Amendment in Companies (Incorporation) Rules 2014

The Ministry of Corporate Affairs (“MCA”) vide its notification dated January 25, 2021, has amended Rule 41 of the Companies (Incorporation) Rules, 2014 (“Rules”).

The notification has amended Rule 41 of the Rules which relates to the conversion of a public company into a private company (“Amendment”).

As per Rule 41 of the Rules, a company which desires to convert itself from public company to private company shall file an application with the Regional Director in e-Form No.

RD-1 within 60 days of passing a special resolution for such conversion in a duly convened meeting along with the prescribed documents.

The gist of the Amendment

• MCA has made slight amendments in the procedure for disposal of an application under Section 14 of the Companies Act, 2013 (“Act”) for the conversion of a public company into a private company in case of objection raised by the Regional Director.
• As per the Amendment, Regional Director is required to record all objections in writing and consequent upon hearing 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.
• In case no consensus is received, the Regional Director may approve the conversion if he is satisfied that the conversion would not be against the interests of the Company or is not being made with a view to contravene or to avoid complying with the provisions of the Act, with reasons to be recorded in writing.
• Amendment aims at easing the conversion of the company while eliminating the powers of the Regional Director to reject the application where no consensus is received.
• However, 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.