How to Convert One Person Company to a Private Limited Company?

Published on 27 Mar 2018 by Shivi

One Person Company means a company which has only one member. One Person Company is a combination of sole proprietorship and company in which a company can be registered with just a single member. The sole member of an OPC or One Person Company has the dual role of the director and shareholder of the company.

A business is registered as One Person Company or OPC to give it features of a sole proprietorship, with the limited liability and separate legal identity of a company. It is also easier to raise funds and attract investors for an OPC as the liability of the shareholders is limited. The owner has full management power and decision making authority.

Special Features of One Person Company

A one-person company is like a better version of a sole proprietorship, and has the following special features:

  • It can be incorporated with a minimum paid-up capital of Rs. 1 lakh.

  • Only an Indian citizen and resident can incorporate a One Person Company.

  • One person can only incorporate one OPC.

  • An OPC is not required to hold an Annual General Meeting (AGM) and Extraordinary General Meetings.

  • It can have a maximum of 15 directors.

  • It does not require to follow the provisions of Board Meetings, Proxies, Voting Rights, etc.

An OPC is very similar to a Private Limited Company, and the owner has the option of converting it into a private limited company. A One Person Company can be converted into a private company either voluntarily or compulsorily.

Section 18 of the Companies Act of 2013 and Rule 7(4) of the Companies (Incorporation) Rules, 2014 lay down the formalities and procedure to convert a one person company both voluntarily and mandatorily. However, it is better to consult the best Chartered Accountants in India to know about the legal formalities to be fulfilled in a mandatory or voluntary conversion.

Voluntary Conversion of an OPC into a Private Company

A one person company can voluntarily convert into a private limited company if it fulfils the following conditions:

  1. 2 years must have been passed from the date it was incorporated,

  2. Irrespective of the total annual turnover or paid-up capital.

  3. The conversion must be in accordance with Section 18 of the Companies Act, 2013 and Rule 7(4) of the Companies (Incorporation) Rules, 2014.

The process of voluntary conversion of one person company into private limited company includes the following steps:

  1. A board meeting must be held if the number of directors is more than one.

  2. A notice of an extraordinary meeting must be sent for alteration of Memorandum of Association and Articles of Association.

  3. Form MGT 14 must be filed within 30 days of passing the special resolution, along with certified copies of minutes and resolution passed.

  4. Other requisite forms must be filed with the Registrar of Companies.

  5. After receiving these forms, the ROC can grant the Certificate of Incorporation to the newly converted company.

The newly converted private company must have a paid-up share capital of Rs. 50 lakh and an annual turnover of at least Rs. 2 crores. If the company fails to adhere to this limit, it can convert back into a One Person Company. Top CAs in India can help a private limited company with its annual compliances.

Mandatory Conversion of an OPC into a Private Company

A One Person Company has to mandatorily convert into a Private Limited Company in the following conditions:

  1. The paid-up share capital of the company has exceeded Rs. 50 lakhs.

  2. The annual turnover of the company has exceeded Rs. 2 Crores.

The process of mandatory conversion of an OPC into PLC includes the following steps:

  1. A resolution must be passed in a General Meeting intimating the members about the need to convert the OPC into PLC.

  2. A board resolution must be passed for alteration of Articles of Association and Memorandum of Association.

  3. A No Objection Certificate is issued by the members and creditors.

  4. The Registrar of Companies must be informed that the company needs to be converted into a private company.

  5. Requisite forms must be filed with the ROC within 15 days of the passing of the resolution.

  6. After the required fees are submitted and other relevant documents like the minutes of meeting and resolution are filed, the ROC grants a Certificate of Conversion to the company.

Conversion of a one person company into a private limited company does not affect its existing debts, liabilities, obligations or contracts. In either kind of conversion, it is also important that the company has at least 2 directors and 2 shareholders.
Legistify makes it extremely easy for a One Person Company to convert into a Private Limited Company. You can convert your OPC into PLC in few simple steps and leave it to the CA experts at Legistify to handle it for you. Call us at 846-883-3013 or send us an email at [email protected]


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