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.
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:
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.
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:
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
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
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.
the annual turnover of a Private Company is less than such amount as may be
prescribed to consider as deemed public Company.
Private Company holds 25% of the paid up share capital of public Company
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.