Convert Section 8 Company to Public Limited Company

The conversion is governed by Section 8(4)(ii) of the Companies Act, 2013, read with Rules 21 and 22 of the Companies (Incorporation) Rules, 2014, as amended by the Companies (Incorporation) Amendment Rules, 2023. These provisions outline stringent conditions, application processes, and requirements for converting a public company into a private one.

The Regional Director (RD) of the Ministry of Corporate Affairs is the sole approving authority. While the Registrar of Companies (ROC) handles post-approval filings, the core approval for license revocation and public company status rests entirely with the RD.

The conversion creates a fundamental shift from non-profit to large-scale for-profit status. The company loses its Section 8 license, forfeits all tax exemptions, gains the ability to have unlimited shareholders, can list on stock exchanges, distribute dividends freely, and raise capital from the public through an IPO/FPO.

No, after conversion to a public limited company, the company must first meet SEBI listing requirements, including minimum paid-up capital, track record, profitability criteria, and complete the IPO process before listing on any recognised stock exchange.

Common reasons include the need for massive capital expansion through public offerings, a desire to provide liquidity to existing stakeholders, a strategic shift to large-scale commercial operations, plans for national/international expansion, or an inability to sustain the charitable model.

Yes, an existing Public Limited company can convert to a Section 8 company by filing Form INC-12, provided it meets the criteria for charitable objectives, obtains a Central Government license, and complies with the strict conditions under Section 8

Post-conversion, the public limited company must have a minimum of 7 members (shareholders) as required by Section 3(1)(a) of the Companies Act, 2013, compared to 2 members for private limited companies.

Minimum three directors are mandatory for a public limited company under Section 149(1)(a), compared to 2 for a private limited company. A maximum of 15 directors can be appointed without a special resolution.

No, Rule 21(4) mandates that all financial statements (AOC-4) and annual returns (MGT-7/7A) must be filed up to the preceding financial year. All defaults must be rectified before applying for public company status.

Companies with FCRA registration must obtain a specific NOC from the FCRA department (Ministry of Home Affairs) regarding foreign funds utilisation and compliance status before RD approval. This is crucial to ensure that all foreign contributions are accurately accounted for and reported.

Yes, comprehensive NOCs are required from the Income Tax Department (for 12A/80G), the Charity Commissioner, the FCRA department (if applicable), any government department providing grants, and additional clearances for public company status.

Yes, RD applies stricter scrutiny to public limited conversions due to potential public investment implications, requiring more detailed documentation, extended review periods, and more stringent compliance verification.

Form INC-18 is the comprehensive e-form for filing a conversion application with the Regional Director, which requires extensive documentation, including three years' financial statements, detailed valuation reports, and multiple regulatory clearances for public company status.

Form INC-19 is the public notice format published in multiple newspapers within one week of filing INC-18, inviting public objections within 30 days, as per Rule 22(2). This format is also required for wider publication in the case of public company conversions.

MOA must remove all Section 8 clauses, adopt unrestricted commercial objectives, and enable public shareholding. AOA must allow free share transferability, provide for a minimum of 3 directors, enable public offerings, and comply with public company requirements.

Yes, a comprehensive valuation report from a Registered Valuer is mandatory, determining the fair market value of all assets with greater detail required for a public company due to potential public investment implications.

Form MGT-14 must be filed within 30 days of the Special Resolution for public company conversion, registering the resolution with the MCA before submitting the INC-18 application, and documenting shareholder approval for public status.

Three years' audited financial statements are required (compared to two for private companies), with the latest not older than 30 days, demonstrating financial stability for potential public investment.

Yes, in addition to the CA/CS/CMA compliance certificate under Rule 21(5), further certifications may be required to confirm readiness for public company compliance and governance standards.

Public limited conversion involves enhanced scrutiny, a more extended RD review period (60-120 days vs. 30-90 days), wider public notice requirements, more comprehensive documentation, and stricter conditions due to public interest implications.

Rule 21(2) requires an explanatory statement to include a detailed business plan for a public company, a proposed capital structure, listing plans (if any), a governance framework, and a comprehensive justification for large-scale commercial operations.

During the 30-day public notice period, as per Rule 22(2), the company must publish in multiple newspapers with wider circulation, maintain website updates, and prepare responses to potentially higher public objections.

