Conversion of Private Company to Public Company and Vice-Versa

# Conversion Between Private and Public Companies

A company's character (private vs. public) is not permanent — it can be changed by altering the Articles of Association and following the prescribed procedure. The route differs in stringency depending on the direction of conversion.

## A. Conversion of Private Company → Public Company

Procedure:

1. Pass a Special Resolution (SR) in a general meeting to alter the AOA so as to delete the three restrictions/prohibitions characteristic of a private company [u/s 2(68)].

2. Intimate the Registrar of Companies (ROC) in the prescribed manner within 15 days of the SR.

3. Thereafter, the company must comply with all provisions applicable to a Public Company (e.g., minimum 7 members, 3 directors, prospectus rules where applicable, etc.).

## B. Conversion of Public Company → Private Company

This is a more onerous procedure, since it restricts public investor protection.

Procedure:

1. Pass a Special Resolution (SR) to alter the AOA so as to include the three restrictions of a private company.

2. Obtain prior approval of the Central Government — this power has been delegated to the Regional Director (RD).

3. Intimate the ROC within 15 days of receipt of the RD's approval, in the prescribed manner.

4. Thereafter, comply with Section 2(68) — the AOA must contain the restriction on transferability, cap on membership at 200, and prohibition on public invitation.

## Comparison

## Why is Public → Private More Restricted?

Public companies typically have a dispersed shareholder base and public interest is at stake. Conversion to private status restricts share transferability and removes the company from public scrutiny. Hence, regulatory approval (RD) acts as a safeguard.