One of the main reasons for converting into a public company is that the shareholders of the company can transfer their shares with great ease and thus can generate huge capital by the help of general public shares. The public company allows the general public to buy or sell their shares. With a higher capital, the company can pursue more investment projects to stimulate growth within the company.
The requirements stated by the government for the conversion under the First Provision of SEC 14(1) are:
There are three types of conversion according to which a private company can be converted to a public company.
If a private company does not live up to the standards laid down in section 3(1)(iii) under the definition of a Private Company, the company will no longer fall under the category of private limited company. The conditions laid down by the government for the structure of private companies are:
In case the company fails to comply with such conditions, the company ceases. A petition is to be filed accepting the failure and to convert it into a public company. By paying prescribed fees of INR 200 along with documents like:
In such cases a private company can transfer to the public company:
The conversion may effect from the date of alteration made in the article of association. Post-conversion, the company, can raise its capital both by old and new investors. The company can quote its share on the stock exchange for the general public and shareholders to buy and sell the same.