As per section 18 of the Companies Act, 2013, if any form of company that is already registered wishes to convert itself into another form of a company, it can do so by making certain changes in the Memorandum of Association and Articles of Association.
This law note covers the conversion of companies under the Companies Act, 2013. Have a look.
How Can a Company Be Converted?
Conversion can take place in the following ways:
1. By alteration of MOA and AOA: Any form of company can convert itself into any other company by altering its Memorandum of Association and Articles of Association as per the provisions of company law.
2. File an application to the Registrar: Application of such conversion shall be filed with the registrar of companies. Once the registrar is satisfied with the registration provisions, he will close the previous registration of that particular company.
3. Issue a certificate of incorporation: After completing the formalities of registering the required documents, the registrar will provide a fresh certificate of incorporation to the company.
4. No effect on the debts, liabilities, etc., incurred before conversion: After registering into a new form of company, the company will still have the same debts, liabilities, obligations, contracts, etc., as it had in the previous form of company or organization.
Conversion of Private Company Into Public Company
The provisions for altering the company’s articles are laid down in section 14 of the Companies Act. At the time of conversion, the company can modify its Articles of Association by way of this section whether converting from:
- Private company to public company, or
- Public company to private company with the approval of its members by way of special resolution.
For the process of conversion, a private company is required to take the following steps:
1. Call a board meeting for:
- accepting the request for the company’s conversion to a public company; and
- setting a date, time, and location for the company’s general meeting to pass the requisite special resolution for conversion through postal ballot.
2. Hold General Meeting and pass a special resolution for altering Articles of Association, name clause and liability clause of memorandum.
3. Copy of special resolutions along with explanatory statements will be filed with the registrar within thirty days in Form MGT – 14.
4. Increase the number of directors to three and members to a minimum of seven.
5. Within fifteen days of obtaining the tribunal’s order, a copy of the competent authority’s order approving the change must be filed with the registrar in Form INC – 27 with a fee, along with the printed copy.
6. Registrar of companies will be issued a fresh certificate of incorporation for conversion of a private company into a public company.
7. Paint the new name of the company on all the signboards, stationery items and certificates.
You should check out: 13 Characteristics of a Company
Procedure for Conversion of Public Company Into Private Company
Here are the necessary steps for converting a public company into a private company:
1. Hold a meeting of the board of directors to discuss and approve the plan for the conversion of the public firm to a private one and fix a time, date, and location for the company’s general meeting.
2. Hold a general meeting and pass a special resolution for the alteration of Articles of Association, name clause and liability clause of memorandum.
3. File the MGT 14 form along with the copy of the resolution within thirty days of passing the special resolution.
4. If necessary, reduce the number of members to 200 or less.
5. Send six copies, including one certified copy of the amendments, to the stock exchange where the securities are listed. As soon as they have been approved by the company in the general meeting, send six copies of the amendment, including one certified copy of the amendments to the Articles of Association to the stock exchanges where the company’s securities are listed.
6. According to section 14 of the Companies Act, the alteration made in the Articles of Association of a company having the effect of converting a public company into a private company will be effective only after the central government’s approval in the prescribed manner.
Three copies of proceedings of the general meeting will be sent to the stock exchanges where the securities of the company are listed. Three copies of the amendments will be sent for advertisement in the newspaper.
7. After the central government has approved the alteration of the articles, a printed copy of the altered articles of the company should be filed with the concerned Registrar of Companies in form INC 27 within one month of the date of receipt of the order of approval.
8. Registrar will then issue the certificate of incorporation in respect of the converted private company.
You should read this: Types and Classification of Company Under the Companies Act
Conversion of One Person Company to Private Company or Public Company
One Person Company (OPC) can convert voluntarily into any kind of company only after two years of its incorporation as One Person Company without any limit or restriction.
When an OPC’s paid-up share capital surpasses rupees fifty lakhs or its average annual turnover for the relevant period exceeds two crores, it is required to convert.
OPC cannot continue to remain an OPC if its paid-up share capital exceeds rupees fifty lakhs, with an average annual turnover of more than two crores. If such a situation arises, OPC shall, within sixty days from the date of applicability, give notice to the registrar in Form INC – 5 informing that it is no longer a One Person Company and that it must now change to a private or public business.
Within six months of the date on which its paid-up share capital exceeds rupees fifty lakhs or the last day of the relevant period during which its average annual turnover exceeds two crore rupees, as the case may be, such One Person Company must convert itself into either a private company with at least two members and two directors or a public company with at least two members and two directors.
Conversion of a Section 8 Company Into Any Other Kind of Company
A company registered under section 8 that wishes to convert itself into another type of company must pass a special resolution at a general meeting authorising the conversion. And after conversion, the company will not be entitled to any privileges or concessions they are currently enjoying.
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