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Companies Act

All about Conversion of Public Company to Private Limited Company | Procedure by Instabizfilings

December 30, 2020 by Team Instabizfilings

Blog Details

Recently, with effect from 02.11.2018 vide the Companies (Amendment) Second Ordinance, 2019, the power to pass order for conversion of public Companies into private Companies has been delegated to Regional Director (RD) whereas earlier it was with National Company Law Tribunal (NCLT) making conversion more speedy and less cumbersome.

 

Accordingly, in this article, we shall study about the applicable sections and rules, procedure, timeline, documents to be filed and other frequently asked questions on topic under discussion.

 

APPLICABLE SECTION: Section 14 of the Companies Act, 2013

APPLICABLE RULE: Rule 41 of the Companies (Incorporation) Rules, 2014

 

PROCEDURE OF CONVERSION:

 

Step 1: Convene the Board Meeting for

> Finalise the draft list of creditors

> Decide upon the day, time, date and place to convene Extra ordinary General Meeting (“EGM”)

> Approval of draft notice to convene EGM.

> Approve the draft memorandum of association

> Approve the draft articles of association.

 

Step 2: Convene EGM to pass special resolution to take shareholders’ approval for conversion into a private limited.

 

Step 3: File MGT-14 within 30 days of passing the special resolution.

Attachments:

> Certified true copy of the special resolution along with the explanatory statement.

> Altered memorandum of association

> Altered articles of association

> Notice of the convened EGM.

 

Step 4: Newspaper Advertisement and Notice

At least 21 days before the date of filing the application in Form RD-1 (i.e. the gap between the filing of application and newspaper advertisement and other things mentioned below should be minimum of 21 days), do the following:

> Advertise in Form INC-25A, in English and regional language of the state in which the registered office of the Company is situated;

> Dispatch individual notice to each creditor;

> Dispatch notice to Regional Director (RD), Registrar of Companies (ROC) and any other regulatory authority such as RBI, IRDAI, in case applicable etc.

 

Step 5: Drafting of Application to be filed with Regional Director

 

Step 6: File the application with RD in Form RD-1 after expiry of 21 days as per step 4 but within 60 days of passing of special resolution.

 

Step 7: The order as received from RD shall be filed with ROC within 15 days from the date of receipt of order in Form INC-28.

 

TIMELINE FOR CONVERSION IN SHORT

 

Sr. No.

                         Events

Timelines

1.

Convene of Board Meeting

X

2.

Convene Extra Ordinary General Meeting to approve conversion and send notice

X+25

3.

Filing of Form MGT-14

X+25+30

4.

Advertisement in INC-25A

21 days prior to filing of RD-1

5.

Notice to creditors

21 days prior to filing of RD-1

6.

Notice to RD and ROC

21 days prior to filing of RD-1

7.

Filing of Form RD-1

X+21+60

8.

RD may call for any other information or may pass order

X+21+60+30

9.

Filing of Form INC-28

Within 15 days of order of RD

 

Documents to be filed with the Application to the Regional Director

1) List of dates and events, setting out the date of board meeting and extra ordinary general meeting in which resolution for conversion was passed.

2)  Altered MOA and AOA.

3) Certified copy of minutes of extra ordinary general meeting.

4)  Power of Attorney or Board Resolution authorizing to file application.

5)  Separate Declaration with respect to the following by KMP or any of the Director:

> That total number of members are not more than 200;

> No deposit has been accepted by the Company till date;

> That there has been no non-compliance of section 73 to 76A, 177, 178, 185, 186 and 188 of the Act and rules made there under;

> That the Company was never listed on any Stock Exchange and if was so listed, all necessary procedures of delisting has been complied with Compliance with all necessary laws.

> That no enquiry, investigation or inspection is going on against the Company.

6) List of creditors, not more than 30 days, setting forth the details such as names, address, nature of amount due and total amount due. Further, an affidavit verifying the list of creditors shall also be attached.

7) Copy of newspaper advertisement.

 


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