HR Policies: Best Practices For Start-Ups In India

Procedure for Conversion into a Public Limited Company

Converting a private limited company into a public limited company in India is governed by the Companies Act, 2013, and involves a formalised legal process. Here’s a step-by-step guide:

1. Convene a Board Meeting

• Pass a board resolution to approve the proposal for conversion.
• Approve amendments to the Memorandum of Association (MoA) and Articles of Association (AoA).
• Schedule an Extraordinary General Meeting (EGM) for shareholder approval.

2. Issue Notice for EGM

• Send notices to all shareholders, directors, and auditors at least 21 days before the meeting.
• The notice should include the agenda, draft resolutions, and explanatory statements.

3. Hold the Extraordinary General Meeting (EGM)

• Pass a Special Resolution to approve the conversion from private to public.
• Approve necessary alterations in the MoA (removal of “Private”) and AoA (removal of restrictive clauses on share transfer and member limits).

4. Filing with Registrar of Companies (RoC)

Submit the following forms with the Ministry of Corporate Affairs (MCA) portal:

• MGT-14: Filing of special resolutions within 30 days of passing them.
• INC-27: Application for conversion, along with certified copies of resolutions, amended MoA/AoA, and EGM minutes.

5. Scrutiny and Approval by RoC

The Registrar reviews the application and, upon satisfaction, issues a Fresh Certificate of Incorporation reflecting the change in company status from private to public.

Related Read: Private Company Vs Public Company: Key Differences Explained

Post-Conversion Requirements

Once the company has been converted into a public limited company, several post-conversion formalities must be completed to align with regulatory and operational standards:

1. Update Statutory Documents

• Obtain a new PAN reflecting the updated company name.
• Revise all statutory records, financial statements, and company stationery (letterheads, invoices, website, etc.).

2. Inform Bankers and Financial Institutions

• Update your company’s status with existing banks and financial institutions.
• Amend authorised signatories if required.

3. Intimate Regulatory Authorities

• Notify relevant authorities such as tax departments, GST authorities, and regulatory bodies, if applicable.

4. Compliance with Public Company Norms

• Increase the number of directors to a minimum of 3 (as required for a public company).
• Appoint independent directors and comply with applicable listing regulations (if planning for a stock exchange listing).
• Adhere to enhanced disclosure norms, audit requirements, and corporate governance standards.

5. Prepare for Capital Raising (Optional)

• If planning an IPO, start preparing for SEBI compliance, drafting offer documents, and engaging with merchant bankers.

Frequently Asked Questions (FAQs)

What is MCA eForm MR-1?

MCA eForm MR-1 is a statutory filing under Section 196 of the Companies Act, 2013. It is used to record the appointment or reappointment of key managerial personnel, namely:

• Managing Director (MD)
• Whole-Time Director (WTD)
• Manager

Filing MR-1 is mandatory for both public and private limited companies. It ensures compliance with corporate governance norms. The form must be filed within 60 days of appointment.

Laws Governing the eForm MR-1

The legal framework for filing MR-1 is governed by:

• Sections 196 & 197 of the Companies Act, 2013
• Schedule V of the Companies Act, 2013
• Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Key provisions include:

• The appointment/reappointment of MD, WTD, or Manager must be filed with the Registrar of Companies (RoC) within 60 days.
• A person cannot be an MD or a Manager in more than one company simultaneously (except subsidiaries with Board approval).
• The maximum tenure is 5 years, and reappointment can only be made within one year of the expiry of the current term.

Eligibility Criteria for Filing MCA eForm MR-1

To be eligible for appointment via MR-1, the following conditions must be met:

• Age requirement: The appointee must be between 21 and 70 years. Appointment above 70 years is allowed only through a special resolution passed by shareholders.
• Must comply with the Articles of Association (AoA) of the company.
• The appointment must be approved by both the Board of Directors and shareholders in the general meeting.
• The appointee must not be disqualified under Section 164 of the Companies Act, 2013 (e.g., insolvent, convicted of an offence, or default in filing returns).

Purpose of the eForm MR-1

The primary purpose of filing eForm MR-1 is to intimate the Registrar of Companies (RoC) about the appointment or reappointment of managerial personnel.

• It serves as the official record of managerial appointments.
• Filing ensures compliance with Schedule V of the Companies Act.
• The form must be filed within 60 days of such appointment.

Documents Required for Filing MCA eForm MR-1

The following documents must be attached to MR-1 while filing:

1. Certified true copy of the Board Resolution approving the appointment.
2. Certified true copy of the Shareholders’ Resolution (if applicable).
3. Central Government approval (if required under Section 196/197).
4. Letter of consent from the appointee.
5. Certificate from the Nomination and Remuneration Committee (if applicable).

