Conversion of OPC Into Pvt Ltd Company

Overview

A One Person Company (OPC) can convert itself into a private company by complying with the procedure laid out under the Companies Act, 2013. There are two ways of converting a One Person Company into a Private Limited Company as per the act.

Types

• VOLUNTARY CONVERSION: Two years should have been expired from the date of incorporation for voluntary conversion of OPC to private company Except, that the paid-up share capital exceeds Rs. 50 lakhs or average annual turnovers exceeds Rs. 2 crores during preceding 3 consecutive financial years then it is obligatory to convert the OPC into a private limited company.
• COMPULSARY CONVERSION: The condition of Mandatory Conversion arises where the paid up share capital of an OPC exceeds 50 lakh rupees or its average annual turnover exceeds Rs. 2 crores during preceding 3 consecutive financial years, it shall cease to be entitled to continue as a One Person Company and have to convert into Private or public limited Company within a period of 6 months from the date of crossing the threshold limit.

Thus we can explain that there are two possible reasons for conversion of OPC into Private limited company.

Procedure for Conversion of OPC Into Pvt. Ltd. Company

• NOTICE OF BOARD MEETING - Notice minimum 7 days before the date of the meeting is required to be given to Directors with the agenda and notes to convene the Board Meeting.
• CONVENE BOARD MEETING - A Meeting of Board of Directors need to be duly conducted for passing resolutions to following:
  i. Approval of notice with explanatory statement for special resolutions to be passed in EGM in relation to alteration of MOA & AOA.
  ii. For giving notice to the Registrar.
  iii. Take note about exceeding the threshold limits if applicable.
• PASSING OF SPECIAL RESOLUTION -
  • The shareholders of the OPC shall hold a General Meeting for passing the special resolution for increase the paid-up capital (if required), no. of shareholders, and appointment of directors for complying the requirements of the Private Limited Company.
  • Special Resolutions to be signed, dated and communicated by the member to the company and entered by the company into minutes.
  Note: For the purpose of conversion OPC to a private limited company, OPC is required to have 2 directors and 2 members.
• FILING OF FORMS TO ROC -
  • There is a requirement of filing MGT-14 form to ROC within 30 days of passing of special resolution with required attachments.
  • Signed and dated CTC of Minutes
  • Altered MOA & AOA
  • CTC of Board resolution
  Note: The OPC must be using with Private limited at the end of its name.
  The clause related to subscribers is required to be changed as it is need to include additional members in the memorandum.
• NOTICE OF CONVERSION FILING OF FORM INC-5 - In case of Mandatory Conversion, Once e-Form MGT-14 is approved, company need to file INC-5 within 60 days from the date passing the resolution intimating the Registrar along with following attachments:
  • Copy of board resolution authorizing giving of notice
  • Copy of the duly attested latest financial statement of the company
  • Certificate from chartered accountant in practice for calculation of the average annual turnover during the prescribed period in case of conversion is on the basis of such criteria
  • Optional Attachment(s) if any
  Note: OPC is required to communicate voluntary conversion to a registrar of companies in form INC 5 within 60 days.
• APPLICATION FOR CONVERSION FILING OF FORM INC-6 - The Company will file Form INC-6 within :
  6 months of compulsory conversion
  30 days of voluntarily conversion
  Along with following attachments:
  1. Altered Memorandum of association
  2. Altered Articles of association
  3. Copy of the duly attested latest financial statement.
  4. Copy of board resolution authorizing giving of notice
  5. Certificate from a chartered accountant in practice for calculation of the average annual turnover during the relevant period in case of conversion is on the basis of such criteria
  6. Affidavit confirming that all the members of the company have given their consent for conversion
  7. Copy of minutes, list of creditors and list of members.
  8. Copy of NOC of every creditor
  9. Optional attachment(s) if any
• CERTIFICATE OF INCORPORATION - After Successful Submission of above mentioned forms and on being satisfied ROC shall issue a new Certificate of Incorporation.

Documents Required for Conversion of OPC Into Pvt. Ltd. Company

• Altered Memorandum of Association
• Altered Articles of Association
• Copy of latest audited financial statement
• List of creditors; and
• Copy of No Objection letter from secured creditors

Forms to be Filed

• Copy of Special Resolution Passed-MGT-14
• In case of Voluntary Conversion-INC-6
• In case of Mandatory conversion-INC-5 & 6

Advantages of Conversion of OPC to Pvt. Ltd. Company

• Easy Money Raising: The private limited can raise the fund through bank loans, Angel Investors, Venture Capitalists, in comparison to LLPs and OPCs.
• Goodwill & recognition in the Market: Private limited is most recognized form of business structure and all the stakeholders would like to deal with these private companies instead of other form of business.
• International Business Expansion: incorporating a Private Limited Company can be fruitful because FDI is allowed and Investments and collaborations with foreign industries can be done.
• Taxation Benefits: There is no separate taxation of One Person Company recognized under the Income Tax Act and hence it is fall under the same category as taxation applicable to other companies. Thus, with point of view of taxation, the concept of One Person Company is less profitable concept as it levied heavy financial burden in terms of tax Hence it is better to choose private Limited Company over One Person Company because under same taxation, it provided more benefits.