shares and debentures prohibiting the invitation or acceptance of deposits from the public

In order to convert a public company into a private company, the following steps are essential: .
1. A public company shall pass a special resolution to alter its articles
so a to include in it the provisions relating to .a private company such as limiting the number of members to fifty, restricting the transfer of shares and
prohibiting invitation to the public to purchase its shares and debentures prohibiting the invitation or acceptance of deposits from the public.
Such a resolution Shan be binding on dissenting shareholders only
(i) it is bondable,
(ii) it is in the interest of the company as a whole,
(iii) it is consistent with the objects in the Memorandum of Association.
2. Take the approval of the Central Government. This approval must
be sought within 3 months fife)m the date of the special resolution.
3. Amend the Memorandum of Association to change its name by adding the word 'private' by passing a special resolution. No approval is necessary in
this regard.
4. A copy of the altered Articles (freshly printed) and of Government approved should be fIled with the Registrar of Companies within one month from the
date of approval.
5. After approval, the Registrar will issue a fresh certificate of incorporation. .
This is complete process of conversion of a public company into a privatecompany.
Problem 1. An association of 12 persons starts a banking business without being registered. Foul' members retire and thereafter' a suit is instituted hy one


of the continuing members fill' the mutation of assets of the business. Is the suit competent?
SoL The suit is not competent as the association is an illegal one within the cloning of Sec. 1]. The illegality of such an association cannot be cured even
by a subsequent reduction in the number o' its members (Madama Vs. Jallki Prasad).
cent of the paid-up share capitol of company A is held by the Centl"al Govemmcnt and eleven peel' cent by public institutions like the Life Insurance Is A a
government company?
SoL No, to constitute a government company, fifty one per cent of the paid up share capital must be held by the Central or State Government. The Life
Insurance Corporation of India and the Unit Trust offended are statutory corporations, but not the governments, or their departments and, therefore, eleven
per cent shares held by these institutions cannot be taken as held by the Central Government. (Sec. 617 and 619).
Problem 3, Company’s, its Managing DiI'ectOl' and another poison hold I'cspr.ctively one-thud of the number' of shares in another' Company Y. Is .
Company Y a subsidies)' of Company X ?
Sol. No, as Company X does not hold more than half in nominal value of equity share capital of Company Y Sec. 4 (1)].