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Procedure To Convert A Private Limited Company Into One Person Company (OPC)

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Posted on January 28, 2020

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Any previously licensed Private Limited Company spread across the country on any of the economic sectors of production, manufacturing business & commerce or services can apply for this conversion into OPC. To figure out the procedure and ways to convert into the OPC, we have provided here with the detailed brief. The conversion process will be carried out in strictly with the rules and provisions given in Section 18 of the Indian Companies Act of 2013, the Companies (Incorporation) Rules of 2014, particularly the sub-rules of rule 7 of the CR-2014.

For such a conversion,

• The private limited applicant must not have the total paid-up capital greater than 50 Lacs rupee.
• The Average Annual Turnover in 3 consecutive preceding budget years must be less than Rs. 2 Crore. In case the company is new and have not completed three years, then the turnover shall be reckoned from the date of its incorporation.
• The shareholder of the resulting OPC must be only one Natural Individual having Indian nationality.
• The shareholder of the OPC must be a resident person. A person becomes a resident if he/she stays for 180 days in India during the immediately preceding single calendar year.
• A minor cannot be a member or nominee of an OPC.

Checklist Or To Do’s Before Going For Conversion

1. The private limited company must maintain its accounts and Financial Statements (prepared and audited).
2. The company must be filed all the ROC Returns.
3. Making sure the company has paid requisite stamp on the issue of share certificate, and that share certificates are duly endorsed with the payment of stamp duty.
4. Check whether the company has filed appropriate TDS Returns.
5. Check the company has paid its Vat and Service Tax / GST and filed appropriate returns for all its period before the commencement of conversion.
6. Check whether the company is keeping its proper minutes of the meeting of its board(records), shareholders, and having the updated registers at its registered office.
7. Whether the company has licensed registration under the establishment act (shop) of the relevant state where they have offices, malls, shops, warehouse and such.
8. 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).
9. Whether the company has obtained its registration under 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 ESIC.

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Procedure for Conversion of Private Company into One Person Company  is given below:

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 principle approval of Directors for Conversion of Private Company into One Person Company (OPC).
• On Fixing date, time, and place for holding Extra-ordinary General meeting (EGM) to get written approval of shareholders, with any Special Resolution for Conversion of Private Company into One Person Company (OPC). This Conversion must be by Rule 7 of Companies (Incorporation) Rules, 2014.
• Discussion on approving the notice of the Extra-ordinary General meeting (EGM) along with the Agenda and Explanatory Statement to the notice of General Meeting (to be annexed) as per section 102(1) of the Companies Act, 2013.
• On authorizing the Director to issue Notice of the Extra-ordinary General meeting (EGM) as approved by the Director of Board.

2. Printed issue notice of the Extra-ordinary General meeting (EGM) to all Members, Directors, and the Auditors of the private limited company in accordance with the provisions of Section 101 of the Companies Act, 2013.

3. The holding of General Meeting:

After the issue notice, hold the Extra-ordinary General meeting (EGM) on the due date and move the necessary Special Resolution; to Convert the Private limited Company into One Person Company (OPC).

4. ROC Form filing:

As per Rule 7(3), any private limited company irrespective of product or service is mandated to file Special Resolution passed by shareholders for Conversion of Private Company into One Person Company (OPC) with concerned companies’ registrar.

So, the file 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 following attachments:

a. Notice of EGM

b. A certified true copy of Special Resolution

5. The respective company should produce an application in Form No.INC.6 for the conversion into One Person Company with the prescribed fee structure as provided in the Companies Rules (2014), by offering the following documents such as like

• The Board of Directors of the company must provide a declaration by an affidavit duly sworn in confirming that all members, 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, Loss Account.
• No Objection letter copy of secured creditors.

6. Duty of ROC

The private limited Company’s concerned registrar (ROC) will have to check the E-forms and all the attached documents filed by the Company for Conversion of Private Company into One Person Company (OPC). On being satisfied by the registrar that Company has followed prescribed requirements, now the Registrar can issue the certificate with the effect of conversion of  Private Limited Company into the one-person company(OPC).

Advantages of One Person Company (OPC) Business form

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 in the form of business is proprietorship business.

However, in the case of a One Person Private Limited Company, the shareholders’ liability is limited to the extent of his/her 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 Companies

The 2013 Act recognized the concept of One Person Company as a Private Limited business structure. As per the act, we all should be aware that the company’s business form is widely used business form and it creates confidence in the specific parties doing business with the company.

An easier fact to understand that any dealers or suppliers or customers feel more ease to deal with a private limited company as compared to a proprietorship firm.

0One of the major advantages in One Person Private Limited Company business form is here that the owner is the sole person who can take any sort of quick decisions with respect to the business of the Company and enjoy, take over the complete control.

3. Easy Banking Operations

Even the banks also prefer to offer their services to OPC rather than a proprietorship. It is logically easy for One Person Companies to get a loan from banks rather than a proprietorship. To be precise, we can say that One Person Company is the perfect alternative of a proprietorship business.

4. Taxation relaxation

The Company Act 2013 has given a lumpsum power to 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 One Person Company.

5. Less Compliance and Management

From the above-mentioned points, it can be easily understood that the concept of One Person Company form of business is the safest and easiest form of business to manage.

Also, to managing the compliances of One Person Company is simpler when compared to routine Private Limited Company business.

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