Private Limited to OPC (One Person Company) Conversion

Private Limited Company Vs One Person Company

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A Private Limited Company is a type of business structure that limits the liability of its shareholders and is required to have at least two shareholders.
A One Person Company (OPC) is also a type of business structure but it is owned and controlled by a single person.

While A Private Limited Company is required to have a minimum of two shareholders, an OPC can be incorporated with just one person as its member. Additionally, a Private Limited Company has to comply with more compliance requirements compared to an OPC.

Both types of company have their own advantages and disadvantages and the choice of which one to incorporate will depend on the specific needs and circumstances of the individual or business.

Requirements for Converting Private Limited to OPC

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Here are some steps and requirements that must be met to convert a private limited company into a one-person company:

✔ The company must have properly prepared and filed its financial statements and balance sheets.
✔ The company must have filed all necessary returns with the Registrar of Companies (ROC).
✔ The company must have paid any outstanding debts, including share certificate fees and stamp duty.
✔ The company must have deducted and filed any required taxes, such as TDS and VAT or GST.
✔ The company must have maintained proper records of board and shareholder meetings and updated registers at its registered office.
✔ The company must be compliant with any applicable state laws for shop and establishment registration.
✔ The company must comply with any professional tax requirements in the state where its registered office is located and any states in which it has employees.
✔ The company must be registered and compliant with any PF and ESIC requirements if it has more than 20 or 10 employees, respectively.

Additionally, in order to be eligible for conversion, a private limited company must meet the following criteria:

✔ The paid up capital of the company must be less than Rs 50 lakhs.
✔ The annual turnover of the company must be less than Rs 2 crores in the past three financial years.
✔ The resulting OPC must have only one Indian national shareholder.
✔ The shareholder of the OPC must have resided in India for 180 days in one calendar year.
✔ The shareholder of the OPC must not already be a member or nominee of another OPC.
✔ Minors cannot be members or nominees of an OPC.

Procedure for Conversion

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The process for converting a private limited company to a one person company (OPC) involves the following steps:

1. Convening a board meeting to decide on conversion and fix a date for the shareholders meeting
2. Issuing notice of the Extraordinary General Meeting (EGM) to shareholders, directors, and auditors, along with a draft resolution and explanatory statement
3. Obtaining no objection from all creditors before the EGM
4. Conducting the EGM and passing a special resolution for conversion and approving altered MOA and AOA
5. Filing the resolution with the Registrar of Companies (ROC) in Form MGT-14 within 30 days of passing
6. Filing an application for conversion in Form INC-6 with attachments such as the list of documents, resolutions, and altered MOA and AOA

The ROC will then scrutinize the application and issue a fresh certificate of incorporation for the conversion to an OPC.

Documents Required for Conversion

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List of documents required for conversion of private limited company to One Person Company (OPC):

1. A copy of the latest financial statement attested by a member
2. An affidavit confirming the consent of all members for the conversion, the paid-up capital being less than 50 lakhs and turnover being less than 2 crores in the previous year
3. A list of members and creditors
4. NOC from every credito
5. Details of the person who will be the sole member of the OPC post-conversion, including ID proof, residence proof, PAN, mobile number, email ID, and education qualification
6. Details of the nominee, including ID proof, residence proof, PAN, mobile number, email ID, and education qualification
7. Consent of nominee in Form INC-
8. Copy of the board resolution and minutes of the members’ meeting
9. Altered MOA and AOA (changes to the articles of association)

Benefits of a One Person Company

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There are several benefits of a One Person Company (OPC) which include:

✔ Limited liability: The liability of the shareholders is limited to their capital contribution in the company providing a layer of protection for personal assets.
✔ Ease of formation and maintenance: OPCs are relatively easy to form and maintain as compared to other forms of companies, making it an attractive option for small businesses and entrepreneurs.
✔ Lower compliance requirements: OPCs have lower compliance requirements when compared to other forms of companies, which reduces the administrative and legal burden.
✔ Flexibility: OPCs have the flexibility to convert into any other form of company at a later stage as the business grows.
✔ Separation of ownership and management: OPCs allow for the separation of ownership and management which can be beneficial for business owners who want to keep control of the company but also want to limit their personal liability.

FAQs on Conversion of Private Limited to OPC

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