Conversion of OPC into Private Limited Company

 

Conversion of OPC into Private Limited Company is governed by Companies Act, 2013 and the Companies (Incorporation) Rules, 2014.

 

 

What is One Person Company?

 

Section 2(62), Companies Act, 2013

One Person Company (OPC) is a type of company which has only one person as its member and it can have minimum one director and maximum 15 directors.

Read More about One Person Company

 

What is Private Limited Company?

 

Section 2(68), Companies Act, 2013

A Private Limited Company is a type of Company which has a minimum paid-up share capital as may be prescribed, and it can through its articles,—
(i) restrict the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred;
(iii) prohibits any invitation to the public to subscribe for any securities of the company.

Read More about Private Limited Company

 

Comparison between OPC and Private Limited Company

 

 

BASIS

 

OPC

 

PRIVATE LIMITED

 

Company Name

Ends with (OPC) pvt. Ltd. Ends with Pvt. Ltd.
 

Minimum No. of Members

 

1

 

2

 

Maximum No. of Members

 

1

 

200

 

Minimum Share-Capital

 

No Requirement

 

No Requirement

 

Maximum Share-Capital

 

50 lakh

(if it exceeds 50lakhs then it shall be converted into private limited company or public company)

 

No Requirement

 

Minimum No. of Directors

 

1

 

2

 

Maximum No. of Directors

 

1

 

15

 

No. of Board Meetings

 

1 meeting in each half year
(the minimum gap between 2 board meetings shall be at least of 90 days)

 

1 meeting in each quarter

(the maximum gap between 2 board meetings shall not be more than 120 days)

 

Transfer of Shares

 

Cannot transfer shares (alteration of MOA is required to transfer the shares)

 

Can easily be transferred

 

Most Suitable

 

Suitable for those who are looking to limit their liability and willing to have 100% control

 

 

Ideal for those businesses who have high turnover, entrepreneurs and who need external funding

 

 

What is Conversion of OPC into Private Limited Company?

 

According to Section 18 of the Companies Act, 2013 and The Companies (Incorporation) Rules, 2014, OPC can be converted into Private Limited Company by altering its Memorandum of Association and Article of Association. There are two methods to convert OPC into Private Limited Company that are –

  1. Voluntary Conversion of OPC into Private Limited
  2. Compulsory or Mandatory Conversion of OPC into Private Limited

 

Benefits of Conversion of OPC into Private Limited Company

 

  1. Increase No. of Members of OPC

Since OPC has only one member. Thus, if the OPC is willing to increase the number of members then it can raise the number of members up to 200 by converting into private limited company.

  1. Raise Paid up Share Capital of OPC above 50 Lakh

In case of OPC, the maximum share capital can be 50 lakhs whereas there is no such restriction on private limited company. Thus, OPC can increase the share capital up to any extent in future by converting into private limited.

  1. Limited Liability of members of Pvt. Ltd.

In OPC, sole owner/member is solely liable for the business while in case of Pvt. Ltd. Co. the shareholders enjoy the limited liability thus; they are liable only to the extent of the amount of shares invested by them.

  1. External Funding is easy in Private Limited

If OPC is looking to get externally funded then it should convert itself into private limited as large investors and venture capitalists mostly prefer to fund private limited companies as compared to OPCs.

  1. High Turnovers in Private Limited

Private Limited Company is considered ideal for those businesses who have high turnover, entrepreneurs and who need external funding to achieve the goals.

 

What are the documents required to convert OPC into Private Limited Company?

 

From Members & Directors

  1. Passport Size photograph
  2. PAN Card
  3. Aadhar Card
  4. Identity Proof – Driving Licence/ Passport/Voter ID card
  5. Address Proof – Bank Statement (not older than 2 months)

From Company

  1. Address Proof – Utility Bill that is Electricity Bill or Telephone Bill (not older than 2 months)
  2. Incorporation Documents
  • MOA & AOA
  • Incorporation Certificate

3.Duly Certified Copy of Audited Financial Statements (Latest)

 

Voluntary Conversion of OPC into Private Limited Company

 

When any One Person Company voluntarily decides to convert itself into Private Limited Company is referred as Voluntary Conversion of OPC into Private Limited Company.

An OPC can voluntarily be converted into Private Limited only when the 2 years from the date of incorporation of the said OPC have expired.

 

Compulsory Conversion of OPC into Private Limited Company

 

Rule 6 of the Companies (Incorporation) Rules, 2014 states the conditions –

It is mandatory for the OPC to convert into Private Limited within 6 months in following two scenarios –

  1. When the paid-up share capital of the One Person Company is more than Rs. 50 Lakh then it is mandatory for OPC to get converted; or
  2. When the Annual turnover of the OPC exceeds Rs. 2 Crore in immediately preceding 3 consecutive financial years then it is mandatory for OPC to get converted.

 

What is the process of Conversion of OPC into Private Limited Company?

 

     1. Board Meeting

The company shall send 7 days prior notice to the Board of Directors for convening Board Meeting to discuss the conversion of OPC into Private Limited.

The Board of Directors has to pass the Board Resolution in Board Meeting to discuss-

  • Whether to convert the OPC into Private Limited Company
  • To Increase in number of Directors and Members as there shall be minimum 2 Directors and 2 Members in Private Limited Company
  • To pass a resolution to get approval from the shareholders to alter MOA & AOA in order to convert the OPC into Private Limited.

      2. Shareholders’ Meeting to Pass special Resolution

Thereafter, the shareholders of the OPC shall hold a General Meeting and to pass Special Resolution on following matters

  • Increase in Paid-up Capital (if required)
  • Increase in number of Directors and Members as there shall be minimum 2 Directors and 2 Members in Private Limited Company
  • Alteration of MOA & AOA to effect the conversion

      3. Intimate ROC –Form INC-5

In case of Compulsory Conversion, the OPC is mandatorily required to intimate ROC by filing Form INC-5 with MCA that the above-mentioned threshold limit has exceeded and thus it is required to get converted into Private Limited Company. This form shall be filed within 60 days from the date of exceeding threshold limits.

      4. Application to ROC – Form INC-6

Then the OPC has to file application before ROC for conversion of OPC into Private Limited Company by filing Form INC-6 within following time-period from the date of passing Special Resolution.

  • In case of Voluntary Conversion – 30 days
  • In case of Compulsory Conversion – 6 months

The form shall be enclosed with following attachments –

  • Duly Certified copy of Board Resolution
  • Altered MOA
  • Altered AOA
  • Duly Certified copy of latest Financial Statements
  • Duly Certified copy of Special Resolution

      5. Certificate of Conversion by ROC

Lastly, the ROC shall issue the certificate to the effect of Conversion of OPC into Private Limited Company upon being satisfied with the application and documents attached therewith that the prescribed requirements of conversion are complied with.

What is the Effect of Conversion of OPC into Private Limited Company on its Debts & Liabilities?

 

Conversion of OPC shall not affect the existing assets, debts, liabilities, contracts or other obligations of the OPC in any manner. Thus, the OPC shall be held liable for all of its Liabilities even after conversion as it was liable before the conversion.

 

Conclusion

 

Get your OPC converted into Private Limited Company and avail the benefits of Private Limited Company.

 

Seek Assistance with Conversion

 

Knowledge Source:

Company Compliances” – A brief Discussion

 

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