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

Sundaram Textiles Private Limited wants to become a public company. Which step is legally required for the conversion?

A private company converts into a public company by altering its articles through a special resolution. Central Government approval is needed only when a public company becomes private. An ordinary resolution or Board resolution alone does not satisfy the requirement.

  1. AAlter its articles by a special resolution, so that the private-company restrictions no longer applyCorrect
  2. BAlter its articles by an ordinary resolution filed within 30 days
  3. CObtain an order of the Central Government approving the conversion before altering the articles
  4. DPass a resolution of the Board alone, since no shareholder approval is needed

Explanation

Section 14 allows a company to alter its articles by a special resolution, including alterations that convert a private company into a public company. The Central Government order is required only for conversion of a public company into a private company, so option C is wrong. An ordinary resolution or a Board resolution alone is not enough.

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