Learn the critical process of modifying a company’s Memorandum of Association (MOA) and Articles of Association (AOA) when converting from private to public status. This second article guides you through document amendments, board approvals, and shareholder meetings with practical templates and case examples.
Table of Contents
Introduction
Previously in “Private to Public: Navigating the Legal Essentials of Company Conversion,”
I discussed how companies preparing for an IPO navigate the complex journey of converting from a private to a public company, using Zomato as an example.
I introduced TechInnovate Private Limited as our case study, assessed its conversion readiness, and established a transformation roadmap.
Now, as I move forward with converting TechInnovate from private to public, I must address what many corporate lawyers consider the most technically demanding aspect of the entire process: modifying its foundational documents
- the Memorandum of Association (MOA) and
- Articles of Association (AOA).
I remember my mentor telling me, “When you change a company’s status from private to public, you are not just changing its name—you are rewiring its DNA.”
This DNA is codified in the MOA and AOA of a company.
For your understanding, think of the MOA as defining what your company can do (its powers and limitations), while the AOA determines how it does it (its internal regulations). During conversion, both documents must be modified simultaneously to reflect the company’s new public status.
This article provides a comprehensive guide to these critical document modifications, using TechInnovate’s case as a practical example.
By the end, you will have the knowledge and tools to execute these changes confidently, whether you are a law student studying corporate transitions or a young lawyer handling your first conversion case.
It’s important to note that until the Registrar of Companies (ROC) approves the conversion and issues a new Certificate of Incorporation, TechInnovate remains a private company and must comply with its existing AOA and the Companies Act provisions applicable to private companies.
This distinction is crucial when determining which procedural requirements apply at different stages of the conversion process.
Why MOA and AOA modifications matter
Let me tell you that modification of MOA and AOA while converting a company is not optional, it is a statutory requirement under the Companies Act. This requirement exists for substantive reasons that affect how a company functions after conversion.
Let me show you, through the table below, what happens when MoA and AoA are not properly modified or revised:
Key consequences of improper modifications
| Consequence | Impact on business |
| Rejection by the Registrar of Companies (ROC) | Delays the entire conversion process |
| Regulatory penalties for non-compliance | Financial and reputational damage |
| Inability to issue shares or raise capital | Derails funding plans and growth strategies |
| Shareholder disputes from ambiguous governance | Legal costs and management distraction |
| Delayed business transactions | Missed market opportunities |
I once worked with a technology company similar to TechInnovate that modified their MOA to remove “Private” from their name, but left several private company restrictions in their AOA as it is.
Six months later, when they tried to issue shares to new investors, they discovered their AOA still required board approval for any share transfers—a typical private company restriction incompatible with public company status.
This inconsistency prevented them from issuing shares to new investors for three months, nearly derailing their funding round.
For TechInnovate, with their ambitious expansion plans and investor expectations, getting these modifications right is crucial. The company’s ability to achieve its strategic objectives—including capital raising, talent acquisition, and potential acquisitions—depends directly on proper document modifications.
Legal requirements for amending the MOA and AOA
When converting a private company to a public company, the law mandates specific modifications to the company’s foundational documents:
Memorandum of Association (MOA) modifications
1. Removal of “Private” from company name
Section 13 of the Companies Act, 2013, requires that when a private company converts to a public company, it must remove the word “Private” from its name. For TechInnovate, this means changing the name from “TechInnovate Private Limited” to “TechInnovate Limited.”
2. Capital clause review
While the Companies (Amendment) Act, 2015 removed the minimum paid-up capital requirement for both private and public companies (previously Rs. 1 lakh for private and Rs. 5 lakhs for public companies), it is prudent to review your capital clause during conversion.
The authorised capital should be adequate for future fundraising plans, especially for an IPO, which may still need to meet stock exchange listing requirements for capital that often exceed the previous statutory minimums.
