Conversion of a private company to a public company is one of the most essential steps in every company. It gives new sources of funding, raising the company profile among people and adding more trust in the market.

Still, this process raises several legal, administrative, and practical issues. We will discuss what it means to convert a private company into a public company.

Differences between a public and a private company

The fundamental distinction between a private and a public corporation would help to prepare one to explain the conversion process:

1. Number of Shareholders: Private companies have no more than 200 shareholders, public companies are not subject to any restrictions regarding the number of shareholders.
2. Transfer of Shares: In public businesses, shares are transferrable, but in private companies, transfer of shares is tightly limited.
3. Raising Capital: Such capital raising, however, is limited to public firms, which can generate money by selling certain shares to the general public via what is known as an initial public offering or IPO, a facility a private company cannot use on its own.

What are the reasons for conversion from a private company to a public company?

Availability of Funds

Perhaps one of the most compelling reasons why companies change their form to public enterprises is that it makes them accessible to a much bigger pool of money where they can sell their shares to the public. It also allows businesses to have cash for debt servicing, acquisitions, or natural expansion.

Improved Credibility

Being strict about reporting and regulation would make public companies living up to those levels, hence having more trust in the market. They might increase the chances of becoming more visible to their clients and their partners as well as investors.

More liquidity for the shareholders

The process of going public makes it possible for founders or initial investors and shareholders to sell shares in the stock market. Their stock becomes a liquid form, and they could expect returns.

Attracting Talent

Typically using stock options and share-based rewards, public firms would attract and retain the brightest and best employees, private firms do not have ready access to this option.

Required Documents to convert a private company to a public company?

The documents needed to convert a private company to a public company is as follows:

1. Director Digital Signature Certificate (DSC)
2. All Directors’ Identification Number: 
3. Card with all Directors’ Permanent Account Number (PAN)
4. Passport-size photos of every Director
5. Copy of the Adhaar Card
6. Rent Agreement Copy (should one be renting property)
7. Bill for Water or Electricity (should business location exist)
8. Property Papers Copy (should one own the property)
9. NOC from Landlord, No Objection Certificate 

Conversion Process of a Private Limited Company to a Public Limited Company 

Step 1: Board meeting

1. A minimum of 7 days before the date of the Board Meeting, a notice must be issued to every Director of the Company using their registered addresses with the Company. More minor notices can be sent in the instance of urgent business.
2. Attach with the Notice Agenda, Notes to Agenda, and Draft Resolution.
3. Call a Conference of Directors of the Company to review the conversion plan.
4. Get the Board Resolution approving the conversion of the Company into a Public Company.
5. Authorize the Company Secretary or any company’s Directors to sign and submit the pertinent document with the Registrar of Companies and undertake such actions, deeds, and things as essential to effect the Board’s decision.
6. To fix the day, date, time, and venue of the General Meeting and approve the draft notice convening the General Meeting together with an explanatory statement annexed to the notice as per the requirement of Section 102 of the Companies Act, 2013 and authorize the Director or Company Secretary to sign and issue a notice of General Meeting.
7. Within 15 days following the end of the Board Meeting, prepare and distribute draft minutes by hand or speed post/registered courier/email to every director for their remarks. 

Step 2: General Meeting 

1. At least 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by registered post or by courier by facsimile by e-mail or any other electronic means or a Shorter notes of General Meeting. 
2. With at least a majority in number and ninety-five percent of the paid-up share capital of the firm issuing a right to vote at such a meeting in line with Section 101, notice can be issued with consent.
3. All the Directors, Members, Auditors of the Company, Secretarial Auditor, Debenture Trustees, and those qualified to get the General Meeting notice will be issued notice.
4. The notice will include a statement on the business to be transacted at the meeting, the day, date, hour, and complete venue address.
5. Call a general meeting and approve a special resolution changing the Memorandum of Association and Articles of Association and converting the Private Company into a Public Company.
6. See the Quorum to see whether the auditor is there—if not. Then, either granted or denied is a leave of absence.
7. Get the General Meeting minutes signed, then arrange based on this.

Step 3: Form INC-27 filing with ROC 

1. File an application in E-Form INC-27 with the Registrar together with recommended fees 15 days following the passage of the Special Resolution, therefore converting a Private Company into a Public Company. 
2. Attachments
3. Minutes of the Meeting of Members
4. Certified accurate copy of the special resolution
5. Modified e-Memorandum of Association and e-articles of association

Step 4: Form MGT-14 filing with ROC 

1. With the documentation, file Form MGT-14 with the Registrar of Companies within thirty days of passing the Special resolution in the General Meeting.
2. We have certified True Copies of the Special Resolutions together with a justification statement.
3. A copy of the notice of meeting was sent to members along with all the annexures.
4. A printed copy of the article of association and memorandum of association.
5. General Meeting Attendance Sheft Copy
6. Shorter Notice Consent

Step 5: New Certificate of Incorporation

The new incorporation certificate of authority registrar will issue a new certificate of incorporation with the revised name upon approval of E-Form MGT-14 and E-Form INC-27. Companies (Incorporation) Rules, 2014 [ Section 13(3) & Rule 29(2).

Conclusion

This is converting a private company to a public company, which is crucial and simultaneously exposes both sides. It will ensure proper decision-making and implementation of growth strategies, the process and legal requirements involved, and the possible outcome that may be generated.

Whether raising funds, enhancing shareholder liquidity, or increasing credibility, this conversion into a public company can be transformative for businesses ready to take that next giant step.

Read our blog: ROC Creation Process Under Companies Act 2013