Conversion of Private Company into OPC (One Person Company)
A One Person Company (OPC) is a type of company where a single individual acts as both the director and shareholder. Here’s what you need to know about converting a Private Limited Company into an OPC:
● Paid-up Capital: The paid-up capital of the company must be less than ₹50 lakh.
● Annual Turnover: The annual turnover must be less than ₹2 Crore.
● Shareholder and Director: The company must have only one shareholder, although it can have more than one director.
● Consent of Shareholders: The conversion of a private company into an OPC must be approved by the shareholders through a special resolution.
● No Default on Payments: The company should not have any outstanding debts or liabilities that could hinder the conversion process.
- Overview
Under Section 18 of the Companies Act, 2013, the process to convert a Private Limited Company (PLC) into a One Person Company (OPC) is allowed. This mechanism has been in place since 1 April 2014, enabling a private company to transition into a one-person company, subject to specific conditions and compliance requirements.
Under Section 18 of the Companies Act, 2013, a Private Limited Company (PLC) can be converted into a One Person Company (OPC) if it meets the following conditions:
● Paid-up capital must be less than ₹50 lakh.
● Annual turnover should be less than ₹2 crore.
● The company must have one shareholder (but can have more than one director).
Key Points:
● The conversion does not affect existing liabilities or contracts, which remain enforceable by law.
● The conversion requires Board and Shareholder Resolutions, and changes to the MOA and AOA.
● Form INC-6 is filed with the Registrar of Companies (RoC) to initiate the conversion.
● The OPC structure offers limited liability and simplified compliance compared to a private company, making it ideal for small businesses.
Converting a Private Limited Company into an OPC provides entrepreneurs with a simplified corporate structure while maintaining business continuity and legal protections.
- Benefits of Conversion from Private Limited Company (PLC) to One Person Company (OPC)
1. Limited Director’s Liability:
In an OPC, the liability of the director is limited to the amount invested in the company. Unlike sole proprietorships, where personal assets can be used to repay business debts, an OPC ensures that only the invested capital is at risk. Personal assets, such as the director’s house or car, are protected.
2. Continuous Existence:
An OPC has a separate legal identity, which means the company can continue to exist even if the founder or director passes away. The ownership and control are transferred to the nominee (appointed at the time of incorporation), ensuring the business remains operational.
3. Fewer Compliances:
Since an OPC has only one director and one shareholder, the compliance requirements are significantly reduced.
There is no need to hold Annual General Meetings (AGMs), and fewer statutory filings are required. Only essential documents, such as share certificates and statutory registers, need to be maintained, making it easier to manage.
Converting a Private Limited Company (PLC) to an OPC offers limited liability, perpetual succession, and reduced compliance burden, making it an attractive choice for small businesses or solo entrepreneurs.
- Requirements for Converting a Private Limited Company into a One Person Company (OPC)
● Financial Compliance:
Ensure accurate books, balance sheet, and up-to-date ROC filings.
Verify share certificates and stamp duty payment.
Comply with TDS and VAT/GST returns.
● Record-Keeping:
Maintain board minutes and statutory registers.
Ensure compliance with local laws (e.g., Shop & Establishment Act).
● Employee-Related Compliance:
Register for PF and ESIC if the company has more than 20 employees.
● Financial Thresholds:
Paid-up capital must be under ₹50 lakhs.
Annual turnover must be under ₹2 crore.
● Shareholder Requirements:
Only one Indian national shareholder is allowed.
Shareholder must have resided in India for at least 180 days in the previous year.
Shareholder must not be a member of another OPC.
These conditions ensure a successful transition from a PLC to an OPC.
- Documents Required for Conversion of Private Company into OPC
To convert a Private Limited Company into a One Person Company (OPC), the following documents are required for filing Form MGT-14:
1. EGM Notice: The notice for the Extraordinary General Meeting (EGM) along with an explanatory statement.
2. Special Resolution: A true certified copy of the special resolution passed by the shareholders for the conversion.
3. Altered MOA and AOA: The Memorandum of Association (MOA) and Articles of Association (AOA) of the company, reflecting the changes due to the conversion.
4. Board Resolution: A certified copy of the board resolution approving the conversion.
These documents should be submitted to the Registrar of Companies (RoC) along with Form MGT-14 to initiate the process of conversion from a private company to an OPC.
When filing Form INC-6 for the conversion of a private limited company into a One Person Company (OPC), the following attachments are required:
1. List of Creditors and Members: A comprehensive list of all creditors and members of the company.
2. Latest Balance Sheet: A copy of the most recent balance sheet of the company.
3. No Objection Certificate (NOC) from Secured Creditors: NOC from secured creditors, allowing the conversion to OPC.
4. NOC from Creditors and Members: No Objection Certificates from other creditors and members consenting to the conversion.
