Section 18 of the Companies Act 2013 governs the conversion of an OPC (One Person Company) to a Private Limited Company. In addition, the provisions of Rule 7(4) of the Companies (Incorporation) Rules, 2014, shall also become applicable.
A One-Person Company (OPC) can be converted into a Private Limited Company (PLC) as per Section 18 of the Companies Act, 2013 (‘Act’) and the provisions of the Companies (Incorporation) Rules of 2014 (‘Rules’). To incorporate a private limited company, there needs to be a minimum of two members and two directors.
It should be specifically noted that this conversion shall not affect the existing debt, liabilities, Contracts, or Obligations entered into by the OPC and now committed by the company.
In a general sense, the conversion of OPC to a Private Limited Company is done in two ways, and these are:
- Voluntary Conversion
- Mandatory or Compulsory Conversion
Under both types of conversions, the OPC must alter or change its Memorandum of Association (MOA) or Articles of Association (AOA), along with the minimum number of directors and members. The minimum requirement here will be at least two members and two directors.
Types of Conversion
Voluntary Conversion
For an OPC to convert to a Private Limited Company, at least 2 years should have expired from the date of its incorporation as an OPC. However, the OPC can convert into a Private Limited Company within 2 months if its paid-up share capital exceeds INR 50 lakhs and the average turnover exceeds INR 2 Crore.
The OPC shall intimate such voluntary conversion to the Registrar of Companies in form INC-5 within 60 days. The OPC should also have at least two directors and two members.
Mandatory Conversion
Under this, an OPC will have to mandatorily convert into a Private Limited Company if the following conditions are prevailing;
(a) Paid-up Share capital of the OPC exceeds INR 50 lakhs, and
(b) The yearly turnover of the OPC during the immediately preceding three consecutive financial years is more than INR 2 Crores.
If these conditions are met, then it becomes mandatory for the OPC to convert into a Private Limited Company within 6 months of attaining these conditions. The conversion will be made by passing a special resolution in the general meeting and checking for a NOC (No Objection Certificate) in written form from creditors and other members of the OPC. The NOC should be obtained before the passing of the special resolution in the general meeting.
The following steps are to be followed by an OPC for converting the same into a Private Limited Company;
Step 1: Passing the Special Resolution
A General Meeting shall be held by the shareholders of the OPC to raise the paid-up share capital of the OPC (if required), the number of shareholders, and the appointment of directors so that the requirements for forming a Private Limited Company are met. A Private Limited Company should have at least two directors and two members.
Shareholders will also pass a special resolution to approve the alteration of the OPC’s MOA and AOA.
Step 2: Application for Conversion of OPC to Private Limited Company
When the above steps are done, the OPC should then apply for conversion into a Private Limited Company with the Registrar of Companies, along with the resolution that was passed in the general meeting, within 15 days of passing such resolution.
The application for such conversion shall be done by the OPC in Form INC-6 along with the payment of prescribed fees and attaching the following documents;
- The directors of the Private Limited Company shall give a declaration by way of an affidavit which duly confirms that the members and creditors have given their consent for the conversion of the OPC into a Private Limited Company. There shall also be a confirmation made with regard to the fact that the paid-up share capital of the company and the average annual turnover of the company are over INR 50 lakhs and INR 2 crores,
- A list of members and creditors of the entity,
- Latest Audited Financial Statements, i.e., Balance Sheet and Profit & Loss Account of the Company, and,
- The copy of the No Objection Certificate or Letter from the Creditors.
The Registrar, after considering the application given by the OPC and the details furnished in it, confirms such details and the fees paid by the entity, after which a Certificate of Conversion shall be issued. Here, the ROC shall provide a new incorporation Certificate to indicate the conversion of the OPC into a Private Limited Company.
The company officers who contravene the provisions of the Companies Act with respect to such conversion or the provisions of such rules shall be punished with a fine amounting to INR 10,000, and there shall also be a further fine of INR 1,000 for every day after which such contravention was committed and is continued.
The concept of OPC was introduced under the Companies Act so that single entrepreneurs could enter the corporate world, open themselves to a wider world of opportunities, and thereby create more economic growth. However, there are also restrictions placed on the quantum of business that could be carried out by a single owner, which will mandatorily result in conversion into a Private Limited Company.
Conclusion
If you are looking to register a One Person Company (OPC) in India, you need to follow several steps. These include obtaining a Digital Signature Certificate (DSC), obtaining a Director Identification Number (DIN), selecting a unique company name, and filing the necessary documents with the Registrar of Companies (ROC). It is advisable to seek the assistance of a professional service provider like Kanakkupillai to ensure a smooth and hassle-free registration process.
Kanakkupillai is a well-known brand in India that provides a wide range of business registration and compliance services, including One Person Company (OPC) registration. With their expertise and experience in the field, they can help you navigate the complexities of the registration process and ensure that your OPC is registered quickly and efficiently. So, if you are looking to register an OPC, look no further than Kanakkupillai for expert assistance.
Key Takeaway
- Conversion of One Person Company to Private Limited Company Section 18 of the Companies Act 2013 governs the conversion of an OPC (One Person Company) to a Limited Company.
- If these conditions are met, then it becomes mandatory for the OPC to convert into a Private Limited Company within 6 months of attaining these conditions.
- The directors of the Private Limited Company shall give a declaration by way of an affidavit which duly confirms that the members and creditors have given their consent for the conversion of OPC into a Private Limited Company.
- After considering the application given by the OPC and the details furnished in it, the Registrar confirms such details and the fees paid by the entity, after which a Certificate of Conversion is issued.
- The ROC shall provide a new incorporation Certificate to indicate the conversion of the OPC into a Private Limited Company.
