Convert a Private to Public Limited Company
A Public Limited Company is a company with limited liability whose shares are freely traded and sold to the general public. To convert a private company to a public limited company under the Companies Act 2013, you must have at least three directors, seven shareholders, and a paid-up capital of five lakh rupees.
Overview on Convert a Private to Public Limited Company
Convert a Private to Public Limited Company opens up new avenues of opportunity, particularly in terms of fundraising and market reach. The company can raise funds through a public offering and also accept deposits. This structure is suitable for medium and large-scale businesses. The conversion will be followed by government approval and changes to the MoA and AoA.
A minimum of 7 members and 3 directors are also required to convert a Pvt Ltd to a Public Ltd. Even after the conversion, the company’s rights, liabilities, powers, and obligations remain the same. Transferring shares is now possible because the restriction on transfer is lifted upon conversion.
Benefits of Convert a Private to Public Limited Company
Raising capital through public issue of shares
A public limited company’s most advantageous feature is its ability to raise shares. It can potentially attract investors from hedge funds, mutual funds, and so on if it is listed on a recognised stock exchange market. A public limited company can raise far more capital than a private limited company.
When a company goes public, it is listed on the stock exchange, and as a result, more people become aware of it and its functions, resulting in increased brand recognition, which leads to increased business.
Each shareholder’s or member’s liability is limited. With this conversion, this characteristic is preserved. Their liability is limited to the amount of stock they own. Shareholders’ or members’ individual or personal assets are not at risk.
Transferability of shares
In comparison to a private limited company, shares in a public limited company are easily transferable. Shareholders can sell their shares and profit from their liquidity. This serves as an incentive for people to invest because they are not obligated to stay with the company indefinitely.
Checklist requirements for conversion of a public limited company
- Two directors’ DSC (Digital Signature Certificate) and DIN (Director Identification Number).
- MOA (Memorandum of Association) and AOA (Article of Association) preparation ( Articles of Association).
- Card with a PAN (Permanent Account Number) and a TAN (Tax Deduction and Collection Account Number).
- Name search, application and name reservation.
- CIN (Certificate of Incorporation).
|Features||Public Limited Company||Private Limited Company|
|Invitation to public||Yes||No|
|Issue of prospectus||Yes||No|
|Quorum at AGM||5 members||2 members|
|Certificate for commencement of business||Yes||No|
|A term worked at the end of the name||Limited||Private limited|
|Managerial remuneration||No restriction||Must not exceed more than 11% of net profits|
|Statutory meeting (mandatory)||Yes||No|
DOCUMENTS NEEDED FOR CONVERT A PRIVATE TO PUBLIC LIMITED COMPANY
- A copy of the directors’ PAN card.
- Passport size photographs of directors.
- Copy of Aadhar card or voter ID.
- Copy of the rental agreement.
- Electricity or water bill (Business place).
- The copy of property papers, if it is owned.
- Landlord NOC (No Objection Certificate) for providing the format.
procedure for Convert a Private to Public Limited Company
We change the articles of incorporation and then remove the word “private” from your company’s name.
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FAQs on Convert a Private to Public Limited Company
- A director’s salary.
- Issuing dividend payments from available profits. Taking money out of a limited company, as a director’s loan.
- Claiming expenses for business-related items.