state the different ways of converting private company into public company?
Answers
A private company may become a public company in any of the following three modes:
1. Conversion by Default.
2. Conversion by Operation of Law or
Private Company to be Deemed Public
Company.
3. Conversion by Choice.
1. Conversion by Default :
Where a private company makes a default in complying with the statutory requirements as laid down in Sec. 3(1)(iii) of the Companies Act (i.e., if its membership exceeds fifty, it permits free transfer of shares, or invites public to subscribe to its shares or debentures), it becomes a public company automatically.
The Company Law Board, however, may relieve the company from being treated as a public company, on such terms and conditions as it thinks just and equitable, if it is of opinion that the default was due to inadvertence or accident or some other sufficient cause, on an application of the company or any interested person.
2. Conversion by Operation of Law or Private Company to be Deemed Public Company :
Section 43 A introduced by the Companies (Amendment) Act, 1960 added a new class of companies of “Deemed to be Public Company”.
Private companies are exempted from the operation of several sections of a Companies Act and enjoy certain privileges principally on the ground that they are family concerns in which the public is not directly interested.
It is, however, well known that there are many private companies with large capital doing extensive business and controlling a number of public companies. This is made possible because funds of other companies, public and private, are invested in such companies. As public money is invested in such companies, there is no reason for treating such companies as private companies.
3. Conversion by Choice:
A private company may deliberately choose to become a public company. If a private company deletes from its Articles of Association, the requirements of Section 3(1)(iii) by passing a special resolution, the company will cease to be a private company from the date of the alteration of Articles of Association.
When a private company chooses to become a public company it will have to comply with all the provisions of the Companies Act applicable to a public company. Within 30 days of its becoming a public company, it shall file with the Registrar a prospectus or a statement in lieu of prospectus and a printed or typewritten copy of the special resolution in accordance with Section 192.