIC INTO PRIVATE COMPANY

Ministry of Corporate Affairs by its notification dated 18th December 2018 has amended the Companies (Incorporation) Rules, 2014 by making Companies (Incorporation) Fourth Amendment Rules, 2018. Rule 41 has been inserted in the said rules which provides for the regulations for making application for conversion of public limited company into private limited company. Earlier the application for conversion was made with NCLT Benches having jurisdiction over companies and the same is very time-consuming process. Thereby to free the tribunals with the cases of conversion, power of approval of conversion has been transferred to Central Government. Thereafter the Central Government has delegated his powers to Regional Director vide notification S.O. 6225 (E) dated 18th December 2018 for approval of conversion of public limited company into private limited company.


PROCEDURE FOR CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY


Step 1 : To Convey and Hold a Board Meeting


Hold a meeting of its Board of directors to consider and approve the proposal for conversion of public company into private company. The following resolutions must be passed at the meeting:
(i) To approve the proposal for conversion of the company into private company.
(ii) To fix time, date and venue for holding an extraordinary general meeting of the company.
(iii) To approve notice for the general meeting along.

Step 2. Convene a General Meeting


Hold the general meeting and have the aforementioned special resolutions passed for conversion of the Public company into a Private company.

Step 3. Filing of MGT-14


Within thirty days of passing of the special resolutions, file Form MGT 14 with copy of resolution along with explanatory statement under Section 102 and amended copy of Articles of Association as attachment

Step 4. Number of Members


If the number of members of the company is above 200, appropriate steps should be taken to reduce the number to 200 or below.

Step 5. In case of Listed Company


Send to the stock exchanges where the securities of the company are listed, six copies including one certified copy of the amendments to the articles of association of the company as soon as they been approved by the company in general meeting.

Step 6. Publishment of Notice


If the Registrar of Companies so directs, publish a notice in newspaper(s) Form INC-25A, in a vernacular newspaper in the district, and in English newspaper, which is circulated widely in the State.

Step 7. Notice sent to Stock Exchange


Send to the stock exchanges where the securities of the company are listed, three copies of proceedings of the general meeting at which the special resolution was passed and also three copies of the newspaper advertisement of notice.

Step 8. Drafting of Application


Drafting of Application for conversion of public limited company into private limited company by setting out the following particulars as required under rule 41(2) of Companies (Incorporation) Rules, 2014:

Step 9. Preparation of List of Creditors and Prepared the list of Creditors


The company shall at least 21 days before the date of filing of the application serve, by registered post with acknowledgment due, individual notice on every creditor and debenture holders of the Company.

Step 10. Notice to Regional Director and Registrar


The company shall at least 21 days before the date of filing of the application serve, by registered post with acknowledgment due, a notice 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.

Step 11. Filing of Application with ROC


Filling of Application with Registrar of Companies in e-form GNL-1: It is advisable to submit a copy of application for conversion to concerned ROC.

Step 12. Filing of Application with RD


Filling of Application for conversion with Regional Director in e-form RD-1 within 60 days from the date of passing special resolution

Step 13. Approval by RD


The Regional Director will make an order approving the conversion on such terms and conditions, if any, as it thinks fit.

Step 14. Filing of Form INC-28


Obtain certified copy of order approving conversion of public company into private company and file e-form INC-28 with the Registrar of Companies within 15 days from the date of receipt of approval.



Some of the Exemptions which are applicable to the Private Company


The provisions of Section 117 shall not apply to the resolutions passed by private limited company in pursuance to the provisions of clause 179(3). No MGT- 14 shall be filed by the Company for the above Board Resolutions passed.
A private company can move the motion to appoint two or more persons as directors by a single resolution.
This means that a director can participate in a meeting wherein such matters are discussed in which he / she is interested, only after he/she discloses his/her interest.
Provided that in relation to One Person Company, small company and private company (if such private company is a start-up), the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company. Annual Return can be signed by any one director of the Company if there is no company secretary.


CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY

The legal provisions related to conversion are given in section 14 of the Companies Act, 2013 read with rule 41 of Companies (Incorporation) Rules, 2014, as amended. As per section 14 of the Companies Act, 2013 a public company may convert itself into a private company by taking approval of members by way of passing special resolution in the General Meeting and by taking the approval of Central Government on an application made in such form and manner as may be prescribed.

Relevant Provisions which are attracted Conversion of Public Company into Private Company

Section 13: Alteration of Memorandum of Association
Section 14: Alteration of Articles of Association
Section 18 : Conversion of Companies Already Registered
Rule 41: Application under section 14 for conversion of public company into private company.