Any previously licensed private limited company spread across the country in any of the economic sectors of production, manufacturing, business & commerce, or services can apply for this conversion to an OPC. To figure out the procedure and ways to convert into the OPC, we have provided a detailed brief here. The conversion process will be carried out strictly with the rules and provisions given in Section 18 of the Indian Companies Act of 2013, the Companies (Incorporation) Rules of 2014, and particularly the sub-rules of Rule 7 of the CR-2014.
Conditions for Conversion of Company to OPC
- The private limited applicant must not have a total paid-up capital greater than 50 lakh rupees.
- The Average Annual Turnover in three consecutive preceding budget years must be less than 2 Crores. If the Company is new and has not completed three years, then the turnover shall be reckoned from the date of its incorporation.
- The shareholder of the resulting one-person Company must be only one Natural Individual of Indian nationality.
- The shareholder of the OPC must be a resident person. A person becomes a resident if they stay for 180 days in India during the immediately preceding single calendar year.
- A minor cannot be a member or nominee of an OPC.
Checklist For Before Conversion
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- The private limited Company must maintain its accounts and Financial Statements (prepared and audited).
- The Company must file all the ROC Returns.
- Make sure the Company has paid the requisite stamp on the issue of the share certificate and that share certificates are duly endorsed with the payment of stamp duty.
- Check whether the Company has filed appropriate TDS Returns.
- Please check that the Company has paid its VAT and Service Tax / GST and filed appropriate returns for all its periods before the commencement of conversion.
- Check whether the Company keeps the proper minutes of its Board (records) and shareholders’ meetings and has the updated registers at its registered office.
- Whether the Company has licensed registration under the establishment act (shop) of the relevant state where it has offices, malls, shops, warehouses, and such.
- Whether the private limited Company has followed the professional tax provision, if applicable in your state (where the registered office of the Company is situated and the states in which it has its regular employees).
- Whether the Company has obtained its registration under Provident Fund (PF), if the total number of employees is more than 20, and with the ESIC registration; if the number of employees is more than 10, paying dues as and when required under PF and Employees’ State Insurance Scheme of India (ESIC).
Process of Converting a Private Company into a One Person Company
1. Calling of Board Meeting
A notice has to be issued in accordance with the provisions of section 173(3) of the Companies Act 2013 for amending a meeting of the Board of Directors. The pivotal agenda for this Board meeting would be:
- To receive the principal approval of the Directors for the Conversion of a Private Company into a one-person company (OPC).
- Fixing the date, time, and place for holding an Extraordinary meeting (EGM) to get the written approval of shareholders, with any Special Resolution for Conversion of Private Company to OPC. This conversion must follow Rule 7 of the Companies (Incorporation) Rules, 2014.
- Discussion on approving the notice of the Extraordinary General Meeting (EGM) along with the Agenda and Explanatory Statement to the notice of the General Meeting (to be annexed) as per section 102(1) of the Companies Act, 2013.
- On authorizing the Director to issue a Notice of the Extraordinary General Meeting (EGM) as approved by the Board.
2. Call for an Extraordinary General Meeting (EGM)
Printed notice of the Extraordinary General Meeting (EGM) to all Members, Directors, and Auditors of the private limited Company in accordance with the provisions of Section 101 of the Companies Act, 2013. A private limited company’s shareholders must first approve a special resolution at an extraordinary general meeting (EGM). The firm must get a certificate of no objection from the current members and creditors before adopting the resolution.
3. NOC from Creditors
Before adopting a special resolution in the EGM, the firm must have a No Objection Certificate (NOC) from the current creditors and shareholders. You must get the NOC in writing. The applicant company must create and audit its profit and loss account, balance sheet, financial statements, and other books of account before undergoing conversion. The applicant company must also file all returns and documentation with the ROC.
4. The Holding of the General Meeting
After issuing notice, hold the Extraordinary General Meeting (EGM) on the due date and pass the necessary Special Resolution to convert the Private Limited Company into an OPC.
Verify that the firm auditor is present. If the corporate auditor is not present, check to see if the leave of absence has been approved in accordance with Section 146 of the Act.
Pass a special resolution to obtain the consent of the shareholders to the conversion of a private limited company into an OPC and the approval of the modified Memorandum of Association and Articles of Association (Articles of Association).
