Converting a private limited company to a public limited company is a significant step towards expanding the business and increasing access to capital. A public limited company can issue shares to the public, which means it can raise funds from a large number of investors. However, this process requires compliance with various legal and regulatory requirements, such as obtaining the approval of shareholders and the Registrar of Companies (ROC), and making changes to the Memorandum and Articles of Association. It is recommended to seek professional guidance from experts to ensure a smooth and efficient conversion of private company into public company.
Let us have a brief understanding of what is Private limited company and public limited company.
Private Limited Company
A company that is privately held for small businesses. The liability of the members of a private limited company is restricted to the number of shares respectively held by them. The shares of a private limited company can’t be traded.
Public Limited Company
A company whose shares are traded on a stock exchange and can be purchased and traded by anyone. It is also called a publicly held company.A public limited company can offer it’s shared to general public.The Company’s Act 2013 also defines a public limited company as one that has limited liability and offers company shares to the public. Anyone can acquire the stocks of such a company either through stock-market trading or via IPOs ( Initial Public Offerings).
Quick Share Transfer
Shareholders of a public limited company can transfer their shares with great ease. All they need to do is file the share transfer form and hand over the share certificate to the buyer. The process of transferring a share to another business structure is very tedious.
Raise Capital
The advantage of the public limited structure is that you can leverage it to raise capital from the general public through shares. This would, however, require listing on a stock exchange. All public limited companies can issue fixed deposits, debentures, convertible debentures to the general public.
Greater Credibility
Public limited companies need to disclose their audited statement of accounts, inform the regulatory bodies of any structural change, and hold annual general body meetings for all shareholders. These compliance procedures bring a great deal of credibility to the organization.