TechInnovate’s situation: With an existing authorised capital of Rs. 2 crores, TechInnovate should consider increasing this amount based on:
- anticipated funding needs for the next 3-5 years
- potential employee stock option plans (ESOPs)
- Reserved shares for future strategic investors
- buffer for unexpected opportunities
After a thorough financial projection, it was suggested that TechInnovate should increase its authorised capital to Rs. 10 crores to accommodate these future needs without requiring further amendments.
This increase should be calculated by estimating capital needs for 3-5 years (approximately Rs. 6 crores), allocating 15% for ESOPs (Rs. 1.5 crores), and adding a 25% buffer for contingencies (Rs. 2.5 crores).
This change requires passing a special resolution at the EGM and filing Form SH-7 with the ROC, along with the amended MOA, to formalise the change.
Articles of Association (AOA) modifications
The AOA requires more substantial modifications than the MOA during conversion because it deals with the internal workings of the company. Public companies face stricter legal requirements due to the involvement of public money.
1. Removal of transfer restrictions
The most significant change required in the AOA relates to share transfers. Private companies typically include restrictions such as:
- right of first refusal for existing shareholders
- board approval requirements for transfers
- prohibitions on transfers to competitors
Most of these restrictions must be removed or modified in a public company’s AOA, as section 58 of the Companies Act, 2013 mandates that shares in a public company must be freely transferable.
However, certain limited restrictions permitted under section 58(2), such as a lien on partly paid shares or restrictions on transfers to specific persons under certain circumstances, may be retained in a public company’s AOA.
Comparison of Transfer Clauses:
| Private company clause (before conversion) | Public company clause (after conversion) |
| 12. TRANSFER OF SHARES (a) The Board of Directors may, at its absolute and uncontrolled discretion, decline to register any transfer of shares without assigning any reason thereof. (b) Before transferring any shares, a member shall give notice in writing to the Company of his intention to transfer, specifying the number of shares, distinctive numbers, and the price at which he is willing to transfer the shares (“Transfer Notice”). (c) Upon receipt of the Transfer Notice, the Company shall, within 15 days, offer the shares to the existing shareholders in proportion to their existing shareholding, and such shareholders shall have the right to purchase these shares at the specified price within 30 days of the offer. | 12. TRANSFER OF SHARES (a) The shares or other interests of any member in the Company shall be freely transferable. (b) The instrument of transfer of any share in the Company shall be executed by or on behalf of both the transferor and transferee. (c) The transferor shall be deemed to remain a holder of the share until the name of the transferee is entered in the register of members in respect thereof. (d) The Board may, subject to the right of appeal conferred by section 58 of the Companies Act, 2013, decline to register— (i) the transfer of a share, not being a fully paid share, to a person of whom they do not approve; or (ii) any transfer of shares on which the Company has a lien. |
2. Minimum number of directors
Section 149(1) of the Companies Act, 2013 requires a public company to have at least three directors, compared to the minimum of two for private companies.
Comparison of Director clauses:
| Private company clause (before conversion) | Public company clause (after conversion) |
| 18. BOARD OF DIRECTORS (a) Until otherwise determined by a General Meeting, the number of Directors shall not be less than two and not more than fifteen. | 18. BOARD OF DIRECTORS (a) Until otherwise determined by a General Meeting, the number of Directors shall not be less than three and not more than fifteen. |
TechInnovate’s situation: TechInnovate already has four directors (three founders and one VC representative), so they already meet the public company requirement. However, they must still update this clause to reflect the legal minimum of three directors.
