Conversion of public limited company to Private limited company
In the current market scenario every trade activities are changing accordingly based on the change in profitability. Nobody is bothered about the trade barriers between the small scales to the large scales companies. However, the change happens from the small companies to the large companies only implemented through the incorporation process. With incorporating a company based on its position, nothing can be performed in the global market.
Thus most of the business people have their thought on starting a small company for an instant and later on it can be expanded with the profit acquired. The process of converting a public limited company to a private limited has its own added advantages through the company incorporation like limited liability, private decision, share transfers, fast access to funds etc.
More advantages over Public limited to private limited co is as follows:
- The number of assets and the liabilities of the company just before the conversion process will be imported to the company.
- There are some properties that are portable and non-portable of the firm will be in the company itself. Hence the process of transferring instrument is required so that No stamp duty is required.
- While transferring the properties from the proprietorship to the company no capital gain tax is charged.
- The brand value of the firm will be the same throughout to maintain a successful business entity even after conversion
- If there happened any kind of loss and absorbed depreciation for the firm previously will also be forwarded to the company
While converting the public limited company to private limited company the mandatory requirements in the number of company shareholders, ownership, number of directors etc. are mentioned below:
- The number of partners in the partnership company can be the shareholders with the same proportion of capital they have invested and it is being recorded at the date of the conversion process.
- The partner’s shares are compensated by making an allotment in the company shares and also the shareholding of the partners in the company which is an aggregate of 50% or above the total voting power. This process will continue for 5 years from the date of conversion.
General Requirements for the Conversion are:
- Partnership registration will have 7 partners
- The share capital value for the minimum amount is Rs. 100,000 for conversion into a Private Limited Company
- The share capital value for the minimum is Rs. 500,000 for conversion into a Public Limited Company
- Sometimes the mentioned requirements for the conversion will not be satisfying, in such case the partnership deed will be altered.
- There should be minimum of 7 Shareholders
- There must be minimum of 2 Directors for Private Limited Company and 3 Directors for Public Limited Company
- The directors and shareholders can be same person
- DIN (Director Identification Number) for all the Directors
- DSC (Digital Signature Certificate) for two of the Directors
Process of conversion
- Requisite form is filed for Conversion
- Arrangements and Preparation of Foundation documents of the Company
- Name approval is filed
- Incorporation documents is filed
- Receiving certificate of incorporation
