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Untraceable shareholders

Rajendra (CA) (46 Points)

03 April 2025

Can a public limited company be converted to private limited if it has over 500 shareholders but the shareholders are untraceable/ unresponsive?

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Rama chary Rachakonda (Master in Accounts & high court Advocate) (8545 Points)
Replied 03 April 2025

Converting a public limited company to a private limited company can be complex, especially when there are a large number of shareholders, including those who are untraceable or unresponsive.

Legal Framework: The Companies Act, 2013, and the Companies (Incorporation) Rules, 2014, govern the conversion of a public limited company to a private limited company.

Requirements for Conversion: To convert a public limited company to a private limited company, the following conditions must be met:

1. *Special Resolution*: A special resolution must be passed by the shareholders, approving the conversion.

2. *Reducing Share Capital*: The company must reduce its share capital to less than ₹5 crores.

3. *Number of Shareholders*: The company must have fewer than 200 shareholders (excluding employee shareholders). .

4. *No Unlisted Debt Securities*: The company must not have any unlisted debt securities outstanding. Untraceable/Unresponsive Shareholders: When dealing with untraceable or unresponsive shareholders,

the company can take the following

steps: 1. *Public Notice*: Publish a public notice in a newspaper, informing the shareholders about the proposed conversion and inviting them to respond.

2. *Advertisement in Newspaper*: Advertise in a newspaper, stating that the company intends to reduce its share capital and convert to a private limited company.

3. *Send Notices to Shareholders*: Send notices to the shareholders, either by registered post or through electronic means, informing them about the proposed conversion. Procedure for Conversion: After completing the above steps, the company can proceed with the conversion process:

1. *File Form MGT-14*: File Form MGT-14 with the Registrar of Companies (ROC), attaching the special resolution and the notice to the shareholders.

2. *File Form INC-27*: File Form INC-27 with the ROC, applying for the conversion.

3. *Obtain ROC Approval*: Obtain approval from the ROC for the conversion. Conclusion:

Converting a public limited company to a private limited company with over 500 shareholders, including untraceable or unresponsive ones, requires careful planning and compliance with the Companies Act and Rules.

The company must take steps to inform the shareholders, reduce share capital, and obtain ROC approval. It's recommended to consult with a company secretary or a legal expert to ensure a smooth conversion process.

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