Introduction: Private Limited and One-Person Company

A Private Limited Company is a business with numerous benefits – it is an entity that is privately held, and has a liability of the directors/members limited to their shares only. Being a separate legal entity its shares are prohibited from being publicly traded, however, the company can purchase the property in its name and have a better credibility rate compared to others. A private limited company is an independent legal structure with the benefits like-

• Separate Legal Entity - This provides a benefit to the organization to acquire assets in its own name.
• Limited Liability - liability of the company’s shareholders is limited to the amount of unpaid value of the shares owned by them.
• Ease in share transfer
• Attracts investors

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A One Person Private Limited Company (OPC) is registered under Section 2(62) of the Companies Act 2013. This concept was introduced in order to promote the individuals who want to operate their businesses on their own without the interference of any other director. This type of entity acts as a bridge between a proprietorship firm and a private limited company, where a business owner can enjoy the benefits of a single owner as well as a private limited company.

Conversation of a Private Limited Company to One Person Private Limited Company (OPC) -

The conversion of a private limited into an OPC was not allowed previously, it was introduced in the Companies Act, 2013. This provided a clear path for the companies’ conversion. Under Section 18 of the Companies Act, 2013 the guidelines for the conversion of a private limited company into OPC.

Eligibility Requirements for the Conversion

• Paid-Up Share Capital shall not be more than INR 50 Lakhs

• Annual turnover shall not be more than INR 2 Crores
• Shareholder’s Approval in Special Resolution passed in EGM
• NOC from the existing members and creditors
• A shareholder is required to have Indian citizenship.
• The nominee is required to be appointed
• A minor is not eligible for nominee or member
• Ensuring that the shareholder of OPC hasn’t incorporated or is a nominee in any other OPC

Advantages of conversion

• Lessor Compliance
• Perpetual succession
• The company’s Director himself is eligible to file the Annual Returns
• No need to appoint a Company Secretary.  
• No interference in decision making
• No requirement of Annual General Meeting (AGM)

Pre-Requirements for the conversion

• Ensure the audit of the P&L statement, Balance Sheet, and accounts books.
• Complete all the ROC Returns.
• Challan of the paid Stamp Duty on Share Certificate.
• File the TDS Returns against the TDS deductions.
• Complete the returns of GST, VAT and Service Tax. 
• Updated register with the records of Minutes of the Meeting (MOM)
• All necessary certificates as per their business requirement like PF registration, ESIC registration, FSSAI, shop and establishment etc.

Procedure

Step 1 - Passing the Board Resolutions

The shareholders of the OPC are required to hold a General Meeting in order to pass the resolution mentioning –

• raising the paid-up capital (if needed),
• no. of shareholders
• Appointment of nominee directors
• Approval for the alteration of the  and

Step 2 - Issuance of Notice

Issue notice to all the Directors, shareholders, members and Auditors before 21 days from the date of the EGM. This notice must include – the agenda of the meeting, the resolution passed, etc.

Step 3 - NOC from the creditors

it is mandatory to obtain the consent of creditors as No Objection Certificate (NOC)

Step 4 – Intimate RoC about the conversion

File Form MGT-14 with ROC for all the passed SR within 30 days of its passing date along with the following these documents-

• Altered MOA and AOA
• Notice of EGM along with Explanatory Statement for conversion
• A certified copy of SR and BR

Step 5 - File Application of conversion

Filing of Form INC-6 for the conversion is done along with the following attachments-

• Declaration by the Directors with a consent of each member
• Deceleration by all creditors with NOC for the conversion.
• The Declaration ensures about the paid-up capital is below INR 50 lakhs by the auditor
• The Declaration ensures about the turnover is below INR 2cr by the auditor
• Reports of P&L, Account and Balance sheet of the Company audited by CA
• List of all the members and Directors;
• Board Resolution
• Special Resolution
• Explanatory Statement for the Conversion
• Altered MOA and AOA
• File Form MGT-14 with ROC for all the passed SR within 30 days of its passing date along with the following these documents-
• Filing of Form INC-6 for the conversion is done along with the following attachments-

Step 6 – Approval of the application by ROC 

Once all the documents are received by ROC. The authority will do the scrutiny of the documents. Based on this, the application will be accepted or rejected.  If the information provided is found to be complete, the ROC will issue a Certificate of Incorporation and approves the application for the conversion.

Post conversion requirement

• New PAN of the company
• Suffix OPC in the name of the company
• New stationery with the new name of the Company
• Update the bank about the conversion
• Intimate all the authorities like Excise and sales tax, FSSAI, shop and establishment, PF, ESI etc
• Keep a copy of the altered MOA & AOA.

Conclusion

Private Limited Companies are considered as more convenient entities for running a business than any other company. But an OPC has more benefits of lesser compliance and taxation. If anyone has an entity registered as a Private Limited Company and wants to convert it into an OPC Private Limited Company, then they can be free to do that with just filing of forms. The forms used for the conversion of the firms require expertise. If you want to convert your company, feel free to contact us.