Overview

As per the provisions of section 18 of the Companies Act, 2013 and the Companies (Incorporation) Rules 2014, the process of converting a one person company into a Private Limited Company has to be performed by a newly incorporated Private Limited Company. However, the conversion process will not affect OPC’s existing debts, liabilities, obligations or contracts.

The introduction of the concept of One Person Company in the Companies Act, 2013 has completely changed the corporate laws in India. OPC registration was a game-changer resulting in acceptance of an entirely new way of setting up business. OPC registration has provided a platform for sole proprietors to enter the corporate sector.

In the topic, we will discuss what is OPC, OPC Registration, method of conversion of OPC into Public and Private Company and the entire process of conversion;

To Understand the Process of Converting One-Person Company to Private Limited Company You have to Know About The Topics Written below

This Article will simplify these topics:

1. What is One Person Company

2. What are the main features of OPC Registration

3. Eligibility Criteria for One Person Company Registration

4. OPC Registration Process

5. Conversion Process of One-Person company to public or Private

6. Process of conversion

7. Takeaway

One Person Company

A One Person Company is a company that has one person as its members. A member of a company is a subscriber to its Memorandum of Association. So, a one person company is a company which has only one shareholder as its member. Generally, OPC registration is done when there is only one member or promoter for the business. In the initial stages, the businessman prefers OPC registration instead of a sole proprietorship business because of the many benefits that OPC provides.

What are the main features of OPC registration?

The Key features of One Person Company are :

1. OPC Registration - The registration of OPC is done as per the Companies Act 2013 and Ministry of Corporate Affairs.
2. OPC is separate from its members - OPC is treated as a separate legal entity.
3. Liability of members - The liability of the member is limited to the extent of his share capital.
4. Criteria for minimum and maximum number of member/s - minimum 1 member and maximum 2 members.
5. Transferability - Transferable to 1 person only.

Eligibility Criteria for One Person Company Registration

Note - Resident means who has lived in India for 182 days in the previous calendar year.

• A person cannot include more than one OPC or be a nominee of more than one OPC.

For OPC registration, the paid-up capital limit is Rs 50 lakh and the average annual turnover is Rs 2 crore in the immediate preceding financial year. The state of the OPC is lost, if the OPC exceeds this limit.

• 1 member can form an OPC.

• OPC registration rules do not allow non-banking financial institutions.

OPC Registration Process

Here is brief of One Person Company Registration process -

1. For OPC registration the applicant is required to obtain a DSC (Digital Signature Certificate) issued by the Certifying Authority, as the authenticity of all the documents is ensured by the DSC.
2. Registration of OPC through RUN (Name Reservation) -
   • RUN service will be used for proposed company name availability
   • Once the name is approved, SPICE form will be filed for the company i.e. (OPC should be incorporated within 20 days from the date of approval of RUN).
   • If the correspondence address and the registered office address are not the same, the company shall file Form INC-22 within 30 days from the date Spice is registered and incorporated.
   • Allotment of DIN (Director Identification Number).
   • Application of PAN and TAN while doing OPC registration through Spice Form INC-32.
   • Electronic MOA and AOA through SPICE Forms (INC-33 and INC-34).
   • A declaration regarding incorporation by an Advocate/CA/CWA/CS stating that all the legal requirements of this Act have been duly complied with. A declaration is given by the professionals involved in the OPC registration process.
   • Nominee has consent that he is desirous of becoming a member of the One Person Company.

Conversion Process of One-person Company to Private Limited Company

Conversion of One Person Company can be done by either-

1. voluntarily or,
2. Mandatory.

1. Must have completed at least 2 years from the date of OPC registration.
2. Application in Form INC-6
3. The limit of shareholders and directors will have to be increased to the required limit.

The OPC has to compulsorily convert itself into a private or public company, if-

1. The OPC has to compulsorily convert itself into a private or public company, if-
2. Notice of Conversion to Form INC-5
3. Filing Form INC-6.
4. OPC will have to increase the required limit of directors and shareholders.
5. Further, if the OPC exceeds the limit prescribed as a statutory body, it needs to be converted into a private or public company and inform the ROC by filing Form INC-5 for the same OPC.

Note - INC-5 will be filed within 60 days of exceeding the limit. An OPC shall file Form INC-6 for the conversion of an OPC into a private or public company

The process to convert OPC into private or public company is mentioned below-

• The company shall give notice to the directors with the agenda at least seven days prior to the date of the meeting for convening a meeting of the Board.

Note - For consideration of the conversion, notice will be given in compliance with Secretarial Standard I.

• To convene a meeting of the Board to decide the day, time, date and place for convening an extraordinary general meeting
• Approval of requisite documents (Draft Notice, Draft MOA and AOA) before convening the Extraordinary General Meeting.
• Providing authority to ensure compliance.
• The resolution passed in the meeting shall be passed to the members and shall be recorded in the minutes book of the company.

Note- This shall be signed and dated by the member.

• The Company (OPC) shall file Form MGT-14 to the ROC within 30 days from the date of passing the resolution along with the required documents-
• Attested true copy of Board's resolution, minutes and latest financial statements.

Note- Once MGT-14 is approved, only INC-5 will be filed for conversion by the company

The Process of Converting One-person Company Private Limited Company Are :

The company shall give notice to the directors with the agenda at least seven days prior to the date of the meeting for convening a meeting of the Board.

Note - Notice will be given in compliance with Secretarial Standard I for consideration of the conversion.

• To convene a meeting of the Board to decide the day, time, date and place for convening an extraordinary general meeting
• Approval of requisite documents (Draft Notice, Draft MOA and AOA) before convening the Extraordinary General Meeting.
• Providing authority to ensure compliance.
• The resolution passed in the meeting shall be passed to the members and shall be recorded in the minutes book of the company.

Note- This shall be signed and dated by the member.

• The Company (OPC) shall file Form MGT-14 to the ROC within 30 days from the date of passing the resolution along with the required documents-

Attested true copy of Board's resolution, minutes and latest financial statements.

Note- Once MGT-14 is approved, only INC-5 will be filed for conversion by the company.

• Form INC-5 will be filed by the OPC within 60 days from the date of passing the resolution under intimation to the Registrar of Companies. (INC-5 is filed only in case of compulsory conversion).
• File INC-6 within 1 month from the date of voluntary conversion and (in case of compulsory conversion) within 6 months from the date of compulsory conversion.

Outcome

The OPC registration rules expressly prohibit the conversion of OPCs into non-profit organizations i.e Section 8 companies. However, OPC can voluntarily or compulsorily convert into a private company or a public company after fulfilling the specified criteria. As per the companies Act 2013[1], companies under OPC registration enjoy the following privileges and exemptions.

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