As per provisions of Indian Companies Act, 1956 there are certain circumstances under which a Private Company will be treated as Deemed Public Company. According to Section 43-A of Indian Companies Act a private company shall be deemed as a public company under the following circumstances.
(i) When 25% or more of the paid up share capital of the private company is held by one or more bodies corporate
For computing 25%, shares held by a banking company shall not be taken into account in the following cases:
(a) Where the shares form part of the subject matter of a trust and not having been set apart for the benefit of any Body corporate are held by banking company as a trustee of that trust.
(b) Where shares form part of the estate of a deceased person having been bequeathed by will to any Body corporate are held by banding companies either as on behalf of, the executor or administrator of the deceased person the above provisions are not applicable in the following cases:
a. To a private company of which the entire paidup share capital is held by another single private company or by one or more bodies corporate incorporated outside India.
b. To a private company in which shares are hold by foreign companies, which, if incorporated in India, would have been private companies, if the central government on an application made by that company, by order so directs
c. To a private company where all shareholding companies are private companies and no Body corporate is a member of such shareholding companies and the total share holders of the private company and other shareholding companies does not exceed fifty excluding past and present employees who are members.
(ii) Where the annual turnover of a Private Company is less than such amount as may be prescribed to consider as deemed public Company.
(iii) When Private Company holds 25% of the paid up share capital of public Company
(iv) When Private company accepts or renews deposits from the public other than its members, directors or relatives
A Private Company becomes deemed Public Company in any of the abovementioned circumstances. Such a company must inform the registrar about this fact within 3 months to delete the word "Private" from the name of the company and amend Certificate of Incorporation.
But it is important to mention here that after becoming deemed public company under the four clauses stated above, a private company may continue to retain provisions as required under section 3(1)(iii) of the Act and the number of its members may also be reduced below seven.