Overview on Conversion of OPC into Private Company
As per Section 18 of the Companies Act, 2013 and the provisions of Companies (Incorporation) Rules of 2014, the procedure of conversion of a One Person Company into a Private Limited Company should be discharged by a newly incorporated Private Limited Company. However, the conversion process will not affect the existing debts, liabilities, obligations, or contracts of the OPC.
The Conversion of One Person Company into a Private Limited Company can be done either voluntarily or mandatorily. Both types of conversion require necessary alterations in the MOA and AOA of the OPC. Even in the case of Voluntary conversion, it is compulsory to follow the correct procedure. Before that, let’s understand what OPC is and what is Private Limited Company?
What is One Person Company and Private Limited Company?
A One-Person company is a company having one person as to its member, and that member of a company is a shareholder of the OPC. OPC Registration is done when there is only one member or promoter for the business. Initially, Businessman prefers OPC registration instead of sole proprietorship business because of the several advantages that the owner of the OPC avails.
A Private Limited Company means a company having a minimum paid-up capital as may be prescribed. Further, it must also hold in its Article the below-mentioned restrictions-
- The right to transfer its shares
It restricts the right of the member to transfer its shares freely.
- Limitation of Members
The criteria for members is a minimum number of 2 and a maximum of 200 members.
Along with the restriction, The Private Limited company also possess the basic criteria -
1. It has a separate legal entity.
2. The liability of the members is limited.
3. Only two directors are required.
4. No criteria of minimum share capital.
What are the Benefits of conversion of One Person Company to a Private Limited Company?
The advantages of Conversion of One Person Company to a Private Limited Company are given below:-
- Much Easier to get funding from the investors.
- Limited liability of shareholders.
- Separate Legal Existence.
- Better taxation Benefits.
- Long and continuity of Existence.
- Easy Transfer of ownership.
- Efficient Management.
- Beneficial to both Small scale and Large-scale businesses.
What are the Methods associated under the Conversion of One Person Company into Private Limited Company?
The conversion of One Person Company to a Private Limited can be done by two methods, those are either by:-
- Voluntary Conversion
- Mandatory Conversion
1. For Voluntary conversion
For Voluntary Conversion, OPC shall meet the following criteria-
- At least two years must have completed from the date of OPC registration.
- Application in Form INC-6.
- Increase the limit of shareholders and Directors as per the requisite limit.
The OPC can convert into any other type of company coming under the Companies Act by modifying the MOA and AOA following the applicable provisions. An application has to be made by the One Person Company for conversion along with the relevant documents. Once the documents are submitted, the ROC has the power to issue a certificate of incorporation.
Note- After the conversion process, a Private Limited Company must have a Paid-up share capital of Rs. 50 lakh and also an annual turnover should not be less than two crores. However, in case of failure, it can convert back to an OPC bypassing of a special resolution.
2. For Compulsory Conversion
For Compulsory conversion, OPC shall meet the following criteria-
One Person Company has to convert itself into a private or public company mandatorily if these two situations arise, those are as follows:-
- The paid-up share capital of an OPC exceeds 50 lakh rupees or,
- If the average annual turnover exceeds two crore rupees immediately preceding three consecutive financial years.
The directors shall follow the requisite steps-
- Intimation of conversion in Form INC-5.
- Filing form INC-6.
- OPC shall have to increase the requisite limit of directors and shareholders.
Further, if the One Person Company exceeds the threshold limits, it is required to be converted into a private or public company, and for the same, the OPC shall inform the ROC by filing the form INC-5.
Note- Form INC-5 shall be filed within 60 days of exceeding the threshold limits. An OPC shall file Form INC-6 for the conversion of an OPC into a private or public company.
In case of conversion of Private Company or Public Company into OPC, Form INC-6 shall be filed by the Private or Public companies for converting itself into an OPC.
What is the Process of Conversion of OPC into a Private Limited Company?
The process of conversion of OPC into a Private Limited Company mentioned below-
I- Where OPC has only 1 Director
When One Person Company has only 1 Director, below-mentioned resolution shall be signed by the Director mentioning the date-
- Note that the threshold limit has exceeded,
- Intimation to the Registrar in FORM INC-5.
- Explanatory notes along with the notice to be communicated to the members for passing the Special resolution. Explanatory Notes shall specify-
• Alteration of Memorandum (Name, Nomination and Capital Clause)
• Alteration of Article of Association for conversion.
