31. Change from public to private company

Question 1

31. Change from public to private company n vice versa

Answer 1

General overview
[31.01] Just as it is possible to change the status from an unlimited company to a limited company, it is also possible for a company to convert from a public to a private company and vice versa. Conversion from a public company having a share capital to a private company requires a special resolution from the members at a general meeting as well as an alteration of the constitution to impose the restrictions and limitations in the transfer of shares. On the other hand, a conversion from a private to a public company is governed by subsection (2).

Question 2

Change from public to private company

Answer 2

[31.02] A public company having a share capital may convert to a private company by way of a special resolution. A private company may be treated as a public company for the purposes s 20(1)(ii) of the Larceny Act 1916 (UK): R v Davies [1955] 1 QB 71; [1954] 3 WLR 664 , Court of Criminal Appeal. Where a public limited company, applied for its reregistration as a private company and the application could only be made by the “holders” of not less than a specified proportion of the company’s issued share capital, it was held that the ultimate economic owners of certain beneficial interests in the ordinary shares who were not registered as the holders of the shares could not sue to object to the conversion

Question 3

Change from private to public company

Answer 3

[31.03] A private company shall lodge with the registrar the following documents when converting into a public company: (a) a special resolution that determines the conversion into a public company and specifying an appropriate change of name; (b) a statement in lieu of prospectus; and (c) a declaration verifying that s 61(2) has been complied with. Thereupon, the restrictions and limitations on the transfer of shares under s 18(1) shall cease to apply to the public company.

Question 4

Statement in lieu of prospectus

Answer 4

[31.04] See ss 59, 60 and 61 on the nature of a statement in lieu of prospectus and the detailed information that has to be disclosed in it.

Question 5

Preservation of status quo

Answer 5

[31.05] Subsection (4) provides that the change in the nature of the company pursuant to subsections (1) and (2) does not affect the identity of the company, and all existing rights and obligations of the company and legal proceedings by or against the company that subsist at the time of conversion shall remain.

Question 6

List of shareholders

Answer 6

[31.06] Act No 36 of 2014 has amended the time for lodgment of the list of shareholders of the company from one month to 14 days: s 31(3A). This shortening of the time period for compiling the list of shareholders may be onerous for a public company in view of the larger shareholder base.