Private Limited Company to OPC

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Private Limited Company to OPC


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About Private Limited Company to OPC

The conversion of a private limited into an OPC (One Person Company) is allowed as per the Companies Act, 2013, which provides a mechanism to convert one class of company into another. Section 18 of the Act, explicitly provides for the conversion of an already registered private limited company with effect from 1-4-2014. Therefore, a private limited company can be converted into the one-person company by the procedures prescribed under the Act and the rules.

Benefits

Limited Liability

There may be various unforeseen events, beyond our control, during the course of business which can destroy the entire business and put personal assets of the proprietor at risk, in case form of business is proprietor ship business. However, in case of a One Person Private Limited Company, the liability of a shareholder is limited to the extent of his/her shareholding in the Company. As per corporate form of business any business loss will not affect personal property of the owner and it will be the Company which will bear the entire loss.

Legal status with complete control

Companies Act 2013 recognized the concept of One Person Company as a Private Limited business structure. As we all are aware that company form of business is a widely used business form and creates a confidences in parties doing business with the company. It is a simple fact to understand that any dealer, suppliers or customers feel more comfortable to deal with private limited companies as compare to proprietorship firm. One of the major advantages One Person Private Limited Company business form is that here owner is one person who can take quick decisions w.r.t. the business of the Company and enjoy complete control.

Easy Banking Operations

Banks also prefer companies for providing their services rather than proprietorship firm. It is comparatively easy for One Person Companies to get loan from banks rather than proprietorship firm. In short we can say that One Person Company is a successful substitute of proprietorship business.

Taxation relaxation

Companies Act 2013, have given ample powers to One Person Company to run its business as a Company and enter into valid business contract with customers and management. Thus all the provisions of tax planning are available to a One Person Company. 5. Less Compliance and Management After above mentioned points one can easily understand that the concept of One Person Company form of business is the easiest forms of business to manage. It is easy to manage compliances of One Person Company as they are less in comparison to routine Public or Private Company business.

Minimum Requirements

  • That the paid-up capital of the company is less than Rs. 50 Lacs
  • That the annual turnover of the company must be less than Rs. 2 crores during the past three consecutive financial years. In case the company is new and have not completed three years, then the turnover shall be reckoned from the date of its incorporation.
  • That the shareholder of the resulting OPC shall be only one Natural Individual having Indian nationality.
  • The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion, the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be;
  • The list of members and list of creditors;
  • The latest Audited Balance Sheet and the Profit and Loss Account; and
  • That the shareholder of the OPC must be a resident person, a person becomes a resident if he stays for 180 days in India during immediately preceding one calendar year.
  • The shareholder of the Resulting OPC must not have incorporated any other OPC, or he is not a nominee of any other OPC.
  • A minor cannot be a member or nominee of an OPC
    The conversion of the private limited company into OPC shall not affect the liabilities, and contractual obligations entered, by the company before conversion & such debts, liabilities, obligations shall be enforceable in law as if no such conversion has taken place and the resulting OPC shall be liable for them.

Documents Required

The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion, the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be;

The list of members and list of creditors;

The latest Audited Balance Sheet and the Profit and Loss Account; and

The copy of No Objection letter of secured creditors.

Process

Convene a Board Meeting

The directors of the company must meet and take a decision on conversion and fix a date for calling the meeting of the shareholders (Extra Ordinary General Meeting). Notice to the shareholders need to be drafted along with draft resolution, to be passed as special resolution to be adopted by the shareholder concerning the conversion of private limited to OPC

Issue Notice of EGM

The notice of the EGM is required to be issued to all the members, directors and auditors of the company. The date of issue of notice must be 21 days before the date of EGM. Along with the notice, the agenda, draft resolution to be passed as a special resolution and an explanatory statement shall be enclosed.

NO objection from All Creditors

Before the date of EGM, the consent in the form of a No Objection Certificate from of all the creditors of the company is necessary to be obtained. A copy of the consent of the creditors is to be placed before the EGM.

Conduct of EGM

The EGM must be conducted as per the notice, on the designated date, time and place. The EGM shall pass the special resolution concerning the conversion & also approval of altered MOA & AOA (A resolution is said to SPECIAL RESOLUTION if it is adopted by 75% of the members present and eligible to vote)

Filing of Resolution with the ROC

As per companies Act, 2013 all the resolution passed as a special resolution by the members must be filed with the ROC in Form No MGT-14, along with prescribed attachments within 30 days from its date of passing. After approval of the MGT-14, the ROC takes the resolution on its record.

The issue of Certificate of Conversion

On receipt of the application for conversion, the Registrar of Companies having jurisdiction scrutinize the application and if found complete and proper approves the form and issues a certificate of Private Limited Company into One Person Company.

Filing of Application of Conversion

After completion of steps mentioned above application for conversion is filed in Form – INC-6 with following attachments

  • A declaration in the form of an affidavit by all the directors that all members and creditors of the company have given consent to conversion of company into an OPC, and that the paid-up capital of the company is less than 50 lacs and that the turnover is less than two crores
  • Affidavits from the members confirming the paid-up capital being less than 50 lacs and the average turnover are less than two crores in the past three consecutive financial years.
  • A certificate from a practicing Chartered Accountant to confirm that the paid-up capital of the company is less than 50 lac and that the turnover is less than two crores.
  • The latest audited profit and loss account and balance sheet of the company
  • No objection / Consent of all the creditors
  • List of members and directors of the company
  • Copy of Board Resolution and the special resolution passed at the EGM, along with its notices, agenda and explanatory statement
  • Altered copy of MOA and AOA, incorporating relevant clauses necessary for OPC.

Frequently Asked Questions

Can an Indian citizen who is living abroad allowed forming One Person Company?

No. As per the Act, Only Indian born citizens can form a One Person Company. Non-resident Indians or individuals who do not reside in India for over 182 days cannot incorporate a OPC.

No, FDI is not allowed for One Person Company, if it is, then it will lose its One Person Company status.

No, the Act clearly states that, the nominee should also be an Indian resident citizen.

As per the Act, Nominee of one OPC, cannot be a nominee of another OPC. In this event, the Nominee has to withdraw his membership from either of the OPCs within one hundred and eighty days.

As per the Act, the average annual turnover during the relevant period should not exceed Rs.2 Crores. If it exceeds, then the company automatically get converted to a Private Limited Company.

The Act has not made any restriction for a One Person Company to become a member of another Private Limited Company.

  • The paid up capital should not exceed Rs. 50 Lakhs
  • Average annual turnover of the private company for three years should not exceed Rs.2 Crore.

  • Obtain NOC from members and creditors of the Private Limited Company
  • Pass a Special Resolution for conversion
  • File Special Resolution in Form No. MGT.14 with ROC
  • File fees and application in Form No. INC.6 and supporting documents with ROC
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