5. Affidavit by Directors: A duly sworn affidavit from the company’s directors, confirming that all creditors and members have consented to the conversion.
- Process to Convert Private Limited Company to OPC (One Person Company)
Here’s a step-by-step guide on how to convert a Private Limited Company (PLC) into a One Person Company (OPC):
1. Gather a Board Meeting – The directors must meet to decide on the date for the Extraordinary General Meeting (EGM) where the conversion will be discussed. The board drafts a notice for the shareholders and a draft resolution for the conversion of the private company to OPC. This resolution must be passed as a special resolution by the shareholders.
2. Issue Notice – for EGM A notice for the EGM must be sent to all shareholders, directors, and auditors of the company.The notice should be issued at least 21 days before the EGM.Along with the notice, provide the agenda for the meeting, the draft special resolution for conversion, and an explanatory statement regarding the conversion.
3. Obtain No Objection from All Creditors – Before the EGM, obtain No Objection Certificates (NOCs) from all creditors of the company. This step is crucial to ensure that no creditors object to the conversion.The NOCs must be submitted before the EGM for record-keeping.
4. Conduct the EGM – The EGM will be conducted on the date, time, and place specified in the notice.The shareholders will pass the special resolution regarding the alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) to reflect the company’s conversion into an OPC.
5. File the Resolution with the ROC – The special resolution passed in the EGM must be filed with the Registrar of Companies (ROC) within 30 days using Form MGT-14.This form should include the resolution, MOA, AOA, and the NOCs from creditors.After receiving the documents and verifying the compliance, the ROC will register the special resolution.
6. Obtain Certificate of Conversion – Once the application is reviewed and approved, the Registrar of Companies will issue a Certificate of Conversion confirming the conversion of the Private Limited Company into an OPC.
- Why Choose GTS for Legal Services
1. Expert Legal Assistance:
GTS handles legal work for over 1000 companies and LLPs every month. With a combination of advanced technology and a dedicated team of legal professionals, we ensure that the process is as seamless and efficient as possible.
2. Realistic Expectations:
We take care of all the paperwork and handle interactions with the government on your behalf. We provide clear guidance throughout the process, ensuring you know what to expect at each stage.
3. Experienced Team:
Our team of over 300 experienced business advisors and legal professionals are always available to assist you. With our vast expertise, we are committed to providing top-tier legal services tailored to your specific needs.
- FAQ
Yes, a private company can be converted into a One Person Company (OPC) under the Companies Act, 2013, provided the following conditions are met:
1. Paid-up capital is less than ₹50 lakhs.
2. Annual turnover is under ₹2 crores in the last 3 years (or since incorporation if the company is new).
3. The company must have one shareholder, who must be an Indian resident.
4. No outstanding debt (or NOCs from creditors if any).
5. A special resolution passed by shareholders at an Extraordinary General Meeting (EGM).
Whether a Private Limited Company (Pvt Ltd) or a One Person Company (OPC) is better depends on the nature of your business:
• Pvt Ltd: Ideal for businesses with multiple owners or those that want to raise capital. It allows for more growth, investor involvement, and has more regulatory compliance (e.g., board meetings, filings). It suits businesses looking for expansion.
• OPC: Best for sole proprietors who want the benefits of limited liability without complex governance. It has fewer compliance requirements and is easier to manage, but it is limited in terms of capital raising and cannot have more than one shareholder.
The cost to convert a Private Limited Company (Pvt Ltd) to a One Person Company (OPC) in India typically ranges between ₹10,000 and ₹15,000. This cost may include:
• Government Fees: For filing forms with the Registrar of Companies (ROC), such as Form INC-6 for the conversion.
• Professional Fees: For legal and accounting services to ensure all documentation, resolutions, and compliance requirements are met.
The process of converting a One Person Company (OPC) into a Private Limited Company typically takes 2 to 4 weeks. The conversion involves obtaining approval through board meetings and shareholder resolutions, filing the necessary forms with the Registrar of Companies (ROC), and receiving the ROC’s approval. The timeline may vary based on the efficiency of the registrar and the completeness of the documentation.
In an LLP (Limited Liability Partnership), partners do not receive a salary. Instead, they can receive remuneration or a share of the profits as per the LLP agreement. This payment is not considered a salary but compensation for their contribution to the business. The agreement typically outlines the terms of profit sharing or remuneration. Partners are taxed on their share of the profits, not as a salary.
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