# Conversion of a Public Company into a Private Company

Governing Section: Section 18 of the Companies Act, 2013.

This conversion is more stringent than Private-to-Public because it requires Central Government approval (now exercised through the Regional Director). The law treats this conversion with greater caution to protect public shareholders.

## Stepwise Procedure

### Step 1 - Special Resolution for Articles + CG Approval

Pass a special resolution for alteration of Articles to ADD the three restrictions of a private company:

Restriction on transferability of shares
Maximum 200 members
Prohibition on inviting public to subscribe for securities

PLUS obtain Central Government (CG) Approval.

### Step 2 - Special Resolution for Memorandum (Name Change)

Pass a special resolution for alteration of the Memorandum to ADD the word 'Private' to the name.

> (Example: 'XYZ Limited' → 'XYZ Private Limited'.)

### Step 3 - File Documents with ROC

File the following with the Registrar of Companies:

(i) Copy of altered Articles
(ii) Copy of altered Memorandum
(iii) Copy of CG Approval ← KEY DIFFERENCE

### Step 4 - File the Special Resolution (within 30 days)

File a copy of the special resolution with the Registrar of Companies within 30 days in Form No. MGT-14.

### Step 5 - Fresh Certificate of Incorporation

The Registrar shall register and issue a fresh certificate of incorporation reflecting the new private company status.

### Step 6 - Reduce Members to 200

If the number of members exceeds 200, take steps to reduce membership to 200 (since a private company cannot exceed this limit).

## Comparison - Why CG Approval?

Aspect	Private → Public	Public → Private
CG Approval	Not required	Required
Reason	Loosens restrictions; protects no one	Tightens restrictions; affects existing public shareholders
Member adjustment	Increase to ≥ 7	Reduce to ≤ 200
Director adjustment	Increase to ≥ 3	(No specific reduction mandated)

## Memory Hook

Public → Private = 'Add - Add - Approve - Reduce'

Add three restrictions (Articles)
Add 'Private' to name (MOA)
Get CG Approval
Reduce members to 200 if exceeded

Worked example

### Example 1

Example: XYZ Limited (a public company) has 350 members. To convert to private: (a) Pass SR altering Articles to add the 3 private-company restrictions and obtain CG approval; (b) Pass SR altering MOA to rename as 'XYZ Private Limited'; (c) File altered MOA, AOA, and CG approval with ROC; (d) File MGT-14 within 30 days; (e) Receive fresh COI; (f) Reduce members to 200 (e.g., through buyback or transfer arrangements).

⚠️ Common exam mistakes

Forgetting that CG approval is mandatory for Public → Private conversion — it is the single biggest distinction from Private → Public.
Missing the filing of CG approval as a separate document along with altered MOA/AOA.
Stating the member ceiling as '50' (old Companies Act 1956 limit) instead of '200' under the 2013 Act.
Confusing the direction of restriction changes — converting TO private means ADDING restrictions, not removing.

Bare-Act text Section 18 · Companies Act, 2013 · click to expand

A company of any class registered under this Act may convert itself as a company of other class under this Act by alteration of memorandum and articles of the company in accordance with the provisions of this Chapter.

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Conversion - Public Company into Private Company (Section 18)

Worked example

⚠️ Common exam mistakes