Private to public limited: why startups convert before an IPO

A private limited company limits how many members it can have, bars public invitations to buy its shares and restricts transfer of shares by its articles. A listed company needs the opposite: shares that anyone can buy and sell freely on the stock exchange. For this reason, a company aiming for an IPO converts to a public limited company first.

A recent live example from StopDown's data is Scripbox, whose board approved converting the firm into a public limited company as a step toward listing, with the word Private dropped from its name.

Conversion is not the same as listing. A public limited company can exist for years without its shares being traded on any exchange. Many large unlisted firms are public companies. Listing is a second, separate step that needs SEBI's observations on the offer document.

The process rests on section 14 of the Companies Act 2013, as of November 2026. In outline:

Founders should plan the timing with their lawyers. Investors who hold rights under a shareholders' agreement are usually asked to agree to the new articles, and a deal that needs everyone to sign can take weeks. Money paid for filings and stamp duty is modest next to the cost of the IPO itself, but the paperwork needs care because errors in the corporate record can slow the later review.

• The board approves the proposal and calls a general meeting of shareholders.
• Shareholders pass a special resolution, which needs at least 75% of the votes cast, to alter the memorandum and articles of association.
• The company files the resolution with the Registrar of Companies, usually in Form MGT-14, and applies in Form INC-27 for the change in status.
• The Registrar issues a fresh certificate of incorporation with the new name, ending in Limited.
• The company updates its records, bank accounts, licences and contracts to show the new name.

Only the last word of the name changes: Private Limited becomes Limited. The company keeps its registration number, its bank accounts, its tax registrations and its contracts. The Registrar issues a new certificate with the new name, and the company then updates its GST, PAN, bank, licence and contract records.

Brands, customers and employees are unaffected. Some startups prefer to complete the change early so that the new name is already on all documents, including the draft offer document, well before the IPO.

A public company needs at least seven members and at least three directors, under the Companies Act 2013 (sections 3 and 149). It must also follow stricter rules on matters such as board composition, key managerial personnel (the CEO, CFO and company secretary), independent directors for listed companies, and what it may pay directors. Private companies get exemptions from many of these rules.

Timelines for filings after the resolution are short, commonly stated as 15 and 30 days for different forms. Check the current rules with a company secretary or lawyer, as filing deadlines are amended.

If the articles keep investor rights that are not allowed for a listed company, the exchange or SEBI can ask the company to remove them before the offer. Founders also need to check that any loan, guarantee or agreement with directors complies with the stricter public-company limits on dealings with directors and related parties. A conversion therefore often goes with a review of every contract that touches the board and the promoters.

The articles of association must be rewritten to remove clauses that are valid only for private companies, such as limits on share transfers. Investors in a startup often hold special rights: a veto on certain decisions, board seats, rights to sell alongside founders, and liquidation preferences. Many of these rights are suited to a private company only. Before listing, they are normally removed, or are written to fall away when the shares are listed. Preference shares and convertible instruments typically convert into ordinary shares before the IPO, which the guide on CCPS conversion covers.

For ordinary shareholders, the rights attached to their shares do not change merely because the company's status changed. What changes is that the company must now follow more public-company rules on disclosure, meetings and governance.

A public company must hold more formal board meetings, publish more in its annual filings, and follow stricter limits on loans to directors and related parties. It must also have an audit committee once it lists, and independent directors on the board. These duties add cost, and a startup should plan for them ahead of time.

Hiring is a practical concern. Public companies need a company secretary, a chief financial officer and a head of compliance who have handled filings with the exchanges and SEBI. Many startups bring these people in a year or more before filing, which is why a conversion often comes with a wave of senior hires and board changes.

SEBI's ICDR Regulations 2018 set the conditions for an issue of shares to the public, and the issuer must be a public company to make one. A company filing a draft offer document (DRHP) will be asked to show its history, including the date of conversion, as part of its corporate record. Converting well before filing leaves time to finish the changes in articles, board and compliance that SEBI and bankers expect.

Some companies convert at the last moment, within weeks of the board approving an IPO. Others convert a year or two ahead to practise being a public company.

A headline about converting can also hint at timing. Companies often begin preparing a draft offer document soon after converting, and a few months can pass before a filing appears. Others convert early and then wait for better market conditions or for profits to improve. The conversion itself is a routine filing, and by itself it says little about the company's finances or valuation.

A conversion is a step, not a listing. It tells the reader that a company is preparing for an IPO, but it does not mean the offer is filed, approved or priced. Many converted companies wait a long time. A headline that says Private has been dropped from the name is the easy sign. This page is general information, not legal advice, and a company secretary or lawyer should confirm the steps.