There are different ways to convert an OPC (One Person Company) to a Private Limited Company. Section 18 of the Companies Act, 2013 and Rules of Companies (Incorporation) Rules of 2014 features the requirement/process related to conversion. Conversion of One Person Company into a Private Limited Company does not affect the existing debts, obligations, contracts or liabilities of One Person Company.
The following piece gives exclusive information about the procedure to convert OPC into a private limited company. However, before delving deep into the conversion process, let’s learn about the meaning of the One Person Company and Private Limited Company. Stay tuned!
One Person Company denotes a company formed with a single person as a member. It means OPC has only one shareholder as its member.
Private Limited Company refers to a company with members ranging from 2-200. The owners of a Private Limited Company may be non-governmental organisations and have a limited number of shareholders or company members
The liability of a Private Limited Company sticks to the number of shares held by them.
Note: Private Limited Company does not trade its share to the general public.
Now that we know the basic definition of One Person Company and Private Limited Company, let’s move on to the procedure to convert OPC into Pvt. Ltd. Company.
To convert One Person Company into a Private Limited Company, respective individuals must follow the provision mentioned in Section 18 of the Indian Companies Act of 2013 and the Companies (Incorporation) Rules of 2014, especially Rule 6.
Remember, there are two ways of converting OPC into a Private Limited Company. These are Compulsory Conversion and Voluntary Conversion.
One Person Company can voluntarily convert into a Private Limited Company at any time, and OPCs need not meet any criteria of having average annual turnover or any paid-up share capital.
Compulsory Conversion from OPC to Private Limited occurs under the following circumstances:
Paid-up capital exceeds ₹ 50 lakh.
Annual turnover exceeds ₹ 2 crores during the period immediately after 3 consecutive financial years.
Now, One Person Company can voluntarily complete the conversion into a Private Limited Company after passing a special resolution. For that, they have to increase the number of members and directors to at least two. Further, they have to collect a No Objection Certificate (NOC) from creditors (in written form) to complete the process.
Respective individuals of OPC must intimate the concerned Registrar of Companies (ROC) in the prescribed method that OPC is converting into a Pvt. Ltd. Company.
In this step, One Person Company must hold a general meeting where they can pass resolutions of appointment for directors and members to fulfil the demand of Private Limited Company.
Additionally, shareholders must pass a board resolution and approve the alteration of the Articles of Association (AOA) and Memorandum of Association (MOA) of OPC to abide by the requirements of Pvt. Ltd. Company.
Remember, OPC can be converted into a Private Limited Company with a minimum of 2 members and 2 directors.
After completing the process mentioned above, OPC must file an application (e-Form INC-6) to the concerned ROC (Registration of Companies) and submit certain documents (discussed later).
Here is a step-by-step guide to filing an application (e-Form INC-6) to the concerned ROC.
Step 1 - One Person Company has to apply in a prescribed format.
Step 2 - After that, the Registration of Companies will verify the details.
Step 3 - Next, they have to pay fees for registration.
Step 4 - The Registration of Companies will finally take its decision after scrutinising application details and submitted documents.
Step 5 - At last, the Registration of Companies will issue a certificate of conversion.
Below is a list of documents essential for the conversion of One Person Company into a Private Limited Company.
Inclusion of One Person Company into a legal framework paves the way for traders and other service providers to set foot in the business arena and explore opportunities with minimal compliance or procedural. This enhances individual capabilities and increases economic growth and employment opportunities.
Moreover, the recent changes in regulation regarding turnover or capital help OPC to get foreign investment. It also lets OPC take the decision freely whether to convert voluntarily or compulsorily after meeting capital criteria.
From the above discussion, individuals can learn about the procedure to convert OPC into a Private Limited Company.
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