Procedure of converting public company into private company.

Procedure of converting public company into private company.

 

WHY CONVERSION?

Through the Companies Act, 2013, the Compliances of Public Companies are increasing day by day, which has put a lot of restrictions on doing business. On the other hand MCA has exempted the private companies from the compliances of various provisions of Companies Act, 2013 vide notification dated 5th June, 2015 and 13th June, 2017.

Keeping in view the relaxation given to Private Companies, a lot of public companies have converted into private companies and many are under process

Conversion of Public Company into a Private Company

Material PROVISIONS:

Section 13: For modification in Memorandum of Association of the Company

Section 14: For modification in Article of Association of the Company.

Guideline 41 of Companies (Incorporation) Rules, 2014 (embedded by Companies (Incorporation) Fourth Amendment Rules, 2018 on 18.12.2018): Approval of Regional Director for transformation of Public Companies into Private Companies.

E-FORMS INCLUDED:

Form MGT 14: To record Special Resolution.

 

FormRD-1: Application of Conversion

 

FormRD-GNL-5: To record resubmissions

 

Form INC-28: To record duplicate of Order

 

Methodology TO CONVERT PUBLIC COMPANY INTO PRIVATE COMPANY:

A. HOLD THE BOARD MEETING according to the arrangements of Section 173, material Secretarial Standards and other appropriate arrangements of Companies Act, 2013

1.) To examine and support the motivation of change and to prescribe the equivalent for endorsement of Shareholders.

2.) To favor the modification of Memorandum and Articles and to prescribe the equivalent for endorsement of Shareholders.

3.) To fix the date, time and spot of general gathering of Shareholder.

 

4.) To support the draft see alongside Explanatory Statement of the general gathering and to approve Company Secretary or some other individual to issue the Notice of General Meeting according to arrangements of Companies Act and Secretarial Standards.

B. ISSUE THE NOTICE OF GENERAL MEETING in any event 21 crisp mornings before the General Meeting.

C. HOLD GENERAL MEETING and PASS THE SPECIAL RESOLUTIONS under Section 13 and 14 to:

1.) Approve the transformation of Public Company into Private Company

2.) Approve the Alteration of Memorandum of Company to conform to the arrangements of Section 2 (68).

3.) Approve the Alteration of Articles of the Company to conform to the arrangements of Section 2 (68).

4.) File Form MGT-14 in consistence with the arrangements of Section 117 (3) inside 30 days of going of Special Resolutions in the General Meeting and join the accompanying Documents with MGT-14.

Connections of Form MGT-14

 

Confirmed genuine duplicate of the Resolution go with Explanatory Statement.

 

A Signed Copy of Notice of the General Meeting with all annexures

 

Marked and Stamped Altered duplicate of Memorandum and Articles of the Company.

 

D. DRAFT AN APPLICATION for Conversion of Public Company into Private Company to be recorded to Regional Director. Following Particulars will be set out in the Application:

 

1.) The date of the Board meeting at which the proposition for change of Memorandum and Articles was affirmed;

 

2.) The date of the general gathering at which the proposed adjustment was endorsed;

 

3.) Reason for change into a privately owned business;

 

4.) Effect of such change on investors, loan bosses, debenture holders, store holders and other related gatherings;

 

5.) Details of any change made inside most recent five years and result thereof alongside duplicate of request;

 

6.) At least TWENTY ONE DAYS before the date of recording of the application publicize in the Form No. INC-25A, in a vernacular paper in the chief vernacular language in the area and in English language in an English paper, broadly circled in the State wherein the enlisted office of the organization is arranged.

 

7.) At least TWENTY ONE DAYS before the date of recording of the application serve, by enlisted post with affirmation due, singular notice on every debenture holder and loan boss of the organization and a notice to the Regional Director and Registrar and to the administrative body, if the organization is managed under any law until further notice in power.

 

8.) File Form RD-1 inside 60 days of going of Resolution with Regional Director alongside the expense as gave in the Companies (Registration Offices and Fees) Rules, 2014 with following connections:

 

Connection of RD-1

 

1.) Signed Copy of Application

 

2.) Draft duplicate of Altered Memorandum of Association and Articles of Association.