3. General meeting requirements
Public companies have stricter requirements for general meetings:
Comparison of general meeting clauses:
| Private company clause (before conversion) | Public company clause (after conversion) |
| 25. GENERAL MEETINGS (a) All general meetings other than annual general meetings shall be called extraordinary general meetings (EGM). (b) A general meeting may be called by giving not less than 21 days’ notice. (c) Two members present in person shall be a quorum for a general meeting. | 25. GENERAL MEETINGS (a) All general meetings other than annual general meetings shall be called extraordinary general meetings (EGM). (b) A general meeting may be called by giving not less than 21 days’ notice. (c) A minimum of five members present in person shall be a quorum for a general meeting, as required by section 103(1)(a) of the Companies Act, 2013, for public companies with up to 1,000 members. This number increases to 15 members for companies with 1,000-5,000 members, and 30 members for companies with more than 5,000 members. |
TechInnovate tip: For smaller public companies like TechInnovate with only 17 shareholders, consider setting a percentage-based quorum (like “15% of total members”) rather than an absolute number. This makes your AOA more adaptable as your shareholder base grows without requiring future amendments.
4. Enhanced governance provisions
Public companies, especially those planning to list on a stock exchange, should include provisions for:
Corporate governance framework for TechInnovate:
| Governance aspect | Required provisions | Implementation for TechInnovate |
| Board Committees | For unlisted public companies, the Audit Committee is required only if financial thresholds are met. Example: Paid up capital > 10 croresturnover > Rs. 100 crore orborrowings > Rs. 50 crore as per Rule. Nomination & Remuneration Committee and Stakeholders Relationship Committee are mandatory only for listed companies under the SEBI LODR Regulations | TechInnovate should assess if thresholds are met; if not yet required, consider voluntarily establishing these committees with at least 3 directors each as preparation for future listing |
| Independent Directors | At least 1/3 of the board is required only for listed companies as per SEBI (LODR) Regulations, 2015. Not mandatory for unlisted public companies like TechInnovate unless specific financial thresholds are met paid-up capital exceeding Rs. 10 crores, turnover above Rs. 100 crores, or loans exceeding Rs. 50 crores, as per Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014) | Plan to appoint 2 independent directors with finance and tech sector expertise as a recommended governance practice ahead of the planned IPO |
| Related Party transactions | Comprehensive policy, board review, shareholder approval for material transactions | Drafting policy requiring board approval for transactions above Rs. 1 crore |
| Dividend Policy | Clear guidelines for declaration and distribution in compliance with section 123 of the Companies Act, 2013 | Implementing policy to allocate 15-20% of profits as dividends after ensuring statutory compliance (providing for depreciation, transferring to reserves, etc.), with the percentage determined based on TechInnovate’s growth projections and cash flow needs |
The Internal approval process
Let us walk through the practical process of implementing these modifications, from board approval to shareholders’ approval.
Approval process timeline
Step 1: Board meeting for passing necessary resolutions
The journey begins in the boardroom. For TechInnovate, the first step is to convene a board meeting to recommend the conversion and document changes to the shareholders.
Notice of board meeting
A proper notice must be sent to all directors at least 7 days before the meeting (unless the Articles provide otherwise). For TechInnovate, all four board members—the three founders and the VC representative—must be notified. The notice should clearly state the purpose of the meeting, including the proposal to convert from private to public status.
Download: Sample Board Meeting Notice Template
Draft board resolution
At the board meeting, the board must pass resolutions recommending:
- conversion from private to public company
- alteration of the MOA (name change)
- adoption of a new AOA suitable for a public company
- notice calling an EGM to seek shareholder approval
Download: Sample Board Resolution Template
TechInnovate case study: When guiding TechInnovate through this process, I drafted a comprehensive board resolution that not only covered the legal requirements but also explained the strategic rationale for conversion. This helped secure unanimous board approval despite initial concerns from the VC representative about potential governance complications.
Draft explanatory statement
The board must also approve an explanatory statement to accompany the EGM notice. This statement explains to shareholders why the conversion is necessary and how it will impact their rights.
Download: Sample Explanatory Statement Template
Step 2: EGM for shareholder approval
After the board meeting, the next step is to convene an Extraordinary General Meeting (EGM) to obtain shareholder approval for the conversion and amendments.
