A Public Company under the company act 2013 can offer its share to general public for subscription. In order to become a public company, the company need to offer its share to general public through IPO.
As per section 2(71), Companies act (amendment) Act 2015, a public company means a company which:
(a) is not a private company
(b) has a minimum paid up share capital, as may be prescribed;
(c) is a private company which is a subsidiary of a company which is not a private company.
A Private company cannot offer its share to general public, it is restricted. The share of private company is held by members or investors. According to section 2(68), as amended by the companies ( amendment ) Act, 2015 , a “private company” means a company which has a minimum paid up share capital, as may be prescribed, and by its articles of association:
(a) restricts the rights of the members to transfer its shares;
(b) limits the number of its members to 200, excluding members who are or were in the employment of the company;
(c) prohibits any invitation to the public to subscribe for any securities of the company.
Conversion of a public company into a private company.
To convert a public company into private the following steps need to be followed :
(i) A public company shall pass a special resolution to alter its articles so as to include in it the provisions relating to a private company, such as
(a) limiting the number of members to fifty
(b) restricting the transfer of shares,
(c) prohibiting invitation to the public to subscribe to its shares or debentures, and
(d) prohibiting invitation or acceptance of deposits from public.
(ii) The sanction of the central Government must be obtained in respect of converting public company to private.
(iii) A copy of the special resolution and a printed copy of the articles as altered shall be filed with Registrar ( ROC) within one month of the date of receipt of order of approval of the Central Government as per section 31.
After the conversion of public company to private the company must add Suffix “private” with its name. It shall not reduce its member to maximum limit of fifty (excluding members who are or were in the employment of the company), if the existing number is more than that.
It shall not invite general public to subscribe its shares or debentures.
