Conversion of OPC to Private/Public Limited 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.
Get your OPC converted to Public/Private limited in the fastest possible manner.
It usually takes 20 to 25 working days.
- DSC
- Filing of SPICe+ Form
- Issue of Incorporation Certificate along with PAN and TAN
- Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
- Excludes foreign national / Body Corporate as director or business needing RBI/SEBI approval
- Assistance in Opening Bank Account
- Businesses looking to expand or scale operations on higher level
- Startups looking to raise capital and issue ESOPs
- Businesses looking to convert their private limited company to public ltd company
- Businesses aiming to work globally or with reputed clients
DSC Application
Name approval form filing
Preparation of Documents
Getting those docs signed by the respective stakeholders
Filing of e-Forms with ROC
Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.
Name, Contact Number and Email Id of all the Stakeholders.
Directors Identification Number, if already.
Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.
Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.
Latest Month Personal Bank statement of all the Stakeholders.
Specimen Signatures of all Stakeholders.
Few Proposed Business Names along with Objects.
Latest Electricity Bill/Landline Bill of Registered Office.
NOC from owner of registered office, If Owned. (Download Template)
Rent Agreement from Landlord, If Rented/Leased. (Download Template)
Brief description of main business activities of the proposed Company.
Shareholding pattern (50:50 or 60:40) between the Stakeholders.
Authorised & Paid Up Share Capital of the Company.
Conversion of OPC into Private Limited Company Summarized
Similarities between OPC & Private Limited
- Separate legal entity: Both of them have separate legal entity. That means OPC or Private Ltd Co. is treated as a different individual in the eyes of law.
- Benefits on taxes: To the both types of business structures tax benefits are given. The tax benefits would be 25% from the profits.
- Limited Liability: In case of OPC the Sole owner and in case of Pvt. Ltd. Co. the shareholders have limited liability to the extent of their shares.
- Registration Process: Both the companies are required to be registered with the Ministry of Corporate Affairs.
Two Types of Conversion
For converting an OPC into Private Limited Company, the provisions laid down in the Section-18 of the Indian Companies Act of 2013, and the Companies (Incorporation) Rules of 2014, in particular the Rule 7(4) of the Companies (Incorporation) Rules, 2014, needs to be followed for both the conditions; voluntarily and under compulsion.
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 exceed INR 2 crores then within two months, the OPC could convert 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.
Procedure for Voluntary Conversion:
| BOARD MEETING |
Issue Notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and SS-I for convening a meeting of the Board of Directors.
– To discuss with directors that Company want to convert the OPC into Private Limited Company. – Pass Board resolution for increase in Number of Directors (Minimum 2 Directors) – Pass a Board resolution to get in principal approval of Directors for increase shareholder of the Company (Minimum 2 Shareholders) – Pass Resolution to get shareholders’ approval for Alteration in MOA & AOA of Company. |
| SHAREHOLDER’S MEETING | There is required to pass Shareholder resolution. Note:- But as per Section 122(1) there is no need to hold EGM by OPC, it shall be sufficient if, in case of OPC, the resolution is communicated by the member of the company and entered into the minutes books required to be maintained u/s 188 and signed and dated by member and such date shall be deemed to be the date of the meeting for all the purpose under this Act |
| ROC Form Filling |
As per Section 18 of the Companies Act, 2013 OPC within 30 days of passing Special. Resolution file form with ROC
– Certified true copy of board resolution where person giving notice has been authorized – Altered copy of MOA & AOA. – Copy of the duly attested latest financial statements – Certified true copy of Special resolution where person giving notice has been authorized – Any other information can be provided as an optional attachment(s) |
Mandatory/Compulsory Conversion
This is a condition where you need to convert an OPC to private limited company compulsorily. It is because an OPC has paid up share capital that exceeds Rs. 50 lakhs and the yearly turnover of immediately previous three consecutive financial years is more than 2 Crores rupees, then it is obligatory for anyone to convert. Such company has to compulsorily convert to a private or public limited company within a period of 6 months from the date when the paid-up share capital exceeded 50 lakhs rupees or the last date of the related period in which the average annual turnover surpasses 2 Crore rupees.
The conversion is made by just 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 are passed.
Procedure for Mandatory Conversion:
| STEPS | PROCEDURE |
| BOARD MEETING |
Issue Notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and SS-I for convening a meeting of the Board of Directors.
– To discuss with directors that Company has crossed the Limits as given above and there is need to mandatory conversion of OPC into Company. – Pass Board resolution for increase in No. of Directors. (Minimum 2 Directors) – Pass a board resolution to get in principal approval of Directors for increase shareholder of the Company. (Minimum 2 Shareholders). – Pass Resolution to get shareholders’ approval for Alteration in MOA & AOA of Company |
| SHAREHOLDER’S MEETING | There is required to pass Shareholder resolution (SR). But as per Section 122(1) there is no need to hold EGM by OPC, it shall be sufficient if, in case of OPC, the resolution is communicated by the member of the company and entered into the minutes books required to be maintained u/s 188 and signed and dated by member and such date shall be deemed to be the date of the meeting for all the purpose under this Act |
| ROC Form Filling |
As per Rule 6(4) The Companies (Incorporation) Rules, 2014: OPC within 60 days from the period when Condition as mentioned above attract give notice to ROC informing that it has ceased to be OPC and that it is now required to convert itself into a private company or public company
– Certified true copy of board resolution where person giving notice has been authorized – Copy of the duly attested latest financial statements – Certificate from a Chartered Accountant in practice for calculation of average annual turnover during the relevant period – This certificate is mandatory to attach if the threshold limit is exceeded on account of average annual turnover. – Any other information can be provided as an optional attachment(s)
As per Section 18 of the Companies Act, 2013 OPC within 30 days of passing Special Resolution file form with ROC
– Certified true copy of board resolution where person giving notice has been authorized – Altered copy of MOA & AOA. – Copy of the duly attested latest financial statements – Certified true copy of Special resolution where person giving notice has been authorized – Any other information can be provided as an optional attachment(s) |
a. Intimating to ROC
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.