Notice of EGM
The EGM notice should be sent as per TechInnovate’s existing AOA, which specifies giving not less than 21 days’ notice either in writing or through electronic mode in compliance with section 101 of the Companies Act, 2013.
Download: Sample EGM Notice Template
Important Note: “Clear days” means excluding both the day of sending the notice and the day of the meeting. For example, if you send the notice on May 1, the earliest date for the EGM would be May 23.
EGM Checklist
| Task | Description | Responsibility |
| Attendance Register | Prepare and have all attendees sign | Company Secretary |
| Quorum Verification | Confirm quorum as per the company’s AOA (currently 2 members personally present for TechInnovate as a private company under Section 103(1)(b), will change to 5 members post-conversion as a public company with fewer than 1,000 shareholders) | Chairperson |
| Presentation Materials | Prepare slides explaining the conversion rationale | CEO/Legal Counsel |
| Voting Arrangements | Set up ballot boxes or an electronic voting system | Company Secretary |
| Resolution Copies | Provide printed copies of all resolutions | Legal Team |
| Q&A Preparation | Anticipate and prepare for shareholder questions | All Directors |
Note: If TechInnovate has not appointed a company secretary (as companies with paid-up capital below Rs. 10 crores are not required to have one under section 203), then all responsibilities would fall to the directors or legal counsel handling the conversion process.
Conducting the EGM
On the day of the EGM, ensure that:
- Attendance and Quorum: Record attendance and confirm quorum is present (at least two members for a private company).
- Chair’s opening: The Chairperson (typically the CEO or a designated director) should open the meeting, explain the purpose, and briefly outline the proposed changes.
- Proposal and discussion: Each resolution should be proposed and seconded, followed by a reasonable time for discussion and questions.
- Voting process: While voting can legally be done by show of hands unless a poll is demanded (Section 107), for special resolutions affecting fundamental documents like the MOA and AOA, conducting a poll is recommended as a best practice.
This ensures accurate representation of voting power, especially in companies like TechInnovate, where shareholders may hold different percentages of shares. For larger companies, consider electronic voting options.
- Resolution Passing: Special resolutions require a 75% majority of those voting. Each resolution should be voted on separately.
- Minutes Recording: Ensure accurate recording of the proceedings, including the exact text of resolutions passed and the voting results.
EGM Minutes
After the EGM, prepare detailed minutes that capture all essential information.
Download: Sample EGM Minutes Template
Best Practice: Have your minutes reviewed by both legal counsel and a director who attended the meeting before finalising. This double-check helps catch any omissions or errors that could create problems during the filing process.
Essential filing requirements
After securing shareholder approval at the EGM, TechInnovate must submit several forms to the ROC to formalise the conversion:
1. Form MGT-14: For filing special resolutions passed at the EGM (must be filed within 30 days)
2. Form INC-27: For conversion from private to public company, along with the altered MOA and AOA
3. Form SH-7: If altering the authorised capital, as planned for TechInnovate
While we will explore these filings in detail in the next article, it is critical to note these requirements now as part of your conversion planning.
Common pitfalls and how to avoid them
Throughout my career handling company conversions, I have witnessed numerous pitfalls that can derail even the most carefully planned processes:
1. Inconsistency between Documents
What goes wrong: The MOA indicates public company status, but the AOA retains private company restrictions.
Real example: A manufacturing company client removed “Private” from their name but forgot to update their AOA’s share transfer clauses. The ROC rejected their application, noting that the documents were incompatible with each other.
Prevention strategy: Create a comprehensive comparison table listing every clause that needs modification. Have a second lawyer review both documents together, specifically looking for inconsistencies.
2. Overlooking shareholder agreements
What goes wrong: The company modifies its MOA and AOA but forgets that existing shareholder agreements may contain provisions incompatible with public company status.
Real example: A technology company similar to TechInnovate completed its conversion only to discover its investor agreements still contained veto rights and transfer restrictions that contradicted their new AOA.
Prevention strategy: Review all shareholder agreements, investor agreements, and founder agreements alongside your MOA/AOA modifications.
