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CA Intermediate · Corporate and Other Laws · Incorporation of Company and Matters Incidental Thereto

Meera Textiles Pvt Ltd, a private company, wants to convert itself into a public company without changing its business. Its articles currently contain the private company restrictions (limit of 200 members, restriction on transfer of shares, and a bar on inviting the public to subscribe). Which course of action is legally correct for the conversion?

A private company converts into a public company by passing a special resolution to alter its articles, deleting the private company restrictions, and filing the altered articles with the Registrar. Alteration of articles needs a special resolution, so an ordinary resolution, court permission or dissolution is not required.

  1. APass a special resolution to alter the articles so that the private company restrictions are deleted, and file the altered articles with the RegistrarCorrect
  2. BPass an ordinary resolution only and inform the Registrar after six months
  3. CApply to the Supreme Court for permission to convert, since a private company cannot become public by its own act
  4. DDissolve the private company and incorporate a new public company, as conversion is not permitted

Explanation

A private company becomes a public company by altering its articles to delete the restrictions that make it private. Articles can be altered only by a special resolution, and the altered articles must be filed with the Registrar. An ordinary resolution is not enough, and no court permission or winding up is needed.

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