 

3.) Copy of the MINUTES of the general gathering with subtleties of votes cast in support and additionally against with names of nonconformists.

 

4.) Copy of Board goals dated not sooner than THIRTY DAYS approving to document application for such transformation

 

5.) Scanned, Signed and Stamped Copy of ADVERTISEMENTS as referenced in Point No. 6.

 

6.) DECLARATION by KMP (If no KMP in the Company by any of the Directors) that:

 

a. As far as possible the quantity of its individuals to TWO HUNDRED.

 

b. NO DEPOSIT has been acknowledged by the Company infringing upon the Act and standards made thereunder.

 

c. There has been NO NON-COMPLIANCE of segments 73 to 76A, 177, 178, 185, 186 and 188 of the Act and guidelines made thereunder.

 

d. NO RESOLUTION is pending to be recorded as far as sub-segment (3) of segment 179 and

 

e. The Company was never recorded in any of the Regional Stock Exchanges and whenever was so recorded, every single fundamental method were consented to in full for complete delisting of the offers as per the appropriate standards and guidelines set somewhere near Securities Exchange Board of India.

 

f. Other Mandatory Attachments:

1.) There will be appended to the application, a LIST OF CREDITORS, DEBENTURE HOLDERS, of a date NOT MORE THAN 30 DAYS before the documenting of Application with Regional Director, SETTING FORTH THE FOLLOWING DETAILS:

a. Name and Address of each loan boss and debenture holder.

b. Nature and sums because of them in regard of obligations, cases or liabilities.

c. In regard of any unforeseen or unascertained obligation, the worth, so far as can be evenhandedly assessed of such obligation or guarantee.

2.) The Company will record AN AFFIDAVIT, marked by the Company Secretary of the Company, assuming any, and at the very least two executives of the organization, one of whom will oversee chief, where there is one, such that they have made a full enquiry into undertakings of the organization and, having done as such, have framed a feeling that the rundown of banks and debenture holders is right, and that the evaluated an incentive as given in the rundown of the obligations or cases payable on possibility or not discovered are appropriate assessments of the estimations of such obligations and cases that there are no different obligations, or cases against, the organization as far as anyone is concerned

3.) Proof of Serving the Notice to all Creditors, Debenture holders, Registrar and other Regulatory Bodies.

 

4.) If any protest is gotten from any individual in light of the ad or notification referenced over, the Company will present the duplicate of Objection with the Regional Director.

 

5.) Where protest is gotten the provincial chief will call the individual who raised complaint and to the Company (any Representative for the benefit of the Both) for hearing and subsequent to giving legitimate chance to being heard, the territorial executive will take the choice.

 

6.) Where the Regional Director on inspecting the application thinks that its important to call for additional data or observes such application to be deficient or inadequate in any regard, he will inside thirty days from the date of receipt of the application, give hint of such data called for or deformities or deficiency, guiding the individual or the organization to outfit such data, to redress imperfections or inadequacy and to re-submit such application inside a time of FIFTEEN DAYS in e-Form No. RD-GNL-5.

Given that limit of two re-entries will be permitted.

a. In situations where such additional data called for has not been given or the deformities or deficiency has not been corrected as per the general inclination of the Regional Director inside the period permitted for example FIFTEEN DAYS, the Regional Director will dismiss the application with reasons inside thirty days from the last date up to which resubmission was required to be made or from the date of last re-accommodation put forth as the defense might be.

b. In the event that No Objective recorded in any of the Regional Stock Exchanges and whenever was so recorded, every single fundamental method were consented to in full for complete delisting of the offers as per the appropriate standards and guidelines set somewhere near Securities Exchange Board of India.

C guidelines been NO NON-COMPLIANCE of segments 73 to 76A, 177, 178, 185, 186 and 188 of the Act and guidelines made thereunder.

d. NO RESOLUTION is pending to be recorded as far as sub-segment (3) of segment 179