How to convert a public limited company into a private limited company

Written by martin muchira
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How to convert a public limited company into a private limited company
The process of converting a company from public to private can take six months to a year (Jupiterimages/BananaStock/Getty Images)

The process of converting a company from public to private can take six months to a year due to the legal and financial scrutiny on the company's conversion. A public limited company can choose to go private for a number of reasons. Private companies have reduced regulatory and report requirements in comparison to public companies. This enables management to focus more time on the development of the company. Taking a company private can pose a number of challenges, such as legal opposition from disgruntled shareholders.

Skill level:
Moderate

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Instructions

  1. 1

    Issue a notice of intended conversion. Issue a notice in the national newspapers in the state where the company is operating, stating that the company will be converted from public to private. Anyone who has reason to object has 21 days to raise an objection. Also, give notice to creditors about the conversion.

  2. 2

    Hold a board meeting to consider the proposal of conversion. Ensure that there is a quorum before proceeding with the meeting. The board of directors should reach an agreement and resolve and authorise the conversion of the public limited company to a private limited company by passing a special resolution. The board then should appoint one of the members to oversee the whole conversion process.

  3. 3

    Amend the articles and memorandum of associations. Delete the sections in the documents that do not apply to a private limited company and insert the ones which do apply. These changes are subject to approval by the central government.

  4. 4

    Notify the stock exchange of the conversion. The notification is done by submitting copies of the amended articles and memorandum of association to the stock exchange where the company's shares are listed.

  5. 5

    Lodge the special resolution with the department of state. Lodge the resolution within 30 days of the resolution being passed by the board of directors. The special resolution should state that you have authorised the conversion of the public company to a private limited company and provide the new name of the company. The word public should be removed from the name of the company and replaced with private. Submit this together with the amended articles and memorandum of association with the application form.

  6. 6

    Apply for a fresh certificate of incorporation. This is under the new name of the company. The certificate of incorporation will show that the company is now private.

  7. 7

    Issue a notification to all stakeholders. Inform government authority's customers and bankers that the company is now private.

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