Step-by-Step Procedure for Filing MCA eForm MR-1

Here’s how to file eForm MR-1 online:

1. Log in to the MCA portal.
2. Download eForm MR-1 from the MCA forms section.
3. Fill in company details (CIN, name, registered office, etc.).
4. Enter appointment details (DIN/PAN of appointee, designation, tenure, remuneration).
5. Attach required documents such as resolutions and consent letters.
6. Digitally sign the form using a valid Director/Professional DSC.
7. Upload the form to the MCA portal.
8. Pay the prescribed filing fee.
9. Generate and save the Service Request Number (SRN) to track status.

Once processed, an acknowledgement of filing is sent by the MCA.

Common Errors in Filing MCA eForm MR-1

Many companies face rejections or delays due to mistakes. Common errors include:

• Entering incorrect DIN/PAN details of the appointee.
• Failure to attach mandatory resolutions.
• Missing the 60-day filing deadline.
• Using an unauthorised or expired DSC.
• Non-compliance with age or disqualification criteria.

Frequently Asked Questions

What is a Trust?

A trust is a legal arrangement where one party (the trustor or settlor) transfers assets to another (the trustee), who manages them for the benefit of a third party (the beneficiary). Trusts can be:

• Private trusts – Created for specific individuals or groups (like family members).
  
• Charitable/public trusts – Established to serve the public good through activities in education, healthcare, relief, or religion.
  

Creation of Trust

Setting up a trust involves a few essential steps:

1. Define the purpose – Clearly outline the mission or goal of the trust.
   
2. Draft a Trust Deed – This is the legal document that outlines the trust’s objectives, details of trustees, mode of operations, and more.
   
3. Appoint Trustees – These are individuals who will manage the trust's affairs.
   
4. Identify Beneficiaries – Define who will benefit from the trust.
   
5. Register the Trust – For a charitable trust to be recognized legally and receive tax exemptions, registration with the local authority is crucial.
   

What is a Charitable Trust?

A charitable trust is a type of public trust established to carry out philanthropic, religious, educational, or social activities. Unlike private trusts, these operate for the benefit of society at large and not for any specific individual or family.

Charitable trusts must be registered under applicable laws, such as the Indian Trusts Act, 1882, or state-specific legislation, to be legally recognised and to enjoy tax benefits.

Benefits of Setting Up a Charitable Trust

Here’s why setting up a charitable trust can be highly beneficial:

• Tax Exemptions: Registered charitable trusts can avail of tax benefits under Sections 12A and 80G of the Income Tax Act.
  
• Legal Recognition: Gives legitimacy and builds trust among donors and beneficiaries.
  
• Structured Fund Management: Enables systematic handling of funds and activities.
  
• Credibility and Transparency: Boosts donor confidence and supports fundraising.
  
• Long-Term Impact: A legal trust ensures that social efforts continue beyond the lifespan of its founders.
  

Legal Structure Options for Charitable Trust

When setting up a charitable organisation, you can choose from a few legal structures:

• Public Charitable Trusts – Governed by the Indian Trusts Act or state laws. Ideal for small to mid-sized social initiatives.
  
• Societies – Registered under the Societies Registration Act, 1860. Suitable for large-scale, membership-based organisations.
  
• Section 8 Companies – Formed under the Companies Act, 2013, for nonprofit purposes. Best for organisations looking for high compliance standards and credibility.
  

Depending on your goals, each structure has different compliance requirements, operational flexibility, and advantages.

Documents Required for Registering a Charitable Trust

To register a charitable trust, you’ll typically need the following documents:

• Trust Deed (on non-judicial stamp paper)
  
• PAN card of the trust and the trustees
  
• ID and address proof of all trustees (Aadhaar, passport, voter ID)
  
• Passport-size photographs of trustees
  
• Proof of registered office address (rent agreement, utility bill)
  
• No Objection Certificate (NOC) from the property owner (if applicable)
  
• Trust objectives clearly stated in the deed
  

Charitable Trust Registration Process

Follow these steps to register your charitable trust:

1. Draft the Trust Deed – Clearly define your objectives, trustees, operations, and rules.
   
2. Get it Notarised – Ensure it’s on proper stamp paper and signed by the settlor and trustees.
   
3. Submit to the Registrar – File the trust deed with the local Sub-Registrar office along with identity proofs and passport-size photos of trustees.
   
4. Pay Registration Fees – Fees vary depending on the state and property involved.
   
5. Apply for PAN – After registration, get a PAN card for the trust.
   
6. Apply for 12A and 80G Certification – These allow income tax exemption for the trust and its donors.
   

Conclusion

Setting up a charitable trust is a meaningful way to contribute to society, but it requires careful planning, legal clarity, and compliance. Registering your trust legitimises your efforts and opens up access to tax benefits and funding opportunities.

Whether you're working toward education, healthcare, or social welfare, a properly structured and registered charitable trust ensures that your good work has a lasting impact.

Frequently Asked Questions