A Public Company may want to change its status to a Private Company when it feels that it no longer needs to tap the Equity market or it does not require too many Equity Shareholders.

One major change that has to done to the Memorandum and Articles of Association, each:

The Name clause in the MoA has to be changed to include the word ‘private’ instead of ‘public’

The  Article defining the Private Company as per Companies Act, 2013 has to be added to the Articles of Association. This Article is generally as follows:

The Company:

(i) restricts the right to transfer its shares;

(ii) limits the number of its members to two hundred

(iii) prohibits any invitation to the public to subscribe for any securities of the company;

Applicable provisions: 

Section 14 and 18 of the Companies Act, 2013 read with Rule 41 of the Companies (Incorporation) Rules, 2014, states the process for conversion of a Private Company into a Public company.

Prior to December 2018, the application had to be filed with the National Company Law Tribunal, who would give the approval for such conversion. Thereafter, it was delegated to the Regional Directors post December 2018.

The procedure for conversion of a Public Company to a Private Company is very strict and has to be done in a time bound manner. It is a process that has many checks and balances with undertakings to be given by the Management of the Company. Public notices in form of newspaper advertisements have to be given stating that objections can be raised by a person.

Further, the conversion shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Companies Act, 2013.

Only on completion of such inquiry inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, conversion shall be allowed. 

Changes to be made after Conversion: 

Under Companies Act, 2013

a. Print the new Altered Memorandum and Articles of Association with new Certificate of Incorporation.

b. Alter the name plate affixed on the outside of every office or place in which its business is carried on and also include, along with its name, the former name or names so changed during the last two years. (Eg: ABC Private Limited (formerly ABC Limited) or XYZ (OPC) Private Limited (formerly XYZ Private Limited))

c. In case of One Person Company, the words "One Person Company" shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.

d. Alter its Common seal, if any. 

e. Alter it letterhead, business letters, billheads, letter papers and in all its notices and other official publications. 

f. Alter the hundies, promissory notes, bills of exchange and such other documents and also include, along with its name, the former name or names so changed during the last two years. (Eg: ABC Limited (formerly ABC Private Limited) or XYZ (OPC) Private Limited (formerly XYZ Private Limited))

g. Arrange new rubber stamps with new name

File Necessary Amendment Application with the following Organisations/Agencies:

a. Update Entity DSC

b. Bank(s) where the entity maintains its Account(s)

c. Update PAN/TAN/GST

d. Basic Utility Service Providers (eg: Electricity, Water, Internet, Telephone etc.)

e. Inform all the concerned parties where company has made investment(s), taken loan(s), given guarantee(s)

f. Intimate Insurance companies, 

g. Update agreements etc.

h. Intimate and update where the entity applies for tenders

i. Goods and Services Act

j. Shops & Establishment Act

k. Private Security Agency Act

l. EPFO

m. ESIC

n. MSME, FSSAI, DIPP, EXIM, FEMA registration, if any

o. Trade License, Professional Tax

p. Factories Act and other Labour Laws

q. Industry Specific Laws