b. Passing the Board Resolutions
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.
c. Application for conversion of OPC to Public/Private Limited CompanyOnce the above steps are completed, 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. Then the registrar makes a decision by finally studying the application and other documents thoroughly and issues the certificate of conversion. Nowadays E-Forms are also available with the Registrar of Companies. There will a penalty is this type of conversion if any officer contravenes the provisions of these rules, and will be punished with a fine amounting to Rs.10 thousand and a further fine of one thousand rupees for every day after the first such contravention being continued.
The introduction of One Person Company into legal system came into existence to encourage the entrepreneurs to enter into the corporate world. It will not only enable the individual capabilities to contribute economic growth but will also generate employment opportunity.
Legal Framework for Conversion of OPC into Public/Private Company
Legal Framework for Conversion of OPC into Public/Private Company
- Section 18 of the Companies Act, 2013, Companies (Incorporation) Rules of 2014 and Companies (Incorporation) Second Amendment Rules, 2021discuss about the conversion of one person company into private limited company. These rules don’t affect the existing liabilities of the OPC. Section 17 of the Companies Act along with Rule 7(4) of Companies (Incorporation) Rules, 2014 also discusses about the same.
- The government in April 2021 has amended the Companies (Incorporation) Rules, 2014 with Companies (Incorporation) Second Amendment Rules, 2021.
- E-form INC-6 has to be filed under section 18 of the Companies Act and Rule 7(4) of the Companies (Incorporation) Rules, 2014.
- Section 18 states that a company can convert itself into any other company by alteration of memorandum and articles. If the company converts according to this section, the applicant has to submit the application to the Registrar. The Registrar will issue the certificate of incorporation after verifying the application and documents. This registration will not affect the liabilities of the company.
- Earlier Rule 7 of the 2014 Rules prescribed that no OPC can convert voluntarily into any kind of company unless 2 years have expired from the incorporation of OPC or the threshold limit has increased to Rs. 50 Lakhs or turnover exceeded Rs. 2 crores. But now, the 2 years restriction has been removed. OPCs can freely convert into any company at any time without any limitations on the turnover or paid-up capital.
- Under the conversion, the alteration of MOA and AOA is according to Section 18 and 122 of the Companies Act. If someone wants to apply for conversion of One person company to private limited company, they need to submit form INC-6. It is mandatory for the company to obtain no objection from the members and creditors of the company. OPCs can convert to private companies after increasing the minimum number and members and directors.
Changes after Companies (Incorporation) Second Amendment Rules, 2021
Changes after Companies (Incorporation) Second Amendment Rules, 2021
- Before April 2021 Amendment there was a rule that OPCs can voluntarily convert after 2 years of incorporation into a private limited company. But it has been omitted in 2021 amendment. Now OPCs can convert into a private company anytime. They have to communicate about the conversion of one person company into private limited company in Form INC-6.
- Before the Companies (Incorporation) Second Amendment Rules came into existence, the OPCs mandatorily converted to private limited if the paid-up share capital crosses Rs. 50 Lakhs and the annual turnover for three consecutive years was beyond Rs. 2 crores. This conversion was done by passing a special resolution in a general meeting. Before the conversion, the creditors and the other members submit a no-objection certificate.
- The government has amended this provision, now there are no limitations on the growth of OPCs in India with respect to paid-up capital and turnover.
Approval of Conversion
The board resolution is to be passed for the purpose of approval of the proposal for the conversion of an OPC into Private Limited Company or Public Limited Company.
The following approvals with subjected to the members’ approval:
- Alteration of Articles of Association
- Alteration of Memorandum of Association.
- Conversion of a company into a Public or Private Limited Company.
The board resolutions passed to be intimated to the sole member by providing a notice of the resolutions that are passed at the board meeting. The resolution member providing the authority to the director to director to sign and submit e-form INC-5 and INC-6 digitally is required to be filed for the conversion of the company.
After the approval from the directors regarding the conversion of the company is obtained, the copy of the resolution is to be sent to shareholder/ member along with Notice of passing of such resolution. The member is required to submit the resolution for the conversion to the company.
Upon the approval of the shareholder for the conversion of the company, the board is required to proceed with the process of filing the application with the registrar of companies and comply with various other formalities.
Note: The Company must not be a defaulter in terms of appropriate submission of the financial statement or any documents due for filing with the Registrar.
Conclusion
The sole purpose of introducing OPCs in India was to boost entrepreneurship. It enables people to contribute to the economic growth of India. One Person Companies can convert to a private limited company after qualifying the criteria laid down by the Companies Act. The 2021 amendments have removed the stringent conditions associated with conversions of OPCs to cater to the growth of OPCs in India.
