Section 14 of Companies Act, 2013 – Alteration of Articles

SECTION 14. ALTERATION OF ARTICLES

[Effective from 1st April, 2014, second proviso to sub-section (1) & Sub- section (2) effective from 1st June, 2016]

(1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of—

(a) a private company into a public company; or

(b) a public company into a private company:

Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company:

[Provided further that any alteration having the effect of conversion of a public company into a private company shall not be valid unless it is approved by an order of the Central Government on an application made in such form and manner as may be prescribed:

Provided also that any application pending before the Tribunal, as on the date of commencement of the Companies (Amendment) Ordinance, 2018, shall be disposed of by the Tribunal in accordance with the provisions applicable to it before such commencement.][2]

(2) Every alteration of the articles under this section and a copy of the order of the [Central Government][3] approving the alteration as per sub-section (1) shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the same.

(3) Any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act, be valid as if it were originally in the articles.

Applicable Rules

Companies (Incorporation) Rules, 2014

[Effective from 1st April, 2014]

Rule 33. Alteration of articles.—(1) For effecting the conversion of a private company into a public company or vice versa, the application shall be filed in Form No. INC.27 with fee.

[1] [(2) subject to the provision of sub-rule (1), for effecting the conversion of a public company into a private company, a copy of order of the Tribunal approving the alteration, shall be filed with the Registrar in Form No.INC-27 with fee together with the printed copy of altered articles within fifteen days from the date of receipt of the order from the Tribunal.]

[4] [Companies (Incorporation)Fourth Amendment Rules, 2018

Effective from 18th December, 2018

Rule 41. Application under section 14 for conversion of public company into private company. (1) An application under the second proviso to sub-section (1) of section 14 for the conversion of a public company into a private company, shall, within sixty days from the date of passing of special resolution, be filed with Regional Director in e-Form No. RD-1 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 and shall be accompanied by the following documents, namely:-

(a) a draft copy of Memorandum of Association and Articles of Association , with proposed alterations including the alterations pursuant to sub-section (68) of section 2;

(b) a copy of the minutes of the general meeting at which the special resolution authorising such alteration was passed together with details of votes cast in favour and or against with names of dissenters;

(c) a copy of Board resolution or Power of Attorney dated not earlier than thirty days, as the case may be, authorising to file application for such conversion;

(d) declaration by a key managerial personnel that pursuant to the provisions of sub-section (68) of section 2, the company limits the number of its members to two hundred and also stating that no deposit has been accepted by the company in violation of the Act and rules made thereunder;

(e) declaration by a key managerial personnel that there has been no non-compliance of sections 73 to 76A, 177, 178, 185,186 and 188 of the Act and rules made thereunder;

(f) declaration by a key managerial personnel that no resolution is pending to be filed in terms of sub-section (3) of section 179 and also stating that the company was never listed in any of the Regional Stock Exchanges and if was so listed, all necessary procedures were complied with in full for complete delisting of the shares in accordance with the applicable rules and regulations laid down by Securities Exchange Board of India.

Provided that in case of such companies where no key managerial personnel is required to be appointed, the aforesaid declarations shall be filed any of the director.

(2) Every application filed under sub-rule (1) shall set out the following particulars, namely:-

(a) the date of the Board meeting at which the proposal for alteration of Memorandum and Articles was approved;

(b) the date of the general meeting at which the proposed alteration was approved;

(c) reason for conversion into a private company, effect of such conversion on shareholders, creditors, debenture holders, deposit holders and other related parties;

(d) details of any conversion made within last five years and outcome thereof along with copy of order;

(e) details as to whether the company is registered under section 8.

(3) There shall be attached to the application, a list of creditors, debenture holders, drawn up to the latest practicable date preceding the date of filing of application by not more than thirty days, setting forth the following details, namely:-

(a) the names and address of every creditor and debenture holder of the company;

(b) the nature and respective amounts due to them in respect of debts, claims or liabilities;

(c) in respect of any contingent or unascertained debt, the value, so far as can be justly estimated of such debt:

Provided that the company shall file an affidavit, signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be managing director, where there is one, to the effect that they have made a full enquiry into affairs of the company and, having done so, have formed an opinion that the list of creditors and debenture holders is correct, and that the estimated value as given in the list of the debts or claims payable on contingency or not ascertained are proper estimates of the values of such debts and claims that there are no other debts, or claims against, the company to their knowledge.

(4) A duly authenticated copy of the list of creditors and debenture holders shall be kept at the registered office of the company and any person desirous of inspecting the same may, at any time during the ordinary hours of business, inspect, and take extracts from the same on payment of ten rupees per page to the company.

(5) The company shall, atleast twenty-one days before the date of filing of the application_

(a) advertise in the Form No.INC.25A, in a vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper, widely circulated in the State in which the registered office of the company is situated;

(b) serve, by registered post with acknowledgement due, individual notice on each debenture holder and creditor of the company; and

(c) serve, by registered post with acknowledgement due, a notice to the Regional Director and Registrar and to the regulatory body, if the company is regulated under any law for the time being in force.

(6) (a) Where no objection has been received from any person in response to the advertisement or notice referred to in sub-rule (5) and the application is complete in all respects, the same may be put up for orders without hearing and the concerned Regional Director shall pass an order approving the application within thirty days from the date of receipt of the application.

(b) Where the Regional Director on examining the application finds it necessary to call for further information or finds such application to be defective or incomplete in any respect, he shall within thirty days from the date of receipt of the application, give intimation of such information called for or defects or incompleteness, on the last intimated e-mail address of the person or the company, which has filed such application, directing the person or the company to furnish such information, to rectify defects or incompleteness and to re-submit such application within a period of fifteen days in e-Form No. RD-GNL-5.

