LIFTING OF CORPORATE VEIL

CONVERSION OF PRIVATE COMPANY INTO

PUBLIC COMPANY

CONVERSION OF PUBLIC COMPANY INTO

PRIVATE COMPANY
 LIFTING OF
CORPORATE VEIL
 MEANING:
• Separate personality of a company is a statutory
privilege it must be used for legitimate business
purpose only.
• Where fraudulent and dishonest use is made of
legal entity, individuals concerned will not be
allowed to take shelter behind corporate
personality.
 The various cases in which
corporate veil has been lifted
are as follows:

1. Protection of Revenue.
2. Prevention of fraud or Improper Conduct.
3. Determination of a company.
 Case Law
Daimler Co. Ltd. v. Continental tyre & Rubber Co. Ltd(1916)
2 A.C. 307.
 A company was incorporated in England for the purpose
of selling in England tires made in Germany by a German
company which held the bulk of shares in the English
company.

 The holders of the remaining share, except one, and all the
directors were Germans, resident in Germany.
During the First World War, the English company
commenced an action for recovery of a trade
debt

Held, the company was an alien company and the

payment of debt to it would amount to trading
with the enemy, and therefore the company was
not allowed to proceed with the action.
4. Where the company is a sham.
5. Company Avoiding Legal Obligations.
6. Company Acting as Agent or Trustee of
the Shareholders.
7. Protecting Public Policy.
 CONVERSION OF PRIVATE
COMPANY INTO PUBLIC COMPANY
 Private company and
Public Company
Business firm in the private (non-public) sector of an
economy.
Business firm in the public (non-private) sector of an
economy.
 METHODS FOR CONVERSION:
Conversion of private company into public company can be done by 2
ways :
(1)Conversion by Default :

 Privileges and exemptions can be enjoyed by a Private Company

only as long as it does comply with the requirement of it’s
definition as stated in Section 2 (68) when a default is made in
complying with any of the provisions, the company shall cease to
be entitled to the privileges and exemptions conferred under the
Act.

 The whole of the Act would then apply to the company as if it were
not a private company.
(2) Conversion by Choice :

(Section 14) Private Company may of it’s own choice becomes a

Public Company.

It may pass a Special Resolution deleting from it’s articles the
requirements of Section 2(68) and from the date of alteration
it becomes a Public Company.

Within 30 days it has to fulfill these requirements of the Act

regarding prospectus and increasing the numbers of it’s
directors and members to statutory minimum.
STEPS IN CONVERSION:
1. CALLING OF BOARD MEETING

2. ISSUE OF EGM NOTICE

3. HOLDING OF EXTRA ORDINARY

GENERAL MEETING

4. ROC FORM FILING

 POST CONVERSION FORMALITIES:
After conversion of Private Company into a Public Company
kindly take care of the following points:

Intimate all the concerned authorities like Excise and sales tax
etc. about the status change.

Arrange new PAN No. of the company. Update company bank

account details.

Arrange new stationary with new name of the Company.

Analyse your newly adopted AOA and MOA and remove
all things which are in contradiction with the conditions
of AOA.

Raise the paid-up capital to minimum Rs. 5 lakhs, if the

same is less than Rs. 5 Lakhs.

Increase Number of Directors to minimum 3 Directors.

Conversion of public
COMPANY into private
company
 CONVERSION OF PUBLIC COMPANY INTO
PRIVATE COMPANY S[14 (1)]:

A public company can also be converted into a

private company.

Special resolution is required to be passed by

which the articles of the company shall be changed
so as to include the requirements of a private
company as per section 2 (68).
 Therefore we just need to file the
following E- form's with the Registrar of
Companies to convert A public company
into A private company;

1. MGT-14 (For registering special resolution)

2. INC-27 (Application for Conversion of Public

Company into Private Company)
PROCEDURE/STEPS FOR CONVERSION OF PUBLIC
COMPANY INTO A PRIVATE COMPANY:

Board Meeting.

Notice of General meeting.

Order of A GENERAL MEETING.

Filing of Special Resolution with ROC in E-form MGT-14.

Filing of INC-27 with ROC.

 • To discuss and approve
proposal of conversion
of the Public company
into a Private company.
BOARD • To grant authority to
director to take
MEETING necessary action.
• To decide place, venue,
time of general
Meeting & to approve
notice calling General
Meeting.
NOTICE OF GENERAL MEETING:

Give 21 days’ clear notice for the general

meeting, proposing the special resolutions with
suitable explanatory statements as per Section
101 & Section 102 of the COMPANIES ACT 2013
Order of A GENERAL MEETING:

Check the Quorum.

Check whether auditor is present, if

not. Then Leave of absence is
Granted or Not. (As per Section- 146).

Pass Special Resolution.[Section-114(2)] to

get shareholders’ approval for Conversion of
Public Company into Private Company along
with alteration in articles of association.

Approval of Alteration in MOA &

AOA.
FILING OF SPECIAL RESOLUTION
WITH ROC IN E-FORM MGT-14:
File Form No. MGT-14 within 30 days of passing of the
resolution.

Filing of INC-27 with ROC:

File Form INC-27 with ROC after approval of MGT-14.
Attachments:
 Notice calling General Meeting.
 CTC of the Special resolution.
 Altered AOA.
 Altered MOA.
 EXAMPLES:
1. DELL COMPUTERS IN 2013.
2. BURGER KING IN 2010.
3. KINDER MORGAN,INC IN 2007.
4. PANERA BREAD IN 2017.
5. EQUITY OFFICE PROPERTIES IN 2007.
THANK YOU