Specifically look for provisions like
- pre-emptive rights,
- tag-along/drag-along rights,
- veto powers, or
- transfer restrictions that may contradict public company requirements.
These agreements must be explicitly amended or terminated with shareholder consent as part of the conversion process to avoid future legal complications and ensure alignment with public company status.
3. Inadequate explanatory statement
What goes wrong: The explanatory statement fails to properly inform shareholders about how the conversion affects their rights.
Real example: A conversion was challenged by minority shareholders who claimed they were not properly informed that the removal of transfer restrictions would dilute their protective rights.
Prevention strategy: Ensure your explanatory statement explicitly addresses how each major change impacts shareholder rights. Consider having separate meetings with key shareholder groups before the EGM.
Conversion document modification checklist
| Document | Key modifications | Common mistakes | Verification step |
| MOA | Remove “Private” from the name | Inconsistent name usage across documents | Check every instance of the company name |
| Review the capital clause | Insufficient capital for future plans | Confirm with financial projections | |
| AOA | Remove transfer restrictions | Keeping ROFR or board approval clauses | Compare against section 58 requirements |
| Update board composition | Not changing the minimum directors | Ensure a minimum of 3 directors are specified | |
| Modify general meeting requirements | Retaining a 14-day notice period | Change to 21-day notice period | |
| Add governance provisions | Omitting committee structures | Include all statutory committees | |
| Shareholder Agreements | Align with public company status | Missing contradictory provisions | Full legal review of all agreements |
| Board Resolutions | Include all required modifications | Incomplete resolutions | Use a comprehensive template |
| EGM documents | Clear explanatory statement | Vague impact disclosure | Explicit rights impact statement |
Anticipating and addressing ROC queries
When filing conversion documents with the ROC, queries often arise that could delay the process. Common ROC queries include: –
- Inconsistencies in company name: Ensure the company name appears consistently across all documents, including the removal of “Private” in all instances.
- Incomplete explanatory statements: The ROC often queries if the impact on shareholder rights is not clearly explained.
- Conflicting provisions: Inconsistencies between MOA and AOA provisions are frequently flagged.
To proactively address potential queries, consider:
1. Attaching a cover letter explaining the rationale for conversion.
2. Including a compliance checklist demonstrating adherence to all relevant sections of the Companies Act.
3. Having an experienced corporate lawyer review all documents before submission.
Conclusion: Preparing for the next steps
With the EGM, we have reached a significant milestone in the conversion process. TechInnovate has now secured all the internal approvals needed for its transformation. The shareholders are on board, the documents are properly drafted, and the company stands ready for its evolution from private to public status.
But as I often tell my clients, getting internal consensus is only half the journey. Now comes the part where we engage with the regulatory authorities to make this transformation official.
In my next article, I will walk you through this crucial regulatory phase, drawing from my own experiences guiding companies through this exact process. We will explore:
- The precise filing procedures with the Registrar of Companies—breaking down what you need to know about Forms MGT-14 and INC-27 with practical tips on completing each one correctly
- Strategic approaches to regulatory submissions that minimise queries and get faster approvals
- Effective techniques for responding to regulatory questions—because even with perfect preparation, regulators often have questions
- Post-conversion compliance requirements that every newly converted public company must address
- How to manage the practical transition across all business functions—from updating letterheads to informing stakeholders
I have structured these articles to follow TechInnovate’s journey as it actually happens in the real world:
- first, assessing conversion readiness,
- then preparing and securing internal approvals for document changes, and
- finally navigating the regulatory process.
This mirrors exactly how I approach conversions with my own clients.
I look forward to completing TechInnovate’s conversion journey with you in the next article, where we will turn all this preparation into official regulatory recognition with that all-important Certificate of Incorporation reflecting the company’s new public status.
FAQs
1. How long does the entire conversion process typically take from board approval to receiving the new Certificate of Incorporation?
