Conversion of a private company into a public company
Conversion of a private company into a public company :
A private company may become a public company by default or choice.
Conversion by Default
Where a default is made by a private company in complying with the basic requirements of a private company as to restriction on-
Transfer of shares;
Maximum number of members;
Invitation to the public to subscribe for shares or debentures;
Any invitation or acceptance of deposits from persons other than members, directors or their relatives.
It shall cease to be entitled to have privileges and the exemptions conferred by or under the Companies Act. The whole of the Act would than apply as if it were not a private company.
Conversion by Choice (Sec.44)
If a private company alters its articles by a special resolution in such a manner that they no longer contain such provisions which make it a private company, it shall be file with the Registrar within the 30 days, either a prospectus or statement in lieu of prospectus. It shall also:
Take steps to raise its membership to at least 7 if it is below that number on that date of conversion and also increase the number of directors to more than 2.
Alter the regulations contained in the articles which are inconsistent with those of a public company.
Note: Section 43 deals with the breach of conditions required of a private company whereas Sec. 44 applies to deliberate amendment of the articles by a private company.
Conversion of a public company into a private company
The companies act does not prevent the conversion of a public company into private company by altering its articles by a special resolution. It involves following steps:
A public company may be converted into a private company by passing a special resolution.
The special resolution should be passed to change the Articles of the company so as to include the conditions as prescribed in Sec. 3 (i) (iii) which make a company private company.
No alteration in the Articles can be made to convert the public company into a private company without the approval of the Central Govt. The application is to be made within the 3 months from the passing of special resolution.
Where the alteration has been approved by the Central Government, a printed copy of the Articles as altered shall be filed by the company with the Registrar within the one month of the date of receipt of approval.
Association not for profit: (Sec.25)
Sec. 25 of the companies Act, 1956 deals with the power of Central Government to permit a charitable or the other company to be registered without the use of word limited or private limited to its name.
Under this Section, where it is proved to the satisfaction of the Central Government, that the association:
Is about to be formed as a limited company for promoting:
Commerce
Art,
Science
Religion
Charity
Any other useful object.
? Intends to apply
its profits, if any
other income in promoting its objects, and
? prohibits the payment of any dividend to its members.
A partnership firm may be a member of an association not for profit.
A licence may be granted by the Central Government on such conditions and subject to such regulations if thinks fit, and those conditions and regulations shall be binding on the association to which the licence is granted. Licence may be revoked by the Central Government at any time.
An Association makes default in complying with the requirements of Sec. 25(9), it shall be punishable with the fine which may extend to Rs.5,000 for every day during which the default continues.
Such an association, if Central Government directs and to the extent specified in the direction, be exempt from such of the provisions of the Companies Act, as may be specified therein.
The Association may thereupon be registered accordingly, and on registration it shall enjoy all the privileges, and be subjected to all the obligations, of the limited companies.
An association licensed under Sec. 25 cannot alter its object clause without the previous approval of the Central Government.
Advantages of incorporation of such associations:
The association gains in stability, public estimation and credit.
It becomes a body corporate with perpetual succession.
It can have a common seal.
It can buy, sell and hold property in its own name.
Without the intervention of the trustees it can contract, and take and defend legal proceedings in its own name.
Its affairs can be conducted more efficiently..
A private company may become a public company by default or choice.
Conversion by Default
Where a default is made by a private company in complying with the basic requirements of a private company as to restriction on-
Transfer of shares;
Maximum number of members;
Invitation to the public to subscribe for shares or debentures;
Any invitation or acceptance of deposits from persons other than members, directors or their relatives.
It shall cease to be entitled to have privileges and the exemptions conferred by or under the Companies Act. The whole of the Act would than apply as if it were not a private company.
Conversion by Choice (Sec.44)
If a private company alters its articles by a special resolution in such a manner that they no longer contain such provisions which make it a private company, it shall be file with the Registrar within the 30 days, either a prospectus or statement in lieu of prospectus. It shall also:
Take steps to raise its membership to at least 7 if it is below that number on that date of conversion and also increase the number of directors to more than 2.
Alter the regulations contained in the articles which are inconsistent with those of a public company.
Note: Section 43 deals with the breach of conditions required of a private company whereas Sec. 44 applies to deliberate amendment of the articles by a private company.
Conversion of a public company into a private company
The companies act does not prevent the conversion of a public company into private company by altering its articles by a special resolution. It involves following steps:
A public company may be converted into a private company by passing a special resolution.
The special resolution should be passed to change the Articles of the company so as to include the conditions as prescribed in Sec. 3 (i) (iii) which make a company private company.
No alteration in the Articles can be made to convert the public company into a private company without the approval of the Central Govt. The application is to be made within the 3 months from the passing of special resolution.
Where the alteration has been approved by the Central Government, a printed copy of the Articles as altered shall be filed by the company with the Registrar within the one month of the date of receipt of approval.
Association not for profit: (Sec.25)
Sec. 25 of the companies Act, 1956 deals with the power of Central Government to permit a charitable or the other company to be registered without the use of word limited or private limited to its name.
Under this Section, where it is proved to the satisfaction of the Central Government, that the association:
Is about to be formed as a limited company for promoting:
Commerce
Art,
Science
Religion
Charity
Any other useful object.
? Intends to apply
its profits, if any
other income in promoting its objects, and
? prohibits the payment of any dividend to its members.
A partnership firm may be a member of an association not for profit.
A licence may be granted by the Central Government on such conditions and subject to such regulations if thinks fit, and those conditions and regulations shall be binding on the association to which the licence is granted. Licence may be revoked by the Central Government at any time.
An Association makes default in complying with the requirements of Sec. 25(9), it shall be punishable with the fine which may extend to Rs.5,000 for every day during which the default continues.
Such an association, if Central Government directs and to the extent specified in the direction, be exempt from such of the provisions of the Companies Act, as may be specified therein.
The Association may thereupon be registered accordingly, and on registration it shall enjoy all the privileges, and be subjected to all the obligations, of the limited companies.
An association licensed under Sec. 25 cannot alter its object clause without the previous approval of the Central Government.
Advantages of incorporation of such associations:
The association gains in stability, public estimation and credit.
It becomes a body corporate with perpetual succession.
It can have a common seal.
It can buy, sell and hold property in its own name.
Without the intervention of the trustees it can contract, and take and defend legal proceedings in its own name.
Its affairs can be conducted more efficiently..
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Conversion of a private company into a public company
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