5. ROC Form Filing
As per Rule 7(3), any private limited company, regardless of product or service, is mandated to file a Special Resolution passed by shareholders for Conversion of Company to OPC with the concerned companies’ registraRegistrarle MGT.14 within 30 days or a period of one month of passing the Special Resolution with the concerned Registrar of Companies, prescribed fees, and with the following attachments:
a. Notice of EGM
b. A certified true copy of the Special Resolution
6. The Issue of the Certificate of Conversion
The Private Limited Company’s Registrar has to check the E-forms and all the attached documents filed by the Company for converting a Private Company into a one-person company (OPC). On being satisfied by the Registrar, the Registrar Company has followed the prescribed requirements; the Registrar will issue the certificate with the effect of conversion of a Private Limited Company into a one-person company(OPC).
Documents Required for Converting a Company to an OPC
The respective Company should produce an application in Form No.INC.6 for the conversion into a One Person Company with the prescribed fee structure as provided in the Companies Rules (2014), by offering the following documents:
- The Board of Directors of the Company must provide a declaration by an affidavit duly sworn in confirming that all members and creditors of the Company have unanimously made their consent for conversion, their paid-up share capital company is fifty lakhs rupees or average or less, annual turnover is less than two crores rupees if there is any such.
- The creditors’ list, along with the members’ list.
- The finally prepared Audited Balance Sheet and the Profit and Loss Account.
- No Objection letter copy of secured creditors.
Post Conversion Requirements by OPC
- Arrange the OPC’s new PAN card.
- Arrange for new stationery bearing the OPC’s name.
- Update the Company’s bank account information.
- Notify the appropriate agencies, such as the Income Tax Department and GST, of the status change.
- Create a printout of the modified MOA and AOA.
Benefits of Converting a Company to an OPC
1. Limited Liability
There can be various unforeseen events beyond our control during the business course, which can terminate the entire business and put all the personal assets of the proprietor at risk if the Company is a proprietorship.
However, in the case of a One-Person Private Limited Company, the shareholders’ liability is limited to the extent of their shareholding in the Company. As per the corporate form of business, any business loss shall not affect the personal property of the owner, and it is the Company that will bear the entire financial loss.
2. Legal status with complete control of the Companies
The 2013 Act recognized the concept of a One-Person Company as a Private Limited business structure. As per the act, we should all be aware that the Company’s business form is widely used and creates confidence in the specific parties doing business with the Company.
A more straightforward fact is that dealers, suppliers, or customers feel more at ease dealing with a private limited company than a proprietorship firm.
One significant advantage of a private Limited Company business form is that the owner is the sole person who can make quick decisions regarding the Company’s business and enjoy complete control.
3. Easy Banking Operations
Even banks prefer to offer their services to OPCs rather than proprietorships. It is logically easier for one-person companies to get loans from banks than for proprietorships. To be precise, we can say that a one-person company is the perfect alternative to a proprietorship business.
4. Taxation relaxation
The Company Act 2013 has given a lump sum power to a One Person Company to carry forward its business as a Company and enter a valid business contract with management and customers. Hence, all the provisions of tax planning are available to a One Person Company.
5. Less Compliance and Management
From the points mentioned above, it can be easily understood that the concept of the One Person Company form of business is the safest and easiest form of business to manage.
Also, managing the compliances of a One-Person Company is simpler than doing routine Private Limited Company business.
How do you apply for the conversion of a company to an OPC?
The following statements are included on Form-INC-6 when applying the conversion of a private company into a one-person company.
- A statement on the form with an affidavit from each Director stating that the Company’s members have approved the conversion to an OPC, that the paid-up capital is less than 50 lakhs, and that the turnover is less than two crores.
- Affidavits from the members attest that the Company’s paid-up capital is more than 50 lakhs and that its average annual revenue over the previous three financial years has been less than two crores.
- A statement attesting that the Company’s paid-up capital is more than 50 lakhs and its annual revenue is less than two crores from a licensed chartered accountant.
- The Company’s most recent balance sheet and profit and loss statement.
- All creditors have signed a letter of no objection.
- List of the Company’s officers
- A copy of the EGM’s notices, agenda, and informative statement, as well as the board resolution and the specific resolution adopted during the meeting.
- OPC requires a modified version of the MOA and AOA, containing any relevant clauses.
Why Kanakkupillai for Conversion of Private Company to OPC?
To convert a private company to OPC registration online, reach out to Kanakkupillai. We guarantee a smooth interaction with the government by taking care of all the paperwork. To help people have reasonable expectations, we provide clarity on the incorporation procedure. You may get the best legal services with only a phone call, thanks to a staff of over 500 knowledgeable business consultants and attorneys.
