Conversion Of Company| Law

1- Concept of conversion:

              Conversion of a public company into private company and private company into public is basically to change the liability of its members and their rights. Company ordinance provides the procedure for conversion along with its effects. Section 44 to 45 of Companies Ordinance 1984

               There are two kinds of company.

 “A company which is not a private company.Private company means a company which its articles. (i)- Restrict the right to transfer its shares (ii)- Limits the number of members up to 5  (iii)- Does not invite public to subscribe its share  (iv)- Prohibit issuance of debenture to public.

2- Conversion of company:

                 Company can be converted into each other by following procedure of company.   There are two modes of conversion.  (i)- By alteration in articles (ii)- By non-competition of articles. There are two types of conversion of company. (i)- Conversion of public into private (ii)- Conversion of private into public.  A notice for conversion of company shall be given to all the member of that company.

 a- Date of meeting  b- Purpose of meting c- Place of meeting  d- Copy of resolution. General meeting shall be held and members shall be discussed the notice. A special resolution by ¾ majority shall be passed to convert a private company into public company. After the special resolution is passed alteration shall be made in memorandum and article

              Following are the effects of conversion of private company into public company. (i)- A private company shall be sealed (ii)- Number of members shall be increase (iii)- Number of directors shall be increase (iv)- Prospective shall be issue  (v)- Qualified editors shall be appointed (vi)- Statutory meeting shall be hold (vii)- Basic documents shall be altered. Following are the ideas of conversion of private into public.

              (i)- Together the capital (ii)- To get the benefits which a public company is entitled (iii)- To enhance the business a broder level (iv)- To issue prospectus (v)- To get more borrowing powers (vi)- To transfer its share without any restrictions (vii)- To invite public (viii)- To issue debentures into public (ix)- To circulate into public As a general rule public company cannot be converted into private company. It can be converted with the prior approval of SECP 1997  

 3- Procedure for conversion of public into private:

                        A notice for a conversion of company

                      a- Date of meeting

                      b- Purpose of meeting

                      c- Place of meeting

                      d- Copy of resolution

  A general meeting shall be held and members discuss conversion of company. A special resolution is to passed by the members by ¾ majority. An application shall be file to SECP which include reason for conversion. SECP shall confirm the conversion and shall give an order for conversion of public into private. (i)- Restriction on transfer of share (ii)-  Reduction in member  (iii)- Cannot invite public (iv)-  Cannot issue prospectus (v)-  Business at narrow level