TRANSFER OF POWER FROM CG TO NATIONAL COMPANY LAW TRIBUNAL
INTRODUCTION
The Provisions of Section 14 and 18 dealing with dealing with alteration of articles for conversion of a public company into a private company became enforced on 1st April, 2014, however the second proviso of sub-section (1) of section 14 and sub-section (2) of section 14 of the Companies Act, 2013 came into force 1st June, 2016 by virtue of notification issued by MCA
Second proviso of sub-section (1) of section 14 and sub-section (2) of section 14 of the Companies Act, 2013 deals with the power of power of National Company Law Tribunal (hereinafter called NCLT) to approve the conversion of a public company into a private company.
The MCA vide notification dated 21st July, 2016 released the most awaited National Company Law Tribunal Rules, 2016 which came into force from the 22nd July, 2016
This Article seek to gather and update the law regarding conversion of unlisted public company to private company in the light of ever-changing Companies Act, 2013 and the newly introduced National Company Law Tribunal Rules, 2016 (hereinafter called NCLT Rules, 2016).
OBJECTIVES FOR CONVERSION OF AN UNLISTED PUBLIC COMPANY INTO A PRIVATE COMPANY
Relaxation in compliance of law
The MCA notified on June 5, 2015 that certain provisions of Companies Act, 2013 shall not apply with such exceptions or modifications as directed in the notification. Thus on conversion, public company can enjoy the below stated relaxed policy regime for private company.
Related Party Transactions
Private company are exempted from the ambit of the second proviso to Section 188(1). This exemption will permit members of the company interested in the contract/arrangement to vote on the resolution for authorizing the related party transactions.
Filing of Board Resolution with authority
Private company are exempted from the ambit of Section 179(3) of the Act. This exemption would also reduce the compliance burden on private company
Confidentiality of the Board proceedings
Private company are exempted from the ambit of Section 179(3) of the Act. This exemption would restrict public access to board proceedings of private companies and thereby help in maintaining the confidentiality of the board proceedings
PROCEDURE FOR CONVERSION OF AN UNLISTED PUBLIC COMPANY INTO A PRIVATE COMPANY AS PER COMPANIES ACT, 2013 AND NCLT RULES, 2016
1. Convene a Board Meeting
Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors.
2. Pass Board resolution
a) To get in-principal approval of Directors for conversion of a Public company into a Private company by altering the AOA subject to the approval of Tribunal;
b) Fix date, time and place for holding Extraordinary General meeting (EGM) to get approval of shareholders, by way of Special Resolution, for conversion of a Public company into a Private company.
c) To approve notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013;
d) To authorize the Director or Company Secretary to issue Notice of the Extraordinary General meeting (EGM) as approved by the board.
3. Provisions of the Section 101 of the Companies Act, 2013 provides for issue of notice of EGM in writing to below mentions at least 21 days before the actual date of the EGM:
- All the Directors.
- Members
- Auditors of Company
4. Convene a general meeting
a) To pass Special Resolution to get shareholders’ approval for Conversion of Public company into a Private company along with alteration in articles of association under section 14 for such conversion.
b) Approval of Alteration in MOA & AOA
5. As per Section 117(3), file E-Form MGT-14 within 30 days of passing special resolution for filing a certified copy of resolution with ROC with following attachments:
- Certified true copy of Special Resolution
- Notice of EGM with copy of explanatory statement under section 102
- Copy of Altered Memorandum of Association
- Copy of Altered Article of Association
- Certified True copy of Board Resolution may be attached as an optional attachment.
Note: It is relevant to note that First you have to file form MGT 14 as SRN No. of form MGT 14 will be used in form INC 27.
6. File a petition to the Tribunal (NCLT) in Form No. NCLT. 1 for conversion of public company into a private company with in 3 month of passing a special resolution with following annexures:
a) Copy of Memorandum of Association
b) Copy of Article of Association
c) Affidavit verifying the petition.
d) Bank draft evidencing payment of application fee.
e) Memorandum of appearance with copy of the Board Resolution or the executed Vakalatnama, as the case may be.
f) A list of creditors and debenture holders, drawn up to the latest practicable date preceding the date of filing of petition by not more than two months, setting forth the following details, namely:
· The names and address of every creditor and debenture holder of the company.
· The nature and respective amounts due to them in respect of debts, claims or liabilities.
· In respect of any contingent or unascertained debt or any such claim admissible to proof in winding up of the company, the value, so far as can be justly estimated of such debt or claim:
Note: A duly authenticated copy of the list of creditors shall be kept at the registered office of the company for inspection and to take extract by any person during the ordinary hours of business on payment of sum of rupees 10 per page to the company
g) Affidavit signed by the company secretary of the company, if any, and not less than 2 directors of the company, one of whom shall be a managing director, setting forth:
· That they has made a full enquiry into the affairs of the company
· List of creditors is correct
· Estimated value as given in the list of debts or claims are proper estimates or that there are no other debts of or claims against, the company to their knowledge.
7. The company shall atleast 14 days before the date fixed for hearing:
· Advertise the petition(as per Rule 35 of NCLT Rules, 2016) in Form NCLT-3A atleast once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situate, and at least once in English newspaper circulating in that district. The advertisement may also be placed on the website of the company, if any.
· Serve, by registered post with acknowledgment due, individual notice in Form NCLT. No. 3B on each debenture-holder and creditor of the company
· Serve, by registered post with acknowledgment due, a notice together with the copy of the petition to the CG, ROC and to the regulatory body, if the company is regulated under any other law.
8. Then Tribunal after considering the objection of any person, if satisfied, may pass an order for approval of conversion.
The Tribunal (NCLT) may disallow the conversion with reasons to be recorded in writing, if it is satisfied, having regard to the circumstances that:
a) Conversion would not be in the interest of the company
b) Conversion is made with a view to contravene or to avoid provisions of the Companies Act, 2013
9. File E-Form INC-27 within 15 days of receipt of order of NCLT to ROC with following attachments:
a) Minutes of the member’s meeting where approval was given for conversion and alteration of the articles of association
b) Copy of Altered Memorandum of Association
c) Copy of Altered Article of Association
d) CTC of Special Resolution
e) Order of NCLT approving such conversion.
f) Affidavit from Director or MD or WTD stating following:
- That Company was never listed with any stock exchange, never it accepted any deposit;
- Letter of no objection have been obtained from all creditors /Debentures holders
- No demand from Sales Tax or Income Tax or Excise is pending
g) Certified list of Creditors of the Company as on date of EGM.
h) Certified list of Members of the Company as on date of EGM.
i) Certified list of Directors of the Company as on date of EGM.
j) Order of competent authority
k) Certified True copy of Board Resolution may be attached as an optional attachment.
l) Other information if any can be provided as an optional attachment
Note:
ROC may require following further documents in INC-27.
- Proof of filing of statutory report with ROC.
- List of cases pending before any court of Law where company is a party.
- Copy of certificate of Commencement of Business
POST CONVERSION REQUIREMENT
- Arrange the new PAN No. of the company
- Arrange new Stationary with new name of the company
- Update company bank account details
- Intimate all the concerned authorities like excise and sales tax etc about the status change
- Printed copy of new MOA & AOA
Disclaimer: This write up is based on the understanding and interpretation of author and the same is not intended to be a professional advice.
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