Overview of Private Limited Company and a Public Limited Company
- Private Limited Company
Any Private Limited company meant to get operated for small companies. The liability of the features of a private restricted company is assigned to the number of shares personally held by them. The legacy of a private limited company can't be shared or updated.
- Public Limited Company
A company whose shares are purchased on a stock exchange and can be obtained and traded by anyone. It is also called a publicly held company. A public limited company, like the signature, signifies that the business offers shares to the public. A public limited company following the company's Act 2013 is a company that has limited liability and contribute shares to the general public. Anyone can acquire its stock, either privately through (IPO) 'Initial Public Offering' or trades on the stock market.
Subjects on Conversion of Private Limited to Public Limited
- A Public Company possesses seven or more members and can invite the public to contribute to its shares. A subsidiary corporation of a Public company is meant to be a public company.
- A Private company is an organisation which limits its number of categories to 200 and cannot invite the public to contribute to its shares. The Companies Act, 2013 provides for converting a Public Company to a Private Company by altering the MOA and AOA of the business.
- The main benefit of Public Company is that it can raise resources at a large scale without addressing the banking system and reducing debt. In contrast, Private Companies which are privately controlled, all the funds are raised by existing members, shareholders and promoters. If a private company goes public, then the opportunity is also shared between the shareholders. Public companies once registered, get indirect promotions and support through stock clearinghouse websites where their stocks are recorded.
- Earlier, the National Company Law Tribunal (NCLT) influences the conversion of Public Company into Private Company. Various amendments took place in Companies Act, 2013 and NCLT has a lot of responsibilities. Since 2013 Act came into effect, NCLT has the discretion to entertain the winding-up Petitions earlier same was given by the High Courts.
Conversion by Negligence
- Wherever a private company performs a default in complying with the legal requirements as laid down in Sec. 3(1)(iii) of the Companies Act (i.e., if its association exceeds fifty, it allows the free transfer of shares, or invites the public to subscribe to its shares or debentures), it becomes a public company naturally.
- The 'Company Law Board may relieve the corporation from being entertain as a public company on any terms and conditions as it thinks just and equitable only if it believes that the default was due to inadvertence or accident or some other sufficient cause.
- It is to be remarked that a private company which displays a public company automatically under the preceding provisions need not comply with any legal ceremony. Again, notwithstanding the conversion, such a company may hold the features of a private company, i.e., it can have limitations as to transfer of shares, company and public subscription. It can proceed to have only two 'members' and 'two directors'.
- Section 43-A sub-section (1) opines that a private company would be meant to be a public company where twenty-five per cent or more of its paid-up share capital.
Conversion by Operation to Convert Private LTD to Public Company
- Section 43 a proposed by the Companies (Amendment) Act, 1960 attached a new class of organisations of "Considered to be Public Company".
- Private businesses are released from the operation of several divisions of a Companies Act and enjoy exceptional opportunities, particularly on the ground that they are family businesses in which the public is not immediately entertained.
- However, it is well known that there are many private companies with significant capital doing great business and controlling various public companies. This got made feasible because funds of other companies, public and private, are advanced in such companies.
- The predicament of private companies has always remained somewhat tricky. On the one hand, there are individual private companies which are zero but a glorified partnership. On the other hand, there are private companies whose services, financial and industrial, are far more comprehensive than those of many public organisations.
- The Companies (Amendment) Act, 1960 attached a new section 43-A planning to deal with those private companies which operate free money in no small amount but escape the limitations and restrictions as to disclosure as applying to public companies.
- The Companies (Amendment) Act of 1974 and 1988 have considerably enlarged the Section 43-A by including three new sub-sections-(1A), (1B) and (1C).