COMPANY- CONVERSION FROM PRIVATE TO PUBLIC COMPANY

Publish by The Daily Star on 14th January, 2012 (Link Above)

This week Your Advocate is Barrister Omar Khan Joy, Advocate, Supreme Court of Bangladesh. He is the head of the chambers of a renowned law firm, namely, ‘Legal Counsel’, which has expertise mainly in commercial law, corporate law, family law, employment and labor law, land law, banking law, constitutional law, criminal law, IPR and in conducting litigations before courts of different hierarchies.

Our civil and criminal law experts from reputed law chambers will provide the legal summary advice.

Query
I am a managing director of a private limited company. I need to know the process of changing the private limited company to public limited company.

Anonymous.

Response
Thank you very much for your query. We have understood that you are the Managing Director of a Private Limited Company and are desirous to convert the same to a Public Limited Company. Such conversion is not at all a complex process and the provisions related to the same can be found in the Companies Act 1994, section 231. It provides that if a Private Limited Company has at least seven members it has to alter its Articles of Association to amend its provisions related to Private Limited Company. By doing so, the company shall be a Public Limited Company as on the date of the alteration. Within a period of 30 days from the date of the alteration you need to file with the Registrar of Joint Stock of Companies and Firms (RJSC) either a prospectus or a statement in lieu of prospectus to this effect.

If your company does not have seven members (i.e. shareholders) at present then you need to have seven members first before such conversion can be made. Members can be added by issuance of new shares to new members or by transferring of existing shares by any shareholder to new members as per the provisions contained in the Articles of Association of your company.

That prospectus or statement in lieu of prospectus has to contain the particulars set out in Part I and the reports specified in Part II of Schedule IV of the Companies Act 1994.

It has to be remembered that non-compliance with the above section will render the company and every officer of the company in default punishable with imprisonment for a term of up to 2 years or with fine of up to five thousand taka or with both.

Worth noting is also the fact that should any prospectus or statement in lieu of prospectus filed under this section include any untrue statement, any person authorizing such filing shall be punishable with imprisonment for a term of up to 2 years or with fine of up to five thousand taka or with both. However, that person may not be thus punished if he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the filing of the prospectus or statement believe that the statement was true.

It is pertinent to mention here that a Public Limited Company is not necessarily a listed company. If you want to become a listed company you have to be listed with the Stock Exchanges and obtain a listing permission from the Securities and Exchange Commission. In case the paid up capital of your company exceeds 50 crore then it is compulsory to become a listed company and is obliged to issue shares to public. If, on the other hand, the paid up capital of your company remains within 50 crore then you can continue with the company in its Public Limited status without listing the same.

We also advise you to consult a lawyer expert in company matters to deal with the entire issue of conversion and filing with the RJSC.

For detailed query contact: omar@legalcounselbd.com.