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CS Executive · Setting Up of Business, Industrial and Labour Laws · Conversion of Business Entities

Ananya Textiles Pvt Ltd, a private company, wishes to become a public company under the Companies Act, 2013 without winding up and re-forming. Which statement correctly describes the route available under Section 18?

A company can convert into another class of company by altering its memorandum and articles in line with the Companies Act. The Registrar then closes the old registration and issues a new certificate of incorporation, as on first registration. No winding up or fresh incorporation is required.

  1. AIt may convert itself into a company of another class by altering its memorandum and articles as per the Chapter, and the Registrar closes the former registration and issues a fresh certificate of incorporationCorrect
  2. BIt must first be wound up and then a new public company must be incorporated by fresh subscribers
  3. CIt can change class only by filing a simple notice with the Registrar, with no alteration of memorandum or articles
  4. DIt can convert only after the Registrar transfers all its debts to the new company by a separate deed

Explanation

Section 18(1) lets a company of any class registered under the Act convert itself into a company of another class by altering its memorandum and articles. Under Section 18(2) the Registrar closes the former registration and issues a certificate of incorporation as in first registration. Winding up is not needed, and a bare notice without altering the documents is not enough.

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