Let us first understand what is a public and private limited company. Public Limited Company is a separate legal business entity. In addition the shares of this company are traded on the stock exchange for the general public. Whereas Private owners own a private limited company. This type of entity limits the owner’s liability to their ownership stake. Further PLC also restricts shareholders from publicly trading shares. The main advantage of Public Company is that it can raise reserves on a large scale. Here are benefits when you convert PLC into a Public Limited Company.
Benefits of Public Limited Company:
- Raising Capital: The biggest advantage of being a Public Limited Company is that it can raise capital from the public by issuing shares. However, this would require listing on the stock exchange.
- Share Transfer: Shareholders can transfer shares of Public Limited Company easily. Therefore shareholders have a benefit of liquidity by filing the share transfer form and hand over the share certificate to the buyer.
- Greater Credibility: As per Company Law, 2013 a Public Company has to compulsorily present its financial stats and position publicly to maintain transparency. It also has to convene the Annual General Meeting for all the shareholders. These compliances bring a great deal of credibility.
- Other Financial Opportunities: Listing of Public Limited Company helps in improving the creditworthiness of the company when issuing corporate debt.
The process to convert Private Limited Company(PLC) into Public Limited Company
Here is a detail procedure for voluntary conversion of Private Limited Company into Public Limited Company:
- Conduct a Board Meeting.
Pass a Board Resolution to get the in-principal approval of Directors for conversion. And also for increase in number of directors upto 3, if directors are less than 3.
Further fix date, day and time for conducting Extra-ordinary General Meeting to get an approval of shareholders. - Send notice to shareholders along with agenda and explanatory statement as per Companies Act, 2013.
In EGM, pass Special Resolution to get shareholders approval for Conversion of Private Company into a Public company. In addition obtain approval for alteration in the Articles of Association for such conversion.
- For alteration in AOA file the below forms along with the copy of special resolution with concerned ROC.
File Form MGT-14 within 30 days of passing the resolution at EGM on the MCA Website.
After that file E-Form INC 27 for conversion of the company with MCA along with necessary attachments. - After receiving the documents, ROC shall satisfy itself that the company has complied with requisite provision for conversion.
Further which ROC shall enclose the previous registration and issue a fresh Certificate of Incorporation.
FAQs
Shareholders are the owners of a public limited company. However, they elect a board of directors who make decisions on behalf of the business.
Shares in a public company are easily transferable in comparison to the PLC. Further the shareholders can sell the shares and benefit from its liquidity. Therefore this acts as an incentive for people to invest as they are not bound to remain with the company forever.
The company should fulfill the following requirements before converting into Public Limited Company:
– DSC for 1 Director
– Minimum 7 Shareholders
– DIN for all directors
– Minimum Authorized Share Capital of Rs 5 lakhs
– Minimum Paid up Share Capital of Rs.5 lakhs
– Director and shareholder can be the same person
– Minimum 3 Directors
Following are the documents required for conversion:
– Copy of PAN Card of Directors
– Passport size photograph of Directors
– Copy of Aadhaar Card/ Voter identity card
– Copy of Rent agreement, if property is on rent.
– Electricity/ Water bill (Business Place)
– Copy of Property papers (If owned property)
– In addition to rent agreement NOC of Landlord
Hello @Dia_malhotra
The biggest advantage of any public company is the ability to raise funds from the general public by issuing shares. Other benefits include ease in transfer of shares, higher credibility, etc.
If you are looking to convert your Public Limited Company to a Private Limited Company, you can learn more here:
Hope this helps!