Converting a private limited company to a One Person Company (OPC) is an increasingly popular choice among entrepreneurs in India. This process, governed by Section 18 of the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014, allows businesses to streamline operations and enjoy the benefits of single ownership. Let’s delve into the details of this conversion, exploring its conditions, processes, benefits, and post-conversion requirements.
Private Limited Companies (PLC) other than Companies registered under Section 8 of the Companies Act, 2013 can be converted to OPC, when the share capital of the PLC is INR 50 lakhs or less and/or the average annual turnover in past three consecutive years is up to INR 2 crores.
The conversion of Private Company to OPC shall be governed by the provisions of Section 18 of the Companies Act, 2013 and Rule 7 of Companies (Incorporation) Rules, 2014 as laid under.
What is a Private Limited Company?
A private limited company is a business entity owned by a small group of individuals. According to the Companies Act, 2013, it must have a minimum of two directors and two members, with a maximum of 15 directors and 200 members. This structure provides limited liability protection to its shareholders and a flexible management framework.
What is a One Person Company (OPC)?
Introduced in the Companies Act, 2013, the OPC is designed for single entrepreneurs who want to limit their liability while retaining full control over their business. An OPC can be registered with just one member, although it can appoint up to 15 directors. This model is ideal for solo entrepreneurs looking to enjoy the advantages of corporate structure without the complexities of a multi-member company.
Conditions for Conversion
Before initiating the conversion, certain conditions must be met:
- Natural Person: The sole member of the OPC must be a natural person.
- Citizenship Requirement: The member must be an Indian citizen and have resided in India for at least 120 days in the preceding financial year.
- Membership Limitation: The individual cannot be a member or nominee of any other OPC.
- Age Requirement: Minors are not permitted to be members of an OPC.
- Company Type: The company seeking conversion must not be a Section 8 company (non-profit).
Required Documents for Conversion of Private Limited to OPC
When submitting the necessary forms, you must attach the following documents:
For Form MGT-14:
- Notice of EGM with an explanatory statement.
- Certified copy of the special resolution.
- Altered MOA and AOA.
- Certified copy of the board resolution.
For Form INC-6:
- List of creditors and members.
- Latest balance sheet of the company.
- No Objection Certificate from secured creditors.
- Written NOCs from all creditors and members.
- Affidavit confirming that all creditors and members consented to the conversion.
Process for Conversion of Private Limited to OPC
The following is the procedure for conversion of Private Limited to OPC:
- Hold a Board Meeting (BM) –
The Conversion of Private Company to OPC shall start by conducting a Board Meeting for the Directors to decide and fix a date, time and place to conduct an Extra-ordinary General Meeting (EGM) wherein the approvals of the shareholders by mode of special resolution is required to be passed for such conversion of Private Company to OPC.
- Extra ordinary General Meeting (EGM) –
As per the notice of the EGM sent at least 21 clear days before the meeting to all the members, auditors and Directors of the Company, the EGM is duly conducted where the special resolution is passed by the members of the Company for the conversion of the Private Company to OPC.
The EGM should ensure that the quorum is present, having the auditor present throughout the meeting. The special resolution should be passed in compliance with provision of Section-114(2) of the Act also the MoA, AoA alteration is approved in the same EGM.
- Filing e-form MGT-14 –
The e-form MGT-14 is to be filed with the Registrar of Companies (ROC) within 30 days of special resolution being passed by the shareholders in EGM along with the filing fees and requisite attachments.
Attachments to filed e-form MGT-14:
- Board resolution
- Special resolution
- Altered Article of Association with stamp duly challan
- Altered Memorandum of Association
- EGM notice with extract of explanatory statement
- Filing e-form INC-6
For the conversion of the Private Company into OPC the e-form INC-6 must be filed with the Registrar of Companies (ROC). The Service request number of e-form MGT-14 filed is required in the e-form INC-6.
Attachments for e-form INC-6 as listed below:
- Declaration stating that the paid-up share capital of the Company is INR 50 Lakhs or less and/or the average annual turnover is lesser than INR 2crores.
- List of members and creditors
- Recent audited balance sheet and Profit and loss account
- Copy of No Objection Certificate from secured creditors in writing
- Directors’ declaration stating all members and creditors agree to conversion through an affidavit.
- Address and identity proofs
- All documents submitted while filing MGT-14
Once the e-form INC-6 is submitted on MCA Portal, the ROC verifies all particulars and required documents submitted and post scrutiny and satisfaction with the procedures being in compliance, the certificate for conversion of Private Company into OPC is issued.
Benefits of Converting Private Limited to OPC
Converting a private limited company to an OPC offers several advantages:
- Streamlined Decision-Making: With only one member, decisions can be made quickly and efficiently, allowing for more agile business operations.
- Reduced Compliance Burden: OPCs are subject to fewer compliance requirements compared to private limited companies, simplifying administrative tasks.
- Lower Costs: The costs associated with maintaining an OPC, including annual filing and regulatory requirements, are significantly reduced.
- No Mandatory Annual General Meetings: OPCs are not required to hold Annual General Meetings (AGMs), which can save time and resources.
- Limited Liability Protection: Like private limited companies, OPCs also offer limited liability, protecting the owner’s personal assets from business debts.
Post-Conversion Requirements
Once the conversion is complete, the OPC must address the following tasks:
- Obtain a New PAN Card: The new entity will require a new PAN card.
- Update Stationery: All company stationery should reflect the OPC designation.
- Revise Bank Account Details: The company's bank account must be updated to reflect its new status.
- Notify Relevant Authorities: Inform the GST and Income Tax departments about the change in company status.
- Print Altered MOA and AOA: Ensure that copies of the revised MOA and AOA are readily available
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