Provided that maximum of two re-submissions shall be allowed.

(c) In cases where such further information called for has not been provided or the defects or incompleteness has not been rectified to the satisfaction of the Regional Director within the period allowed under sub- rule (6), the Regional Director shall reject the application with reasons within thirty days from the date of filing application or within thirty days from the date of last re-submission made, as the case may be.

(d) Where no order for approval or re-submission or rejection has been explicitly made by the Regional Director within the stipulated period of thirty days, it shall be deemed that the application stands approved and an approval order shall be automatically issued to the applicant.

(9) (i) Where an objection has been received or Regional Director on examining the application has specific objection under the provisions of Act, the same shall be recorded in writing and the Regional Director shall hold a hearing or hearings within a period thirty days , as required and direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Regional Director shall pass an order either approving or rejecting the application along with reasons within thirty days from the date of hearing, failing which it shall be deemed that application has been approved and approval order shall be automatically issued to the applicant.

(ii) In case where no consensus is received for conversion within sixty days of filing the application while hearing or otherwise, the Regional Director shall reject the application within stipulated period of sixty days.

Provided that the conversion shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.

(10) On completion of such inquiry, inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, conversion shall be allowed.

(11) The order conveyed by the Regional Director shall be filed by the company with the Registrar in Form No.INC-28 within fifteen days from the date of receipt of approval along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.]

Applicable Circulars

Clarification for filing of form No. INC.27 for conversion of company from public to private under the provisions of Companies Act, 2013

Circular No. 18/2014, dated 11-6-2014

Attention of the Ministry has been drawn to difficulties being faced by stakeholders while filing form INC.27 for conversion of a public company into a private company. The relevant provisions of Companies Act, 2013 (second proviso to sub-section (1) and sub-section (2) of section 14) have not been notified. In view of this, the corresponding provisions of Companies Act, 1956 (Proviso to sub-section (1) and sub-section (2A) of Section 31) shall remain in force till corresponding provisions of Companies Act, 2013 are notified. The Central Government has delegated such powers under the Companies Act, 1956 to the Registrar of Companies (ROCs) vide item No. (c) of the notification number S.O. 1538(E) dated the 10th July, 2012 and this delegated power remains in force. Applications for such conversions, therefore, have to be filed and disposed as per the earlier provisions.

Clarification on filing of e-form RD- l-Conversion of public company into private company and change in a Financial Year-reg.

General Circular No. 03/2019 dated 11^th March, 2019

This Ministry vide notification no. G.S.R 1219(E) dated 18/12/18 has notified Companies (Incorporation Fourth Amendment) Rules, 20 18, whereby applications u/s 2(41) (change in a financial year) and u/s 14 of the Companies Act, 20 13 (conversion of public limited company into private company), along with e-form RD-1 shall be processed by Regional Directors.

2.Stakeholders have expressed certain difficulties in filing e-form RD-1 on account of aforesaid two purposes pending deployment of revised version of e-form RD- 1. It is therefore clarified and Regional Directors are advised to process e-form RD-1 for the above referred applications, if ‘others’ is selected on account of aforesaid two counts, till the revised form is deployed by this ministry.

3.Further, it is also clarified that such applications filed in e-form no.RD-1 should not be rejected merely on the ground that “others” is selected and “eform is not available”, till the said form is deployed by this Ministry.

Applicable Notification

Delegates to the Registrar of Companies power and functions vested under specified sections of the Companies Act 1956

Notification No. SO1538 (E), dated 10.07.2012

In exercise of the power conferred by sub-section (1) of section 637 of the Companies Act 1956 (1 of 1956), and in supersession of the notification of the Government of India, in the then Department of Company Affairs, number G.S.R. 222(E), dated the 17th March, 2011, except as respects things done or omitted to be done before such supersession, the Central Government hereby delegates to the Registrar of Companies, the power and functions vested in it under the following sections of the said Act, subject to condition that the Central Government may revoke such delegation of powers or may itself exercise the powers and function under the said sections, if in its opinion such a course of action is necessary in the public interest, namely:

(a) section 21,

(b) section 25,

(c) proviso to sub section (1) of section 31,

(d) sub section (1D) of section 108,

(e) section 572.

2. The powers and functions under sub-section (1D) of section 108 shall be exercised and performed either by the Registrar of Companies of the State in which the registered office of the Company is situated, or by the Registrar of Companies of the State in which the applicant ordinarily resides.
3. This notification shall come into force with effect from 12th August, 2012.

 

[1] Substituted by the Companies (Incorporation) fourth Amendment Rules, 2016, vide Notification No. F.No. 1/13/2013/CL-V dated 1^st October, 2016. Prior to the substitution it read as under:

“A copy of order of the competent authority approving the alteration, shall be filed with the Registrar in Form No. INC.27 with fee together with the printed copy of the altered articles within fifteen days of the receipt of the order from the Central Government.

Explanation.—For the purposes of this sub-rule, the term competent authority” means, the Central Government.”

[2] Substituted by The Companies (Amendment) Ordinance , 2018 dated 2nd November, 2018. Prior to substitution it read as under:-

“Provided further that any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal which shall make such order as it may deem fit.”

[3] Substituted for the words “Tribunal” by The Companies (Amendment) Ordinance , 2018 dated 2nd November, 2018.

[4] Inserted by Companies (Incorporation)Fourth Amendment Rules, 2018 vide Notification No. F. No. 1/13/2013 CL-V, Part-I, Vol.II dated 18^th December, 2018.