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

Prakash Ltd, a public company, alters its articles to convert itself into a private company. It holds a special resolution of the members but has not yet obtained any approval. Which statement is correct regarding conversion of a public company into a private company?

A public company becomes private only when the articles are altered by special resolution and the alteration is approved by the Central Government through the Regional Director. The Registrar then records it. A special resolution alone, or mere notice to the Registrar, does not complete the conversion.

  1. AThe conversion is effective on passing the special resolution
  2. BThe conversion needs approval of the Central Government alone, and no Registrar filing is required
  3. CThe conversion is valid on filing a notice with the Registrar within 30 days, with no approval
  4. DThe conversion requires a special resolution altering the articles and approval of the Regional Director (Central Government), then the Registrar records the alteration and issues a fresh certificate if neededCorrect

Explanation

Converting a public company to a private company requires altering the articles by special resolution, and the alteration takes effect only after approval of the Central Government (power delegated to the Regional Director). The Registrar then registers the alteration. The special resolution alone does not make the conversion effective, and mere notice to the Registrar is not enough.

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