Conversion of One Person Company into Private Company

Conversion of One Person Company into Private Company:

The conversion of an OPC- One Person Company into Private Limited Company as per Section 18 of the Companies Act, 2013 and the provisions of Companies (Incorporation) Rules of 2014 should be discharged by a newly formed Private Limited Company. These rules will not affect the existing debts, liabilities, obligations or contracts of the OPC. There are two ways of converting an OPC into a private limited company either voluntarily or mandatorily.

Under both these type of conversions, the requirements are necessary alterations in the MOA and AOA of the OPC (As per the provisions provided in section 18 of the Companies Act, 2013, along with section 122 of the Act).The section says to obtain no objection in written form, from the concerned members and creditors; passing a resolution in support of conversion; and it should also satisfy the requirements of the minimum paid-up capital, along with the minimum number of members and directors.

For incorporating a private limited company the minimum paid capital recommended is Rs. 1,00,000  and two members and two directors at a minimum. To apply for conversion of OPC to private limited company, you need to fill the Form INC-6, to the Ministry of Corporate Affairs, Govt. of India.

Voluntary Conversion:

Voluntary conversion into a private limited company is not permitted unless two years is expired from the date of incorporation of the OPC. Though, if the paid-up share capital exceeds Rupees 50 lakhs or if its average turnovers exceeds Rupees  2 crores then within two months, the OPC could get converted into a private limited company.

OPC has to communicate voluntary conversion to a registrar of companies in Form INC 5 within sixty days. For converting to a private limited company, OPC is required to have 2 directors and 2 members.

Compulsory Conversion:

In case the paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into private or public company. Such conversion shall be done within a period of 6 months from the date when the paid-up share capital exceeded Rupees 50 lakhs  or the last date of the related period in which the average annual turnover surpasses Rupees 2 crores.

The conversion is made by passing a special resolution in the general meeting. It is checked for a No objection certificate in written from the creditors and the other members before the resolution is passed.

Steps for conversion of an OPC into a Private Limited Company:

  1. The concerned ROC should first be communicated through the prescribed method that the OPC is now required for converting itself into a private limited company.
  2. The shareholders of the OPC should hold a General Meeting for passing the resolution for raising the paid-up capital (if needed), no. of shareholders, and appointment of directors for meeting the requirements of the Private Limited Company. For converting an OPC to a Private Limited Company, there should be at least 2 shareholders and 2 directors.Furthermore, a board resolution should be passed by the shareholders for approving the alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) of the OPC.
  3. The company needs to file an application to the registrar along with a copy of the resolution within fifteen days of passing the resolution. The registrar then confirms on the application details filled to be correct and fees are being paid against the registration.