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

Rohit Traders Private Limited alters its articles and removes the restrictions and limitations that the Companies Act, 2013 requires to be included in the articles of a private company. No other step is taken. What is the legal position?

The company ceases to be a private company from the date of the alteration. Under the proviso to section 14(1), removing the restrictions required in a private company's articles takes away its private status automatically, without any Registrar cancellation or Central Government order.

  1. AThe company continues as a private company until the Registrar cancels its registration
  2. BThe company ceases to be a private company from the date of such alterationCorrect
  3. CThe company becomes an unlimited company from the date of alteration
  4. DThe alteration is void because no Central Government order was obtained

Explanation

The first proviso to section 14(1) states that where a private company alters its articles so that they no longer include the required restrictions and limitations, it ceases to be a private company from the date of the alteration. Central Government approval applies to public-to-private conversion, so the last option is wrong.

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