Q.4 What is private limited company? How it can be converted into public limited company?
Ans: PRIVATE LIMITED COMPANY
According to Companies Ordinance 1984 a private company has been defined in the following words:
I.“Private company means a company which by its articles restricts the rights to transfer its shares and Limits the number of its members to fifty 50.”
II. “It also prohibits any invitation to the public to invest their money in company.”
III. “At least two persons can form the company.”
IV. “The word “private limited” must be used with the name of company.”
CONVERSION OF PRIVATE COMPANY INTO PUBLIC COMPANY
CAUSES OF CONVERSION
Private company business cannot expand due to limited capital, limited production and limited sale. So to expand the business private company is converted into public company.
MFTHODS OF CONVERSION
The private company can be converted into public company in the following ways:
1. Shareholders may transfer their shares.
2. They may invite the public for subscription of shares and debentures.
3. Restriction on maximum limit (50) should be removed.
4. New articles of association should be submitted to registrar within 14 days of alteration. An important document required for conversion like consent and declaration of directors about shares should also be attached.
5. The number of members must be increased to 7 if there are less than 7.
After the submission of the document to the registrar’s office private company may be converted into public company.