Comparison between a Private Limited Company and a Public Limited Company

• A recognized stock exchange allows for the trading of stocks to the general public of a public limited company, whereas a private limited company is privately admitted by its affiliates or members and not listed on the stock exchange. General body meetings with all members are compulsory for public limited companies, but not for private companies.
• In order for a public limited company to operate, it is required to release either a prospectus or statement, unlike private companies which are not obligated to do so. Additionally, the issuance of a post-incorporation certificate of commencement is necessary for public limited companies to begin functioning, whereas private companies are able to commence operations immediately following their incorporation.
• When it comes to public companies, their potential is vast due to the ability of their directors to solicit funds from the general public. However, the legal limitations they face can be burdensome. Conversely, private limited companies have fewer members and restrictions, limiting their scope. On the other hand, Public Limited Companies bear a much greater regulatory burden, as they must provide essential information to shareholders and potential investors.
• In order to manage general meetings of a private limited company, a written resolution must be approved with all relevant details included. On the other hand, a public company requires the appointment of a company secretary to oversee such tasks.

What are the set of criteria that must be met in order to convert a company from Private Limited to Public Limited?

• Two directors are required to obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN).
• The company's Memorandum of Association (MOA) and Articles of Association (AOA) must be prepared and drafted.
• Additionally, a PAN card and TAN number must be acquired.
• It is necessary to find a unique name for the company and complete the application and name reservation process.

Finally, a Certificate of Incorporation (CIN) will be issued

Take note of the significant characteristics that set apart a private limited company from a public limited company:

What are the steps necessary for converting a private limited into public limited company?

·         In order to convert into a different type of business structure, a company must make adjustments to its memorandum and articles. Once these changes have been made, the company must submit an application to the registrar of the state in question. This process is available to companies that have already been established under a different structure.

·         Once all steps have been verified and the necessary documentation has been thoroughly reviewed, the company's registration is officially completed by the registrar.

·         A certificate of incorporation will then be granted if the conversion documents are also deemed satisfactory by the Registrar. This is the procedure for converting into a public limited company.

The steps to transform a private limited company into a public limited company, in compliance with the relevant provisions of the Companies Act of 2013 and the Companies (Incorporation) Rules of 2014, are as follows:

Assembly of Directors

The Board Meeting's agenda must be communicated to the Directors through a formal notice, to be dispatched to the registered addresses of the company at least one week or 7 days ahead of the meeting's scheduled date. The proposed matters for discussion that should be mentioned in the agenda of the Board Meeting include:

The consent of shareholders or members is necessary for the following matters:

·         Implementation of a new or modified MOA or Memorandum of Association

·         Implementation of a new or modified AOA or Articles of Association

·         Transformation of a private limited company to a public limited company

·         Permission for holding an exceptional general meeting along with appointment of a responsible person to manage the dissemination of the notice pertaining to the EGM

·         The extraordinary general meeting needs to have a set location, date, and time.

·         In order for a public limited company to comply with Section 149(1)(a) of the Companies Act 2013, a Board Resolution is necessary to authorize an increase in the number of directors, shareholders, or members. A minimum of three directors should be appointed.

Notification announcing an official communication in regards to the Extraordinary General Meeting (EGM) and proclaiming the commencement of the EGM

After the Board Meeting adjourned, the Director and designated Company Secretary will distribute the announcement for the upcoming extraordinary general meeting to the following parties:

·         The EGM or extraordinary general meeting necessitates the issuance of a notice to Shareholders, Directors, and Auditors no less than 21 days in advance of the meeting date.

·         However, if at least 95% of shareholders or members eligible to vote approve, a shorter notice period may be provided.

·         The approval can only be obtained by means of written communication or electronic methods like email and text messages.

·          During the EGM or extraordinary general assembly, the shareholders will grant authorization for the proposals presented.

Submission of the document to the Registrar of Companies:

After the EGM approves the company's resolutions, it is necessary to complete the form filing requirements with the Registrar of Companies within the allotted time.

Within 30 days of passing their resolutions, individuals must file the E-Form MGT-14 with the RoC and pay the required fees.

To file the form, one must head to the MCA portal and provide the accompanying documentation, which includes:

·         a Notification of the Extraordinary General Meeting (EGM) or EGM's Explanatory Statement as specified by Section 102 of the Act;

·         authenticated copies of company resolutions passed during the EGM;

·         copies of the recently developed Memorandum of Association (MOA); and

·         copies of the recently developed Articles of Association (AOA).

E-Form INC – 27: The application for the transformation of a private limited company into a public limited company may be completed via the E-Form INC - 27. Once the resolutions have been passed during the extraordinary general meeting or EGM, there is a 15-day window during which this form may be submitted to the RoC.

Submission of the application form requires the inclusion of certain documents. These documents include the

·         minutes from an EGM,

·         a copy of the newly drafted AOA and MOA,

·         any resolutions passed at the EGM, and

·         a comprehensive list of the company's members or shareholders along with their important documents.

What are the specifications needed after conversion process?

·         The company must request a new PAN card, update all business letterheads and stationery with the new name, and revise the bank account information.

·         Additionally, it is necessary to inform tax authorities and other relevant individuals about the conversion to a public limited company.

• The newly drafted MOA and AOA must be produced as printed copies without delay. Converting the company will not only result in listing on the stock exchange but also enable capital enhancement and smooth business scaling.

Benefits of Incorporating a Public Limited Company

• A Public Limited Company has the unique benefit of having perpetual succession. This allows the company to exist without any interruptions, until it is officially dissolved according to legal procedures. Essentially, as a separate legal entity, the company remains unaffected by the departure or death of any of its members. As a result, it maintains its existence, despite any changes in its membership structure.
• If you plan to make a significant investment, then establishing a Public Limited company would be the most suitable structure for your business.
• When it comes to investing money, Public Limited companies are the preferred choice for investors and other interested parties due to their organized and easily understandable business structure. If one plans to raise capital for their business while also considering selling ownership in the business, then opting for this type of company is highly recommended.

A Public Limited Company is a separate 

• legal entity that has the ability to possess, procure, relish and dispose of its own properties. The ownership of the property in the company's name cannot be claimed by its shareholders as long as the company is operating in a stable condition.
• Another advantage of being a shareholder in a public limited company is that selling or transferring shares is a simple process. The investor or buyer only needs to obtain the shares and complete the share transfer documentation.
• Raising funds and obtaining loans is a simple process with a Public Limited Company. Comparable to an individual, this type of company can register on various stock exchanges in India, allowing it to acquire capital from the stock market and interested investors. It also has a multitude of avenues available to procure capital from the general public, institutional investors, and banks.