Section 43 lays down that if a private company fails to comply with any of the four restrictive provisions incorporated in the articles, the company shall cease to be entitled to the privileges and exemptions conferred on private companies and the provisions of the Companies Act shall apply to the company as if it were not a private company.

However the Company Law Board, on being satisfied that the infringement of these conditions was accidental or due to inadvertence or that on other grounds, it is just and equitable to grant relief, may grant relief to the company from the consequences of such default.

It may be noted that the infringement of the conditions dos not automatically convert a private company into a public company. It continues to be a private company and it only ceases to be entitled to the privileges and exemptions available to private companies and the Companies Act shall apply to the company as if it were not a private company.

Note: The aforesaid power of Company Law Board shall be transferred to Central Government, once the Companies (Second Amendment) Act, 2002 comes into force.