Yes, conversion requires a name change, removing Section 8 indicators (Foundation/Association) and adding a mandatory "Limited" or "Ltd" suffix as required for public limited companies.

Form INC-20 filed with the ROC after RD approval, serving as intimation about the public limited conversion. Includes RD order and a completely revised MOA/AOA for public company structure.

Besides the Chief Secretary notification, public conversion requires enhanced coordination with SEBI (for future listing), stock exchanges (if planned), and additional regulatory bodies for public company compliance.

Rule 22(10) mandates that accumulated surplus cannot be distributed but must be transferred to another Section 8 company or the Investor Education and Protection Fund within 60 days, even in the case of a public company conversion.

Rule 22(9) requires the payment of the difference between the acquisition cost and the current market value for government-subsidised property, with stricter valuation requirements for public companies due to transparency requirements.

The entity loses all exemptions, including 12A and 80G. Subject to standard corporate tax (currently 25-30% depending on turnover). May face additional tax on listing gains if shares are subsequently listed.

No, accumulated surplus from the Section 8 period can never be distributed as dividends, even in a public limited company. Only post-conversion profits can be distributed to shareholders.

The company must establish a new share capital structure suitable for public company operations. There is no minimum paid-up capital requirement for a public company as per the Companies (Amendment) Act, 2015, which allows for provision for future public offerings and unlimited shareholders.

All donor funds must be utilised for original purposes or transferred to another Section 8 company. Government grants must be settled per specific instructions. Donors must be notified of conversion to public status.

The process typically takes 5-8 months due to enhanced scrutiny, including internal approvals (30-40 days), a 30-day public notice period, comprehensive NOC procurement, and an extended review by the RD (60-120 days) for public company status.

RD conducts a deeper scrutiny for public limited conversions due to potential public investment implications, requiring a detailed review of business plans, governance structures, and public interest protection measures.

Rule 22(2) mandates that objections be received within 30 days after the publication of Form INC-19. This period cannot be shortened and requires wider publication for the public company conversion to be effective.

Yes, Form INC-20 must be filed within 30 days of receiving the RD approval. Delays may result in penalties and complications in obtaining a public limited company certificate.

Public limited companies face extensive compliance, including enhanced ROC filings, potential SEBI regulations, mandatory board committees, higher disclosure standards, and statutory audit requirements.

Yes, public limited conversion typically attracts more objections due to its broader impact on stakeholders, requiring the company to prepare comprehensive responses during the 30-day objection period.

If rejected, the company continues as a Section 8 entity. The company may address deficiencies and reapply or appeal to NCLT. Rejection is more likely for public conversion due to higher standards.

Yes, the company can appeal RD's rejection to the National Company Law Tribunal (NCLT), demonstrating an error in the decision or presenting new facts that support the viability of public company conversion.

Valid objections include incomplete charitable projects, pending beneficiary obligations, public interest concerns, inadequate business plans for a public company, governance concerns, or issues related to asset transfers.

The company must prepare a detailed stakeholder communication plan that addresses the concerns of donors, beneficiaries, potential investors, and regulatory bodies regarding the transition to public company status.

A public limited company must maintain a minimum of 3 directors at all times. If listed, additional independent directors are required per SEBI regulations. Directors can receive market-based remuneration.

No, the company must first establish a track record as a public limited company, meet SEBI eligibility criteria, including profitability/net worth requirements, appoint merchant bankers, and complete an extensive IPO preparation process.

Public limited companies require enhanced governance, including mandatory board committees (if listed), structured board meetings, comprehensive stakeholder reporting, and compliance with listing regulations if applicable.

Yes, all liabilities, debts, and obligations from the Section 8 period continue. A public limited company remains fully responsible for all past commitments, with enhanced disclosure requirements in place.

Failure to comply with RD conditions may result in conversion revocation, restoration to Section 8 status, penalties under the Companies Act, and potential legal action for non-compliance.

Yes, post-conversion public limited companies can accept foreign investment under the automatic route up to sectoral caps per FDI policy, subject to FEMA compliance, unlike Section 8, which faced FCRA restrictions.

Setindiabiz provides end-to-end assistance, including strategic planning for public structure, comprehensive documentation, INC-18 preparation, multi-jurisdiction NOC coordination, public notice management, RD representation, objection handling, post-conversion compliance setup, and preparation for eventual listing requirements. Our experts ensure a seamless transition to public limited status.