Conversion of Private Company into OPC

One Person Company (OPC) can be formed with only 1 owner, who acts as both the director as well as a shareholder of the company. There can be more than 1 director, but not more than 1 shareholder. For converting a Private Limited Company to an OPC, your paid-up capital and annual turnover should be less than ₹50 lakh and ₹2 Crore respectively.

• A private company must have only one shareholder and meet other legal requirements to convert into an OPC.

• The conversion requires approval through a special resolution passed by the existing shareholders.

• The company’s Memorandum and Articles of Association must be revised to reflect the new structure as an OPC.

• After conversion, the company must comply with specific tax and regulatory obligations applicable to OPCs, such as restrictions on paid-up capital and foreign ownership.

Conversion of Private Company into OPC - An Overview

The conversion of PLC (Private limited company) into an OPC (One Person Company) is provided as per the Companies Act, 2013, which implements a mechanism to convert one class of company into another. Section 18 of the Act, explicitly grants the conversion of an already registered private limited company starting from 1 April 2014.

The conversion of Private Company into OPC would not affect the responsibilities and contractual obligations of the company before conversion, and such claims, liabilities, obligations shall be enforceable by law, and the resulting OPC shall be liable for them.

Benefits of conversion from PLC to OPC

Limits Director's Liability

Businesses often need to borrow money. With sole proprietorships, proprietors are personally liable for all the debt. So if it cannot be repaid by the business, the proprietor would have to sell his/her car, house or jewellery to do so. In an OPC, only the amount invested in starting the business would be lost; all personal property would be safe.

Continuous Existence

If a promoter were to operate as a sole proprietorship, rather than an OPC, the business would come to an end with his/her death. Since an OPC has a separate legal identity, it will pass on to the nominee director and, therefore, continue to exist.

Fewer Compliances

An OPC can only have one director and one shareholder, so annual filings are limited to share certificates and statutory registers.

Requirements to Convert Private Limited Company Into OPC

Here are some requirements to be followed to convert the private limited company into a one-person company:

• The company should have suitably prepared its books of accounts as well as its balance sheet.
• The company has listed and filed all ROC (Registrar of Companies) returns.
• To examine whether the company has paid requisite on the result of the share certificate and that the share certificates are properly matched with the payment of stamp duty.
• The company has deducted all TDS (Tax Deducted at Source) and filed relevant TDS returns.
• The company has paid VAT and Service Tax, or GST, and filed suitable returns before initiating the conversion.
• To check whether the company is maintaining a record of minutes of the meeting, for its board and shareholders, and keep updated registers at its registered office.
• The company is registered under the shop and the establishment acts as per the applicable state laws, where they control offices, shops, warehouses, etc.
• The company complies with the requirements of the professional tax, if applicable in the state where the registered office of the company is located and the states in which it has employees.
• The company is registered under PF, if the number of employees is more than 20 and with ESIC (Employees State Insurance Corporation), if the number of employees is more than 10, and if its listing monthly returns and paying dues as expected under PF and ESIC.

Check the below requirements to change a private limited companyinto the one-person company:

• The provided capital of the company is less than Rs. 50 lakhs.
• The annual turn over of the company should be less than Rs. 2 crores during the past three progressive financial years. Additionally, if the company is new, and has not completed three years, then the turnover shall be considered from the date of its incorporation.
• The shareholder of the resulting OPC shall be only one individual of Indian nationality.
• The shareholder of the OPC is a person residing in India for 180 days of one calendar year.
• The shareholder of the resulting OPC must not have incorporated any other OPC, or he/she is not a candidate of any other OPC.
• A minor cannot be a member or part of an OPC.

Documents Required for Conversion of Private Company into OPC

The Form MGT-14 should be accompanied by the following attachments:

• The EGM notice with the explanatory statement copy
• A true certified copy of the special resolution
• The altered MOA and AOA of the company
• A certified copy of the board resolution.

The Form INC-6 should be accompanied by the following attachments:

• The total list of creditors and members.
• The latest balance sheet of the company.
• A copy of the NOC letter of secured creditors.
• The NOC of creditors and members.
• The company directors should give a declaration through a duly sworn affidavit confirming that all creditors and members of the company have given their consent for conversion.

Process to Convert Private Limited Company to OPC

Gather a board meeting

• The directors of the company must meet and decide on a date for calling the meeting of the shareholders. Additionally, known as an Extraordinary General Meeting (EGM).
• The notice must be drafted to shareholders along with draft resolution. This must be passed as a special resolution to be adopted by the shareholder concerning the conversion of Private Limited Company to OPC.

Issue notice of EGM

• The notice of EGM is expected to be given to all the members, directors and auditors of the company. The date of issue of the notice must be 21 days before the date of EGM.
• Simultaneously, along with the notice and the agenda, the draft resolution is to be given as a special resolution, and an informative statement shall be included.

No objection form all creditors

• Initially, before the date of EGM, the No Objection Certificate (NOC) from all the creditors of the company has to be obtained.
• A copy of the approval from creditors is to be settled before the EGM.

Conduct of EGM

• The EGM must be handled as per the notice, on the assigned date, time and place. The EGM can pass a special resolution concerning the approval of altered MOA (Memorandum of Association) and AOA (Articles of association)

Filing of resolution with the ROC

• As per Companies Act, 2013 all the resolutions declared as a special resolution by the members must be registered with the ROC in Form No MGT-14, along with directed attachments within 30 days from the approaching date.
• After the endorsement of the MGT-14, the ROC records the resolution on its record.

The issue of the certificate of conversion

• On acceptance of the application for conversion, the Registrar of Companies having jurisdiction examines the application, and if complete, it is approved and issues a certificate of Private Limited company into One Person Company.

How To Apply For Conversion of Private Company into OPC?

The application of the conversion of private limited company into a one-person company is filed using Form-INC-6 with the following statements.

• A declaration of the form with an affidavit by all the directors that all members and creditors of the company have given consent to the conversion of company into an OPC, and that the paid-up capital of the company is less than Rs. 50 lakhs and that the turnover is less than Rs. 2 crores.
• Affidavits from the members confirming the paid-up capital is less than Rs. 50 lakhs and the average turnover is less than two crores in the past three consecutive financial years.
• A certificate from a practising Chartered Accountant to confirm that the paid-up capital of the company is less than Rs. 50 lakhs and the turnover is less than two crores.
• The latest audited profit and loss account and balance sheet of the company.
• No Objection Certificate from all creditors.
• List of members and directors of the company.
• Copy of the board resolution and the specific resolution taken at the EGM, along with its notices, agenda, and informative statement.
• A modified copy of MOA and AOA, including related clauses, required for OPC.

Post-Conversion Requirements by the OPC

• Arrange for a new OPC PAN card
• Arrange for new stationery having the OPC's name
• Change the company's bank account information
• Inform the appropriate authorities, such as GST, the Income Tax Department, etc., of the status change
• Make a copy of the revised MOA and AOA.

Disclaimer: The materials contained herein are provided solely for informational purposes. When you access or use the site or the materials, no attorney-client relationship is formed. The information on this website does not constitute legal or professional advice and should not be relied on for such purposes or used as a substitute for legal advice from a licensed attorney in your state.

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