The conversion of Private company (Private Limited) into One Person Company is authorized under the Companies Act, 2013.
Can private limited company be converted into OPC?
Yes, Only OPC with less than 50 lakh capital can be converted into private limited. however subject to following conditions. If you fulfill all these condition then you can file application for conversion.
- That the paid-up capital of the company is less than Rs. 50 Lacs
- That the annual turnover of the company must be less than Rs. 2 crores during the past three consecutive financial years. In case the company is new and have not completed three years, then the turnover shall be reckoned from the date of its incorporation.
- That the shareholder of the resulting OPC shall be only one Natural Individual having Indian nationality.
- That the shareholder of the OPC must be a resident person, a person becomes a resident if he stays for 180 days in India during immediately preceding one calendar year.
- The shareholder of the Resulting OPC must not have incorporated any other OPC, or he is not a nominee of any other OPC.
- A minor cannot be a member or nominee of an OPC
Section 18 of the Company Act 2013, explicitly provides for the conversion of private limited company with effect from 1-4-2014.
Can OPC be converted into private limited company?
Yes, but OPC can be converted into Private Limited after two years of incorporation, or even before that if its turnover is more than Rs 2 crore and paid share capital surpasses Rs 50 lakhs in a financial year.
Can OPC be conversion into section 8 company?
No, OPC cannot be incorporated or converted into a company under section 8 of the Act. OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any other body corporates.
Yes, a Section 8 Company can be converted into any other company including OPC as prescribed under Section 8(4)(ii) read with Rules 21 and 22 of Companies (Incorporation) Rules, 2014. This is further subject to restrictions and compliances as per other applicable laws including Income tax Act, 1961.
Advantages of One Person Company
- Limits Director’s Liability: Every business needs some form of investment to keep the business alive, and mostly they go for procuring loans. Unlike other forms of company structure, the liability of OPC is limited to the extent of his shares in the company. Hence, only the amount invested in the business would be lost; all personal assets would be safe.
- Taxation relaxation: Companies Act 2013, have given ample powers to One Person Company to run its business as a Company and enter into valid business contracts with customers and management. Thus all the provisions of tax planning are available to a One Person Company.
- Easy Banking Operations: Banks also prefer companies for providing their services rather than proprietorship firm. It is comparatively easy for One Person Companies to get loan from banks rather than proprietorship firm. In short we can say that One Person Company is a successful substitute of proprietorship business.
- Continuous Existence: A sole proprietorship company cease to exist after the death of the business owner. But, in case of an OPC which operates as a separate legal entity would pass on the nominee director and continue to exist.
- Fewer Compliance: OPC is completely controlled and managed by a single owner with few compliances to be followed. So, annual filings are much reduced, as is work relating to share certificates and the statutory registers.
Documents and information required:
- Copy of the duly attested latest financial statement;
- Affidavit confirming that all the members of the company have given their consent for conversion, the paid up capital of the company is Rupees 50 lakhs or less and turnover is less than Rupees 2 crores in the immediately preceding year( I WILL PROVIDE THIS DRAFTS)
- List of Member and Creditors;
- NOC from every creditor;
- Details of person who will be sole member of the OPC subsequent upon conversion;( with id , residence proof, PAN, mobile no., email id, education qualification)
- Details of nominee (with id ,residence proof, PAN, mobile no. email id, education qualification)
- Consent of Nominee in FORM INC-3( I WILL PROVIDE THIS)
- Copy of Board resolution and minutes of members meeting( I WILL PROVIDE THIS)
- Altered MOA and AOA( alteration in articles)
The step-wise procedure of converting a Private Limited into an OPC
- Convene a Board Meeting: The board of directors of the company must meet and take a decision on conversion and fix a date for calling the meeting of the shareholders (Extra Ordinary General Meeting). Notice to the shareholders need to be drafted along with draft resolution, to be passed as special resolution to be adopted by the shareholder concerning the conversion of private limited to OPC
- Issue Notice of EGM: The notice of the EGM is required to be issued to all the members, directors and auditors of the company. The date of issue of notice must be 21 days before the date of EGM. Along with the notice, the agenda, draft resolution to be passed as a special resolution and an explanatory statement shall be enclosed.
- NO objection from All Creditors: Before the date of EGM, the consent in the form of a No Objection Certificate from of all the creditors of the company is necessary to be obtained. A copy of the consent of the creditors is to be placed before the EGM.
- Conduct of EGM: The EGM must be conducted as per the notice, on the designated date, time and place. The EGM shall pass the special resolution concerning the conversion & also approval of altered MOA & AOA (A resolution is said to SPECIAL RESOLUTION if it is adopted by 75% of the members present and eligible to vote)
- Filing of Resolution with the ROC: As per companies Act, 2013 all the resolutions passed as a special resolution by the members must be filed with the ROC in Form No MGT-14, along with prescribed attachments within 30 days from its date of passing. After approval of the MGT-14, the ROC takes the resolution on its record.
- Filing of Application of Conversion: After completion of steps mentioned above application for conversion is filed in Form – INC-6 with following attachments
- List of document mention above
- The issue of Certificate of Conversion: On receipt of the application for conversion, the Registrar of Companies having jurisdiction scrutinize the application and if found complete and proper approves the form and issues a certificate of Private Limited Company into One Person Company.
On being satisfied that the company has complied with approved requirements the Registrar will issue a fresh certificate of incorporation to the effect of conversion of private limited company into one person company (OPC).
Conversion of companies completed