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Reason for conversion from Public to private

Shruti Chawla (CS) (258 Points)

19 May 2010  

Hi,

What reason can i give for converting a public company toa  private company. We are doing it merely for making things easier.


 13 Replies

daya shankar singh (CA ,CS) (629 Points)
Replied 19 May 2010

Public co. has to follow large number of filing requirement and it also disclose its activities to all stakeholder .

1 Like

Shashikala Shah (Practising C S ) (43 Points)
Replied 19 May 2010

The reason can be that its a closely held co with most of the shareholders being relative & friends of the Directors .

1 Like

KAILASH A. DANGADE (ACCOUNTS & FINANCE MANAGER)   (121 Points)
Replied 19 May 2010

Shashikala I think your right...

This Reason will be ok

1 Like

J. Manivannan (Advocate & IP) (242 Points)
Replied 19 May 2010

Dear Shruti Chawla

If entire share capital of the company held by promoters, then you may use the following reason:

All the shareholders of the company are promoters and their relatives. All the funds procured by the company are from promoters and banks. In these circumstances and under proper legal advice, the directors feel that no purpose would be served by retaining the Public Limited character of the company. Besides this, formalities to be complied by a Public Limited Companies on legal angle are much greater than the formalities to be complied by Private Limited Companies.

1 Like

Nitin Grover (CS) (1128 Points)
Replied 19 May 2010

Dear Shruti

 

Reason given by Mr. Vannan is fine you can use it or also add that "BOD wants only two Directors in firm because of closely held and they are not able to fulfill more complicance (not necessary).

or any other actual fact (if any)

 

Regards

1 Like

Shruti Chawla (CS) (258 Points)
Replied 19 May 2010

Thankx a lot to u all??

Also when is the advertisment in the newspaper required to be give?? is it before filing form 1B or after or both?? We have no creditors in the Company.

J. Manivannan (Advocate & IP) (242 Points)
Replied 19 May 2010

 

 

Dear Shruti Chawla

The paper advertisement should be given before filing of Form-1B and that clippings should be attached in Form-1B.

If there is no creditor, the directors should mentioned in their affidavit as “the company has no creditors at present”

In addition to the above, the company should furnish the Auditor Certificate (as attachment of Form-1B) which stating that the company has not contravened the provisions of sections 58A, 269, 198/309 read with Schedule XIII, 297/299/301/295/372A/205A and C of the Companies Act, 1956, for the last three years.

Ankur Garg (Company Secretary and Compliance Officer)   (114654 Points)
Replied 20 May 2010

My Reason:

 

EXPLANATORY STATEMENT

 

As the members are aware that the Company was originally incorporated on ___________ as a public limited company. Your Board of directors considered that since there is no involvement of public in the shareholding or management of the Company, it would be appropriate to convert the Company into the Private Limited Company to avoid unnecessary formalities and to obtain privileges which are available to the Private Limited Companies which would help the management to carry out its affairs efficiently.

Ankur Garg (Company Secretary and Compliance Officer)   (114654 Points)
Replied 20 May 2010

Conversion of a Public Limited Company into a Private Limited

 

Section 31 plays an important role during conversion of a public company into a private company. As conversion of a public company into a private company involves alteration of article of association of public company which cannot be done under section 31 of the Companies Act, 1956, without previous approval of Central Government (powers delegated to the ROC).

 

Find below detailed procedure for Conversion of a Public Limited Company into a Private Limited

 

(i)         Hold a Meeting of board of directors of the public company to consider the proposal of conversion of a public company into a private company and pass necessary board resolution for conversion subject to the approval of Central Government.

 

(ii)        Limit the numbers of members to fifty as desired by section 3(1))(iii)(b);

 

(iii)       Publication of newspapers notice is required once in English and local language, where the registered office of the company is situated and a copy of the notice is required to be attached with the application to be filed with the Registrar. This notice is required for providing opportunity to raise objections, if any, to the public at large.

 

(iv)       Notice to all the creditors having liabilities in excess of Rs. One Lacs is required by Registered post and proof of delivery of such notice is required to be attached with the application to be filed with the Registrar.

 

(v)        Board of directors should pass a board resolution for calling a general meeting of members and approve the draft notice of general meeting along with explanatory statement as desired by section 173 of the Companies Act, 1956.

 

(vi)       Certified copy of the special resolution along with Explanatory Statements and amended copy of the Memorandum and Articles is required to file through submission of form-23 with the prescribed fee. This form-23 is required to be filed under section 192 within 30 days of passing special resolution in the general meeting.

 

(vii)      Application for conversion of a public company into a private company is required to be filed in e-Form 1B to the ROC concerned, with all the necessary annexures and with prescribed fee.

 

(Viii)    After that wait for the fresh certificate of incorporation consequent upon conversion of a public company into private company.

 

The Board of directors should pass a board resolution for authorizing someone to move the application to the concerned Registrar of Companies for approval after passing special resolution regarding conversion.

 

 

SAMPLE BOARD RESOLUTION FOR CONVERSION OF THE PUBLIC COMPANY INTO A PRIVATE COMPANY

 

“RESOLVED THAT pursuant to the provisions of section 31 of the Companies Act, 1956 and subject to the approval of the Central Government and the members at the General Meeting the name of the Company be changed from CAC Tyres Limited to CAC Tyres and Tubes Private Limited.

