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Company Law: Dr. A. J. Raju

A private company can become a public company through three ways - by default if it fails to comply with private company restrictions, by operation of law if certain ownership or revenue thresholds are met, or by choice if it passes a special resolution and meets other filing requirements. A public company can convert to private by altering its articles through a special resolution, reducing its member count if needed, obtaining government consent, and filing altered articles with the registrar.

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Prasad Bulbule
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73 views5 pages

Company Law: Dr. A. J. Raju

A private company can become a public company through three ways - by default if it fails to comply with private company restrictions, by operation of law if certain ownership or revenue thresholds are met, or by choice if it passes a special resolution and meets other filing requirements. A public company can convert to private by altering its articles through a special resolution, reducing its member count if needed, obtaining government consent, and filing altered articles with the registrar.

Uploaded by

Prasad Bulbule
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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COMPANY LAW

UNIT 1.3

CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY


AND
CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY

by

Dr. A. J. Raju
(Professor & HoD)

Department of Commerce,
Rajarshi Shahu Mahavidyalaya(Autonomous)
Latur, Maharashtra
COMPANY LAW
UNIT 1.3
CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY
A Private Company becomes a Public Company either by Default or by Operation of
Law or by Choice. Section 43, Section 43A and Section 44 of the Companies Act
contain the relevant provisions of conversion.
1. Conversion by Default:
When a private company fails to comply with the restrictions imposed on it, it shall
be treated as a public company. For example-
i) Where the private company allows free transfer of shares,or
ii) Issuing securities to the public or accepting public deposits,or
iii) Allows the membership to exceed the maximum limit.
In all such cases, the provisions of public companies are applicable to private
companies.
COMPANY LAW
UNIT 1.3
CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY

2.Conversion by Operation of Law:


A private company becomes a public company (known as deemed to be public
company) in each of the following cases;
i) If 25% or more of its paid up capital is held by one or more body corporate.
ii) If it holds 25% or more of the paid up share capital of a public limited company.
iii)If it invites or renews deposits from the public.
iv) If its average annual turn over during the preceding three years exceeds Rs.25
crores.
COMPANY LAW
UNIT 1.3
CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY

3.Conversion by Choice:
A private company may get itself converted into a public company
by its own choice. In such a case it must-
i)Pass a special resolution for altering its Articles to delete the
restrictive clauses applicable to private company,
ii) Increase the number of members to Seven, if it is less than seven,
iii) Increase the number of directors to Three, if it is less than three,
iv) File a copy of the Special Resolution passed for altering the
articles and a Prospectus or Statement in lieu of prospectus with the
Registrar with in Thirty days of passing the resolution.
COMPANY LAW
UNIT 1.3
CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY

A Public Company can be converted into a Private Company by taking


the following steps;
1. Alter the Articles of the company by passing a Special Resolution to
incorporate the restrictions, limitations and prohibitions imposed by
the Act on Private Company,
2. Reduce the number of members to 200, if it exceeded the maximum
limit,
3. Get the consent of the Central Government,
4. File with the Registrar a copy of the Articles as altered within one
month of receipt of permission of Central Government..

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