The timeline varies depending on company complexity and ROC workload, but typically follows this pattern:
- Board Meeting to EGM: Minimum 21 days (due to notice period requirements)
- EGM to MGT-14 filing: Should be done within 30 days of the EGM
- MGT-14 processing: 3-7 working days
- INC-27 filing and processing: 7-15 working days
- Addressing ROC queries: Varies (1-4 weeks, depending on complexity)
- Certificate issuance: 7-15 working days after final query resolution
For TechInnovate, the entire process from initial board meeting to certificate issuance took approximately 10 weeks. Companies with simpler structures or fewer shareholders might complete the process in 8 weeks, while more complex cases can extend to 12-16 weeks.
2. Can a company continue normal business operations during the conversion process?
Yes, absolutely. The conversion process does not restrict or impede your normal business operations. However, I recommend these practical considerations:
- Inform key business partners about the ongoing conversion
- Consider the timing of major contracts or financing rounds (some parties may prefer to wait until the conversion is complete)
- Prepare dual versions of standard documentation (with both private and public company names) to use during the transition period
- Avoid issuing new share certificates during the conversion process if possible
For TechInnovate, we specifically advised postponing a planned equity financing round until after conversion to avoid complications with share issuance mechanics.
3. What happens if the ROC rejects our conversion application?
Outright rejection is rare when proper preparation has been done. More commonly, the ROC will raise queries seeking clarification or additional information. However, if a rejection does occur:
- You will receive a formal rejection letter stating specific grounds
- You have the right to reapply after addressing the issues
- No statutory waiting period exists before resubmission
- Previous filing fees are typically not refundable
The most effective approach is prevention through meticulous preparation. If rejection does occur, treat it as a learning opportunity—analyze the rejection grounds carefully, consult with experienced counsel, and prepare a more robust application for resubmission.
4. Do we need to change our company’s PAN, TAN, GST and other registrations immediately after receiving the new Certificate of Incorporation?
Yes, but with practical timing considerations:
- The changes should be initiated promptly, but need not be simultaneous
- PAN/TAN updates should be prioritize,d as many other registrations depend on them
- Most tax authorities allow 30-60 days for such updates
Consider a phased approach, prioritizing:
1. PAN/TAN (immediate)
2. GST registration (within 15 days)
3. Bank accounts (within 30 days)
4. Other registrations (within 60 days)
For TechInnovate, we created a comprehensive checklist with responsible parties and deadlines for each update, which prevented any compliance gaps during the transition period.
5. Can we convert back to a private company if we change our minds after the conversion?
Yes, the Companies Act allows conversion from public to private status, but:
- It requires another set of special resolutions and regulatory approvals
- The process is often more scrutinized by the ROC
- There may be tax and stamp duty implications
- Investor consent requirements are typically more stringent
- The business rationale must be clearly explained
The conversion back to private status follows a similar procedural framework but with additional scrutiny. Before pursuing such a reverse conversion, I typically recommend a cooling-off period of at least 6 months and a thorough reassessment of the business objectives that initially drove the public conversion.
In TechInnovate’s case, we included a specific discussion of this question in our board presentation, calculating that a conversion back to private status would cost approximately 1.5 times the original conversion cost and take 20-30% longer due to increased regulatory scrutiny.
Glossary of Key Terms
| Term | Definition |
| MOA (Memorandum of Association) | The document defining a company’s constitution, powers, and limitations |
| AOA (Articles of Association) | The document specifying a company’s internal rules and regulations |
| EGM (Extraordinary General Meeting) | A shareholder meeting called for specific purposes outside the annual meeting |
| Special Resolution | A resolution requiring 75% majority of voting shareholders to pass |
| Quorum | The minimum number of members required to be present for a valid meeting |
| ROC (Registrar of Companies) | The government authority responsible for registering companies |
| ROFR (Right of First Refusal) | A provision giving existing shareholders priority to buy shares before they are offered to others |
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