Conversion of a Private Company into a Public Company

If a private company wants to convert itself into a
public company, then it shall have to do such amendmentsnin its articles by special proposal so that all the restrictionsnput on it in the capacity of private company may terminate.nIt shall have to forward information of the intention andnprospectus-magazine or officiating prospectus-magazine tonthe Registrar within 14th days as given in the second schedule of the Companies Act.

But according to the rules of Section 43(a) of companies (Amendment) Act, 1960, a private company is converted itself into a public company, such a public company is called “deemed public company” also.

Conditions – According to the above, mentioned section, private company is treated as a public company in anynof the following conditions-

(i) If anyone or more than one amalgamated institution holds at least 25% paid shares of the total share capitalnof a private company, but such shares of that private company shall not be counted for in this percentage which arenheld by a banking institution.

(ii) The information regarding conversion of privatencompany into a public company must reach the Registrarnwithin a period of three months as per same section. Tonreceive such information, the Registrar shall delete the word “private’ in his registers as mentioned before the word Limited in the name of that company and shall make an entry orthis amendment in the memorandum of the company andncertificate of incorporation.

(iii) If the private company is converted into a public company but does not forward information in this regard to the Registrar then its each defaulter official can be penalised @ Rs.200 per day of the duration of default.

Difference between a Private Company and a Public Company

Companies Act clarifies the form of Private
Company and Public Company, by Companies Act, 1956, necessary amendments were made therein. In brief, the case of distinction between both type of companies is given as under –

(1) Number of Members- It is necessary that there must be minimum 7 persons in forming a Public Company whereas two or more than two persons maximum can form a private company. There is no limit of maximum number of members in the public company whereas the number of members in the private company has been limited upto 50 members.

(2) Transfer of Shares – There is no restriction on
transfer of shares in a Public Company. Therein, the transfer of shares can be made freely. But restriction can be put to the transfer of shares by the internal rules in a Private Company

(3) Pre-emptive Right- The general public has got
pre-emptive right of contributing share in public companybwhereas private company cannot provide such pre-emptivenright.

(4) Number of Directors- Each public company andnthe private company subordinate to a public company shallnhave three directors at least whereas there is provision of having minimum two directors in a Private Company,

(5) Consent – Information is necessary to be given tonthe Registrar by the director of a public company regarding his consent that he is willing to do the job of a director.

Simultaneously the directors are supposed to give information on memorandum letter of the institution duly signednregarding non-acceptance of shares of cost not lesser than the cost of their worth shares or they have to render oath in black and white to the Registrar regarding obtaining of their worth shares from the company, whereas there are no such boundations in a private company.

(6) Statutory Meeting and Statutory Report- A public company is supposed to call for a statutory meeting and to render its statutory report to the members and the Registrar necessarily after at least one month or within six months from the date on which it has become authorised to start the work of company whereas it is not required in a Private Company.

(7) Commencement of Business – The Public Company, which has invited the public through its statement for purchasing of its share cannot commence its business or cannot use its power of contracting debts until sanction for commencement of business by the company is not received from the Registrar after legal declaration duly filed by it under Section 149 whereas the Private Company can allot the shares just after amalgamation.

(8) Winding-up – If the number of the members becomes lesser than seven in a public company then it can be Wounded-up by the court whereas winding-up of the private company can be done only when its number of members become lesser than two.

(9) Certificate of Commencement of Business- Public Company cannot commence the business until it does not obtain certificate of commencement of business but the

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