Conversion of One Person Company into a Private Limited Company

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Conversion of One Person Company into a Private Limited Company

One Person Company is a relatively new business structure as compared to private limited companies. Private limited companies have existed for several decades. However, OPC was introduced under the Companies Act of 2013. An OPC is very much like a private limited company. However, the difference between them lies in the fact that OPC has one shareholder while a private limited company has a minimum of two shareholders. 

Having more than one shareholder in a company means the responsibilities are shared between all the shareholders. Since a one person company cannot have more than one shareholder, it must be converted to a private limited company to be able to have more than one shareholder. Are you interested in conversion of your one person company into a private limited company? If so, then you have made the right decision by visiting our article.  

What is a One Person Company?

A One Person Company (OPC) is a type of company set up by a single person. This single person is the sole owner of the company and is responsible for managing it. 

One person company offers the benefits of a sole proprietorship while the offering limited liability offered by a company. If you do not want to share your company with another shareholder, then establishing a one person company is a great idea. 

Features of OPC

The following are the features of a one person company:

• One Person Company can only be formed by a single individual.

• OPC’s unique feature is that its sole member has to mention a nominee while registering the company with RoC.

• A minimum of one director is required and a maximum of 15 directors are allowed in an OPC.

• Annual general meetings are not required to be held by OPCs. 

• The financial statements of such companies do not need to include the cash flow statement.

• OPC continues to exist even after the owner’s demise.

What is a Private Limited Company?

A private limited company is a type of company which requires a minimum of two and a maximum of 200 shareholders. In this kind of company, the liability of the shareholders is limited to the number of shares held by them. 

A private limited company is a good choice for those entrepreneurs who want to get access to funding since venture capitalists and investors usually prefer this type of company over OPC.

Features of Pvt Ltd Co

The features of a private limited company are as follows:

• In a private limited company, shareholders aren’t personally liable for the losses incurred by the company. They also do not receive all of the profits of such a company.

• A pvt ltd co continues to exist even after the death or resignation of one of the members as long as it isn’t dissolved through a legal process.

• Private limited companies do not have the pressure of meeting quarterly earning expectations and can focus on growth strategies which will benefit them in the long run.

• A minimum of two members are required to form pvt ltd co as opposed to one person company which requires only one member for company formation.

• The financial standing isn’t required to be disclosed publicly in case of a private limited company. Hence, confidentiality is maintained in this kind of company (as opposed to a public limited company).

Documents for OPC to Private Limited Conversion

Below is a list of documents essential for the conversion of One Person Company into a Private Limited Company.

• DSC (Digital Signature Certificate) of Director

• DIN (Directors Identification Number)

• List of creditors

• Name Approval from RoC

• Altered MOA and AOA

• Consent of the nominee 

• Application for PAN & TAN

• Proof of identity of the nominee and member 

• Residential proof of the nominee and member

• NOC of every creditor along with the application for conversion

• The most recent audited balance sheet of the company showing all the profits and losses

• Copy of PAN card of the nominee and member 

• Copy of special resolution

• The list of proposed directors and members, along with their consent

Procedure for OPC to Pvt Ltd Conversion 

In this section, we will explore how to convert opc to pvt ltd. For converting an OPC to a private ltd co, there should be a minimum of 2 members and 2 directors. The conversion of one person company to a private company can be done in two ways. Opc to pvt ltd conversion can be voluntary or by compulsion. 

In Case of Voluntary Conversion

In case of voluntary conversion, the following procedure has to be followed:

• Earlier, the OPCs were required to wait for two years before seeking conversion. However, now there’s no such waiting period since the amendment by MCA in 2021. An OPC can start the procedure of conversion into a private or public limited company when the need for the same is felt.

• The voluntary conversion of opc into private company comes under section 18 of the companies act.

• Company that comes under this act can convert itself into another company coming under this act by the alteration of the memorandum of association and articles of association in accordance with the provisions.

• A board resolution should be passed for the alteration to the MoA and AoA.

• After the board resolution has been passed, the company has to file an application to the registrar using form INC-6 along with the documents attached which are essential for the conversion.

• Once the registrar receives the application, it will be scrutinized carefully.

• If satisfied with the application, the registrar of companies will issue a certificate of incorporation in the same manner as issued earlier.

• The registration of the company under this act shall not affect any debts, liabilities or obligations before the conversion and are enforced after the conversion.

• After the conversion, it is mandatory for a private limited company to have a paid up share capital of 50 lakhs and an annual turnover may not be less than 2 crores. In case of failing, it can be converted back to OPC by passing a special resolution.

In case of Compulsory Conversion

In case of compulsory conversion, the following procedure has to be followed:

• When a One Person Company has paid up share capital exceeding 50 lakhs and annual turnover above 2 crores, then it is compulsory for them to convert into a private limited company.

• For the conversion, the members just have to pass a special resolution in the general meeting.

• Before passing the resolution, one has to obtain no objection certificate in writing from the creditors, and other members.

• There is a requirement of filing an application using INC-6 form with the registrar within 30 days of passing of special resolution.

• After filing an application and paying the fees, the registrar will make a decision after scrutinizing the documents and then issue the certificate of conversion.

Conclusion

Both OPCs and Private Limited Companies are registered with the Registrar of Companies (RoC) under the Companies Act 2013. Many entrepreneurs feel the need to convert their company to another type of company. One person companies are generally converted to private limited companies when it is felt that having more than one shareholder would be better for the business. Moreover, private limited companies have better access to funding as compared to a one person company. 

If you want to get OPC to private limited company conversion for your business easily, connect with Registrationwala consultants.

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