In most private companies, the founder is the board. Decisions are made quickly, approvals are recorded afterwards if at all, and the line between the promoter’s money and the company’s money is drawn by trust rather than by process.
A listed company works differently. The founder remains in charge of the business, but decisions that affect minority shareholders are made, recorded and sometimes vetoed by people who do not report to the founder. This guide sets out what changes, in roughly the order it needs to happen.
1. Convert to a public limited company
Only a public company can offer shares to the public. Conversion from a private company under section 14 of the Companies Act, 2013 requires a special resolution, articles of association with the private company restrictions removed, and approval from the Registrar of Companies. A public company needs at least three directors and seven members.
Conversion has consequences beyond the name. Exemptions that private companies enjoy, for example on loans to directors under section 185, on accepting money from relatives of directors under the deposit rules, and on auditor reporting on internal financial controls, fall away. Deal with the balances and processes affected before you convert, not after.
2. Rebuild the board
A listed public company must have at least one-third of its board as independent directors and at least one woman director. Independent directors must meet the independence tests in section 149(6), which rule out material financial relationships with the company and its promoters, and must be registered in the databank maintained by the Indian Institute of Corporate Affairs. Unless exempt, they must also pass its online proficiency self-assessment test.
Choose independent directors for what they will add, not only to meet a number. At least one should be comfortable reading financial statements in depth, because they will likely chair or sit on the audit committee, and merchant bankers and investors look at who is on the board.
3. Set up the committees
- Audit committee under section 177: at least three directors, with independent directors forming a majority, and a majority including the chair able to read and understand financial statements. It approves related-party transactions, oversees internal financial controls and reviews the auditor’s work.
- Nomination and remuneration committee under section 178: three or more non-executive directors, at least half of them independent. It recommends board appointments and the remuneration policy.
- Stakeholders relationship committee: required once the company has more than 1,000 security holders, which is often the case soon after listing.
- CSR committee under section 135: required once the company crosses any of the thresholds, including net profit of ₹5 crore in the preceding financial year. Many IPO-ready companies already qualify.
A listed company must also establish a vigil mechanism through which directors and employees can report genuine concerns.
4. Appoint key managerial personnel
Section 203 requires a listed company to have a managing director, chief executive officer or manager (or a whole-time director), a company secretary and a chief financial officer. The company secretary usually also acts as compliance officer under the SEBI LODR Regulations after listing. Appoint them early enough that they own the pre-IPO processes they will be accountable for afterwards.
5. Put related-party dealings on a formal footing
This is usually the largest cultural change for a founder. Transactions between the company and its promoters, their relatives and their other businesses need prior approval: by the audit committee, by the board and, above thresholds, by shareholders, with the interested parties not voting on the resolution.
For SME-listed companies, Regulation 23 of the LODR Regulations now applies, and a transaction is material if it exceeds 10% of annual consolidated turnover or ₹50 crore, whichever is lower. Material transactions need shareholder approval. Rent paid to a promoter for a factory, purchases from a sister concern, or a promoter’s personal guarantee for company borrowings all fall within this framework.
Start by listing every related party and every recurring transaction with them, and adopt a written related-party transaction policy that the audit committee can apply.
6. Build internal financial controls that can be tested
Once the company is public, its auditor reports on the adequacy and operating effectiveness of internal financial controls over financial reporting, and after listing the directors confirm in their responsibility statement that such controls are in place and working. Controls need a track record before the auditor tests them, so they should be documented and operating well before the first audit that will cover them.
In practice this means process documentation for revenue, purchases, payroll, inventory, fixed assets and the financial close; a risk and control matrix; evidence that each control is performed; and a remediation plan for the ones that fail.
7. Prepare for life as an insider
After listing, the SEBI (Prohibition of Insider Trading) Regulations apply. The company needs a code of conduct, a list of designated persons, a trading window that closes around results and other price-sensitive events, and a structured digital database recording who has had access to unpublished price-sensitive information. Promoters and their families are among the designated persons.
Promoter shares are also locked in. The minimum promoter contribution of 20% of post-issue capital is locked in for three years, and holdings above that are released in two stages, half after one year and half after two.
What SME listing does not require
SME-listed companies are relieved from some obligations that apply on the main board. They publish financial results half-yearly rather than quarterly, and several of the corporate governance provisions of the LODR Regulations do not apply to them. The Companies Act requirements described above still apply in full, as do the related-party transaction rules under Regulation 23. If the company later migrates to the main board, the full LODR governance framework follows.
A realistic timeline
Most of this work is procedural rather than difficult, but it is sequential and it involves people. Identifying and appointing suitable independent directors can take months. Controls need at least a few months of operation before they can be tested. For a company that currently runs with one or two directors and informal approvals, 12 to 18 months before the target filing date is a sensible time to start.
Planning the transition? Our diagnostic maps where your governance stands against these requirements and sets out the order in which to close the gaps. Book a diagnostic call or read about our governance and restructuring work.
This article is general information on the law and regulations as understood in September 2026 and is not advice on any specific situation. Regulations change; confirm the current position before acting.