How To Convert A Private Limited Company Into A Public Limited Company
Transitioning your private limited company into a public limited company is an exciting journey that opens a new door of opportunities and comes with its own set of advantages. If you have decided to take the plunge to have your private limited company converted to a public limited company, read on to find out how you can do so.
Our experienced corporate secretaries in Singapore can assist you with the process if you have further questions. Meanwhile, we hope this article can help you understand the process better.
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What Are the Main Features of a Public Limited Company?What’s the Difference Between a Private Limited Company vs Public Limited Company
Why Should Anyone Convert Their Private Limited Company to a Public Limited Company?
What Is the Procedure Like for Converting Private Limited Company to Public Limited Company
What Happens After Conversion
What a Public Limited Company Needs To Do To Stay Compliant
What Are the Main Features of a Public Limited Company?
While the public limited company structure shares some similarities with the private limited company structure, its features make it more ideal for large businesses. Its main features include:
- Shareholders: A public limited company requires at least 50 shareholders, making it ideal for large businesses
- Public: Unlike a private limited company, a public limited company can offer shares to the general public when it goes listed
- Regulations: A public limited company will be put under more rigid accounting and reporting rules due to its nature
As with the private limited company structure, a public limited company will also be required to have a registered office in Singapore.
What’s the Difference Between a Private Limited Company vs Public Limited Company
| Private limited company | Public limited company |
|---|---|
| Privately held for small businesses and has a maximum of 50 shareholder | Publicly held and has more than 50 shareholders |
| Liability of members of private limited company is limited to the number of shares respectively owned by them | Perceived as a separate entity from its directors or founders and has legal capacity. Shareholders also have limited liability |
| The shares of a private limited company cannot be traded publicly | The shares of a private limited company can be traded publicly if it goes listed |
Why Should Anyone Convert Their Private Limited Company to a Public Limited Company?
Advantages
Your private limited company will have to be converted to a public limited company when there are more than 50 shareholders. Converting to a public limited company and getting listed comes with the following advantages:
Your private limited company will have to be converted to a public limited company when there are more than 50 shareholders. Converting to a public limited company and getting listed comes with the following advantages:
Unlock and maximise long-term shareholder value
The conversion of private limited company to public company best demonstrates the brand's real value in the market and offers the original shareholders a significant Return on Investment (ROI).
Liquidity
Stockholders of a registered private limited company's stock have to look for investors who are willing to buy its shares. On the other hand, stockholders of a public limited company will have an open niche market in which sellers and buyers can interact and do business.
Compensation
In Singapore, companies that are publicly listed can give securities to their directors, officers and employees as a form of compensation. The market value of the securities is determined by its stock exchange selling price.
Disadvantages
While converting a private limited company to a public listed company comes with advantages, there are also some disadvantages, including:
- It is not cheap to set up
- There are more stringent accounting and reporting requirements
- There is a higher possibility of a hostile takeover by a competitor, since the company is unable to control the buyers of its shares
- Shareholders will expect a percentage of the profits as their dividends
- Shareholders may have differing opinions when it comes to decision making for the business
What Is the Procedure Like for Converting Private Limited Company to Public Limited Company
Step 1: Engage a lawyer
You will need to engage your lawyer to draft out a Statement in lieu of Prospectus.
Step 2: Pass shareholders’ resolution
East river Pte. Ltd. will then pass Shareholders’ resolution (Special resolution) for the following agenda:
- To convert the private limited company to public limited company
- To change the company name to East river Ltd.
- To adopt the Statement in lieu of Prospectus
- To adopt a new set of Constitution (for Public Limited Company)
Step 3: Lodge shareholders’ resolution
You will then have to lodge the passed Shareholders’ resolutions with Accounting and Corporate Regulatory Authority (ACRA)
Step 4: Notice of incorporation
ACRA will issue a notice of incorporation.
Step 5: Lodge another lodgement
Lodge another lodgement (a list of persons holding shares in the company) with the ACRA within 14 days after the issuance of the notice of incorporation.
What Happens After Conversion?
Changing your company structure to a public limited company is not your company's final destination, but just the first step in a new journey. After conversion, your company is also expected to:
Set up an audit committee
Under the Singapore Companies Act, all public listed limited company in Singapore are required to have an audit committee, made up of board members of an independent majority and are not affiliated with an executive director or executive directors. The role of the audit committee is to uphold the integrity of your company’s financial statements and any announcements about the financial performance of your company.
What a Public Limited Company Needs To Do To Stay Compliant
Register a Prospectus
A public limited company has to adhere to more complicated regulatory principles in comparison to a private limited company. For a start, a public limited company has to register a prospectus with the Money Authority of Singapore (MAS), with the following information:
- Reports
- Risk factors
- Tax issues
- Investment objectives and policies
- Share classes
- Structure of the business and its history
- Company's directory, management, and administration
Secure special permits and licenses
If your public limited company is activating in business sectors including hotels, food services businesses, land transport services, animal and veterinary services, education centres and the like, you are required to apply and obtain special permits and licenses to operate in these regulated types of services.
Hold annual shareholders’ meeting
Public limited companies in Singapore are required to hold an annual shareholders’ meeting to present their accounts to its members and allow them to raise questions about the business’s financial situation. The date of the shareholders’ meeting will be dependent on your company’s financial year end.
Stay on Top of Administration Work
Converting your private limited company to a public limited company involves heavy investment of resources and is a long-term commitment, but we’ve got your back. We know how busy you are, and we can help you sort out your accounting tasks in Singapore so you can concentrate on the core business at hand.
We’ll take over your invoices, receipts, and bank statements in any format. We then sort, match them and prepare reports to ensure your company always stays compliant. Drop us a message today!
