One Person Company is a new business concept introduced under the Companies Act, 2013. As the name suggests, One Person Company can be registered with a single individual only.
On the other hand, a Private Company is a type of Company which is held privately by a small group of individuals. Under Companies Act, 2013, the Conversion of one class of Companies to another class is provided. Due to more legal compliances to be followed, the Private Limited Company go for Conversion into One Person Company (OPC). In the article, we will discuss the process of Conversion of Private Company into OPC.
What is a Private Company and a One Person Company (OPC)?
Private Company
Under Companies Act, 2013, the Private Company is defined under Section 2(68) of the Act. A Private Company is a privately held company or a closed corporation, whose shares cannot be traded in public at large. The Article of Association (AoA) of Private Company put a restriction on the transferability of shares. The maximum number of members in a Private Company is 200 as per Section 2(68) of the Companies Act, 2013.
The liability of each member is limited to as their shares only. The Shareholder can sell their own shares in case the Company faces loss. Private Company keeps in existence of law forever, even in case of death, bankruptcy or insolvency of any of its members.
One Person Company
Under Companies Act, 2013, One Person Company (OPC) is defined under Section 2(62) of the Act. OPC only has one person as to its member. In this Company, the compliance requirements are less than that of other classes of Companies under the Act.
The unique feature of One Person Company (OPC) is that the sole member of Company has to mention a nominee while registering for OPC. So, in case of death of sole member, the nominee has the right to choose or reject for becoming sole member of OPC.
OPC enjoys several privileges and exemptions under the Companies Act, 2013, as compared to the other classes of Companies.
What are the legal provisions governing the Conversion of Private Company into OPC?
The legal provisions governing the Conversion of Private Company into OPC are as follows:
- Section 18 of the Companies Act, 2013[1].
- Rule 7 of the Companies (Incorporation) Rules, 2014. Â
What are the conditions for Conversion of Private Company into OPC?
The following are the conditions for Conversion of Private Company into OPC:
- The paid-up share capital of Company is less than 50 lakh Rupees.
- In the past 3 consecutive years, the annual turnover of the Company should not be less than 2 crores Rupees.
- The Shareholder of the new OPC should have Indian nationality.
- The Shareholder of the new OPC should be a resident person of India. A person becomes resident if he/she stays in India for a period of 180 days of one calendar year.
- The Shareholder should not be holding any other OPC, or he/she should not be a member of any other OPC.
- A minor cannot be a part or member of OPC.
Read our article: Conversion of Public Company into Private Company: A Complete Procedure
What is the procedure for Conversion of Private Company into OPC?
The procedure followed for the Conversion of Private Company into OPC is as follows:
Call for Board Meeting
The notice for Board Meeting should be sent to all the members at least 7 days before the date of the Board Meeting. The agenda of Board Meeting should be mentioned in the notice.
Hold Board Meeting
The Board Meeting should be held for the following purposes:
- For the approval from the Directors for the Conversion of Private Company into OPC.
- For fixing the date, place, time, and day of the Extraordinary General Meeting (EGM).
- For approval of notice for EGM along with the agenda and Explanatory Statement.
- To authorize any of the Directors to issue the approved notice of the EGM.
Call for EGM
A notice for Extraordinary General Meeting (EGM) should be sent to all the members, directors and auditors of the Company. The notice for EGM should be sent at least 21 days before the date of the EGM.
NOC from Creditors
Before passing the Special Resolution in the EGM, the Company should get a No Objection Certificate (NOC) from the existing shareholders and creditors. The No objection Certificate (NOC) should be in writing.
Hold EGM
The EGM is convened for the following purposes:
- Check for the Quorum of the Meeting.
- Check for the presence of Auditor of the Company. If not present check for Leave of Absence is granted or not as per Section 146 of Companies Act, 2013.
Form Filing to RoC
For the purpose of Conversion of Private Company into One Person Company (OPC), certain e-Forms are to be filed with the concerned Registrar of Companies (RoC). The forms to be filed with the concerned Registrar are as follows:
Form MGT-14
After passing of the Special Resolution in EGM, Form MGT-14 should be filed with the RoC. The Form MGT-14 should be filed with RoC within 30 days of passing of the Special Resolution. The following attachments should be made with the Form MGT-14:
- The notice of EGM with the copy of the explanatory statement.
- A true certified copy of the Special Resolution.
- The Altered Memorandum of Association (MoA) and Articles of Association (AoA) of the Company.
- A true certified copy of the Board Resolution.
Form INC-6
The application for the Conversion of Private Company into OPC should be filed to the RoC. The application should be filed in Form INC-6 with the following attachments:
- The total list of members and creditors
- The latest balance sheet of the Company
- The copy of No Objection Letter
- An affidavit of the declaration of the Directors of Company that all the creditors and shareholders have given consent for the Conversion of Private Company into OPC, the paid-up capital of the Company is 50 lakh rupees or less, and the turnover of the Private Company is less than 2 crore rupees.
Issue of Share Certificate
The Registrar of Companies (RoC) will verify all the e-Forms submitted and all attached documents filed by Private Company for Conversion of Private Company into OPC. Once the Registrar of Companies (RoC) is satisfied that the Private Company has complied with the prescribed requirements, should Issue Share Certificate for the Conversion of Private Company into OPC.
Conclusion
One Person Company (OPC) can be easily managed with very fewer compliances to be followed as compared to Private Company. The Conversion of Private Company into OPC will benefit most people associated with the Company. The process of Conversion of Private Company into OPC is long-lasting and lengthy. We at Corpbiz have experienced professionals who will assist you with the process of Conversion of Private Company into OPC. Our professionals will help you and will assure the successful completion of your work.
Read our article:What are The Compliances and Annual Filing Requirements of One Person Company?