 

FURTHER RESOLVED THAT Mr. Ketan Joshi, Managing Director of the Company be and is hereby authorized to make an application to the Registrar of companies, Uttar Pradesh, in e-Form 1B and to do all such acts, deeds and things as may be required to be done in this regard and issue a notice of Extra-ordinary General Meeting to the members of the Company.”

 

SAMPLE NEWS PAPER NOTICE

 

Notice is hereby given that members of the Company at their Extra Ordinary General Meeting held on xx.xx.xxxx, have passed a special resolution for the conversion of the Company CAC Tyres Limited to CAC Tyres and Tubes Private Limited under the provisions of section 31 of the Companies Act, 1956. Anybody having objection for such conversion may raise their objection with an affidavit and supporting evidences, if any, with the Registrar of Companies, Uttar Pradesh with a copy of the same to Company at the Registered Office. The Registrar of Companies will proceed for issuance of certificate for change of name after expiry of 21 days from the date of this notice.

         

Place:                                                                                                              For, CAC Tyres Limited

Date:                                                                                                                 Managing Director

 

 

SAMPLE SPECIAL RESOLUTIONS FOR CONVERSION OF PUBLIC LIMITED COMPANY INTO PRIVATE LIMITED COMPANY

 

“RESOLVED THAT pursuant to the provisions of section 31 of the Companies Act, 1956 and other applicable provisions, if any and subject to the approval of the Central Government the consent of the Company be and is hereby given to convert the Company from 'Public Limited' to 'Private Limited' and consequently the name of the company be changed from CAC Tyres Limited to CAC Tyres Private Limited by inserting the word 'PRIVATE' before the word 'LIMITED', where as appears in the Articles of Association of the Company.

 

EXPLANATORY STATEMENT (Most Important part of this Article)

 

As the members are aware that the Company was originally incorporated on ___________ as a public limited company. Your Board of directors considered that since there is no involvement of public in the shareholding or management of the Company, it would be appropriate to convert the Company into the Private Limited Company to avoid unnecessary formalities and to obtain privileges which are available to the Private Limited Companies which would help the management to carry out its affairs efficiently.

 

The Directors of your company recommend the adoption of the said Special Resolution as set out in Item No._____ of the notice in the best interest of the Company. All the material documents and corrected copies of the Memorandum & Articles of Association of the Company are available for inspection during the business hours till the date of the Meeting.

 

None of the Directors of your Company are concerned or interested in the proposed resolution except as a Shareholder of the Company.

 

                                    ------------------JJJJJJJJ----------------

1 Like

Vijay (Finance Mgr) (22 Points)
Replied 20 May 2010

Pretty good & detailed approach of Mr.Ankur Garg

Shruti Chawla (CS) (258 Points)
Replied 20 May 2010

hi,

Thank u Ankur SIr for teh wonderful clarity you provide.

Can anyone please provide me some format for the affidavits to be given ?? Do i Also provide a separate affidavit stating that the company has no creditors? Also please lemme know the amount of stamp paper on which such affidavits are to be given.

J. Manivannan (Advocate & IP) (242 Points)
Replied 20 May 2010

Dear Ankur Ji,

I am immense happy for you are come back to forum. You are explains the provisions relating to conversion of Public Company into Private as exhaustive manner. Please post your valuable contribution continuously to forum, which will be more useful to budding professionals.   

Dear Shruti Chawla

Herein below a specimen affidavit which may serve your purpose.

AFFIDAVIT

We, AAAA, son of Mr. XXXX, aged about 37 years, by faith Hindu, by occupation Entrepreneurship at present residing at 44, Barathi Street, Chennai-600090. and

We, Mrs. BBBB, wife of Mr. AAAA, aged about 31 years, by faith Hindu, by occupation Entrepreneurship at present residing at 44, Barathi Street, Chennai-600090.

 Do hereby jointly and severally solemnly affirm and state as follows:

 

1.      That we are the all Directors of ABC India Limited, having its registered office at 44, Barathi Street, Chennai-600090 and are duly authorised to make affidavits on its behalf.

 

2.      That the Company is not listed in any Stock Exchange and has not issued any shares to the public by issue of prospectus or any other kind of Advertisement in the recent past and has not accept any deposit from Public.

 

3.      The company has no Secured Creditors.

 

4.      That for the purpose of general information to the Public at large about conversion of the Company from LIMITED to PRIVATE LIMITED the company published news paper advertisements, on…….(date) in two widely circulated dailies of State, viz. ………………(name of dailies) and no objection has been received by the Company from any person.

 

5.      That no one will be prejudiced in any manner whatsoever if the Company is converted in to a Private Limited Company.

 

6.      That the statements made in paragraph 2 is true to our knowledge and the statements made in paragraphs 1, 3 and 4 are based on the information derived from the records of the Company and we believe them to be true and correct and the contents in the paragraph 5 is true to our belief and in the nature of submission to Registrar of Companies,_______(Name of the State and Address).

 

7.      We solemnly declare that this declaration is true, that it conceals nothing and that no part of it false.

 

Solemnly affirmed at Chennai, this 15th Day of May 2010

and signed these names in my presence.

 

1 Like

J. Manivannan (Advocate & IP) (242 Points)
Replied 20 May 2010

Further, stamp duty is different from state to state, so kindly check with your concerned State Stamp Act.

 

 

 

1 Like

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