II- Where OPC has more than 1 Director
- Organize the Board Meeting
The First step of the process is to convene the Board Meeting. For convening the Board Meeting, the OPC shall give notice to the Directors along with the Agenda at least seven days before the date of the meeting.
• Convene the Board Meeting and Pass the Board Resolution for giving notice to the Registrar in FORM INC-5.
• Also, decide the day, time, date, and place to convene Extra-Ordinary General Meeting.
• Explanatory notes, along with the notice to be communicated to the members for passing the Special resolution. Explanatory Notes shall specify-
• Alteration of Memorandum (Name, Nomination and Capital Clause)
• For conversion, alteration of Article of Association.
- Before convening Extra Ordinary general meeting, approval of requisite documents (Draft notice, Draft MOA and AOA).
- The Special resolution passed in the meeting shall be circulated to the members and shall be entered in the Minute book of the Company.
Note- The notice shall comply with the Secretarial Standards I. And, it shall be signed and dated by the member.
III- Obtain the Fresh COI from the Registrar
Obtain from the ROC, a fresh COI, subsequent upon conversion of the OPC into a Private Limited Company.
IV- File MGT-14
The Company shall file Form MGT-14 to the ROC within 30 days from the date of passing the Special resolution along with the requisite documents-
- CTC of the Board Resolution,
- Minutes of Meeting
- Latest financial statement.
Note-Once MGT-14 is approved,cINC-5 shall be filed by the Company for conversion.
Form INC-5 shall be filed by the OPC within 60 days from the date of passing the resolution intimating the Registrar of the Companies.
File INC-6 shall be filed within One month from the date of voluntary conversion and (In case of Compulsory conversion) within Six months from the date of the compulsory conversion process. Attachments required for INC-6 are as follows:-
- Certified True Copy of the Board Resolution, Minutes and Latest financial statement duly signed and dated.
- Altered Memorandum of Association and Article of Association.
To meet the minimum compliance requirement, the Directors shall be appointed before conversion of OPC into a Private Limited Company.
V- Arrange for a New Common Seal and to adopt the same at a meeting of BOD.
What Documents are Essential for the Conversion of OPC into a Private Limited Company?
The Below-mentioned documents are essential for the conversion of OPC into a Private Limited Company-
- Id and Address Proof of the Proposed Directors and Shareholders.
- Photograph for DIN and DSC application.
- Incorporation documents of OPC.
- Altered MOA and AOA.
- Financial Statements.
How CorpBiz can Assist Clients to Convert One Person Company into Private Limited Company?
We at Corpbiz have trained experts to help you throughout the Annual Compliance process of the Company. Our Experts will guide and assist you throughout the Conversion process right from obtaining the DIN and DSC till the completion of the conversion process. Corpbiz also ensures the timely and effective completion of your work. For any queries related to the Conversion of OPC into a Private Limited Company and related services, feel free to contact our experienced and trained professionals at Corpbiz. Contact Corpbiz and our team of experienced professionals and provides timely updates about the process, and get your job completed.
- Proper Assistance in Conversion.
- Following the requisite conversion process.
- Arranging the documents for conversion.
- Submission of respective forms and documents to the authority.
Frequently Asked Questions
The OPC must convert itself into a Private Company in case of the following situations:
- If the paid-up share capital of the OPC hits more than Rs 50 lakh.
- If the annual turnover exceeds Rs 2 crores consecutively for the last three years.
NO, an OPC cannot be incorporated as or converted into Non-profit organization.
The conversion of a private limited into an OPC is allowed as per the Companies Act, 2013, which also provides a procedure to convert a Private Limited company into OPC. However, in case the company is new and has not completed three years, then the turnover is calculated from the date of its incorporation.
An OPC is a company that has only one shareholder as its member whereas, a Private Limited Company is a company where a minimum of 2 members are required, and the maximum number of members can be 200.
Yes, in case of Non-compliances, the authority has the power to issue a legal notice and in initiating of legal proceedings against the Companies.
All companies (Public Limited Company, Private Limited Company, One-person Company, and section 8 company, etc.) are required to file an annual return with the MCA every year.
Yes, Private Limited Company is compulsorily required to get its accounts audited from a Chartered Accountant, as applicable to Public Company.
A person cannot incorporate more than 1 OPC.
A similar naming guideline that applies to Private/Public Limited Company applies to OPC.
Yes, a person can sell his OPC to another person.