Page 135 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes 6. A private company need not hold a statutory meeting but a public company must hold a

statutory meeting and file a statutory report with the Registrar.

7. The directors of a private company are not required to file with the Registrar written consent
to act as directors or sign the memorandum of association or enter into a contract for their

qualification shares. But the directors of a public company must file with the Registrar
their written consent to act as directors, must sign the memorandum and must enter into a
contract for their qualifi cation shares.
8. Directors of a private company may be appointed by a single resolution, but it is not so in
case of a public company.

9. Directors of a private company are not required to retire by rotation, but in case of a public
company, at least two-third of the directors must retire by rotation.
10. The number of directors in a private company may be increased to any extent without
the permission of the Central Government, but in case of a public company if the number
of directors is to be more than twelve then the approval of the Central Government is
necessary.
11. Two members have to be personally present to form the quorum in a private company but
in a public company this number is fi ve members.

12. In a private company, there are no restrictions on managerial remuneration.
13. In addition to the above, a private company enjoys some special privileges. A public
company enjoys no such privileges.
14. A private company cannot issue share warrants.

7.5 Conversion of Private Company into a Public Company

Section 44 provides for conversion of a private company into a public company. The procedure
is:
(1) The company in general meeting must pass a special resolution altering its articles in such
a manner that they no longer include the provisions of s.3(1) (iii) which are required to be
included in the articles of a private company. On the date of the passing of the resolution,
the company ceases to be a private company and becomes a public company.
(2) Within thirty days of the passing of the special resolution altering the articles, the company

shall file with the Registrar (i) a printed or type-written copy of the special resolution and
(ii) a prospectus or a statement in lieu of prospectus.
If default is made in filing the resolution and the prospectus or the statement in lieu of

prospectus, the company and every officer in default shall be liable to a fi ne upto ` 5,000

for every day of default.
(3) If the number of members is below seven, steps should be taken to increase it to at least
seven whilst the number of directors should be increased to at least three, if there are only
two directors.
(4) The word ‘Private’ is to be deleted before the word ‘Limited’ in the name.

7.6 Conversion of Public Company into a Private Company

There is no direct or express provision in the Act for the conversion of a public company into a
private company except a reference in the proviso to s.31(1). A public company having a share

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