Procedure to convert One Person Company to a Private Limited Company
The conversion of a One-Person Company (OPC) to a Private Limited Company is governed by the Companies Act 2013 and the Companies Incorporation Rules, 2014.
Section 18 of the Companies Act, 2013 read with Rule 6 of the Companies (Incorporation) Rules 2014, provides a mechanism for the conversion of a OPC to a Private Limited Company and is elaborated below:
I. Types of Conversion
There are two methods for converting an OPC to a Private Limited Company:
i. Compulsory Conversion:
When the paid-up capital of OPC exceeds INR 50,000,00 (Indian National Rupees Fifty Lacs) or its average annual turnover during the relevant period exceeds INR 2,00,000,00 (Indian National Rupees Two Crores).
ii. Voluntary Conversion:
OPC can convert itself to a Private Limited Company without meeting any specific criteria mentioned above.
II. Conversion Process
OPC must undertake the following procedure to convert itself to a Private Limited Company.
i. Alteration of MoA and AoA:
The proposed conversion requires altering the Memorandum of Association (MoA) and Articles of Association (AoA).
ii. Application to the Registrar of Companies (RoC)
An application needs to be made in Form INC-6 along with prescribed fees to the RoC along with the prescribed fees to the RoC.
iii. Declaration by Directors:
A declaration in the form of an affidavit declaring that all members and creditors consent to the conversion. Further, the affidavit should mention that the paid-up share capital is INR 50,00,000 (Indian National Rupees Fifty Lacs) or less, or the average annual turnover is less than INR 2,00,000,00 (Indian National Rupees Two Crore).
iv. Submission of documents with the RoC:
The following documents must be submitted to the RoC:
a. A list of members and creditors.
b. The latest audited balance sheet along with the profit and loss account.
c. No objection certificate from secured creditors.
These documents are essential for ensuring compliance with regulatory requirements and for the Registrar of Companies (RoC) to verify that all necessary conditions for conversion have been met.
v. Convene a General Meeting:
The OPC needs to convene a General Meeting to pass resolutions for:
a. Appointment of additional directors and members (minimum two).
b. Alteration of MoA and AoA.
vi. Verification by the RoC:
Once all necessary documents and requirements have been submitted and upon satisfaction, the RoC will issue a certification of conversion.
III. Compliance and Penalties
OPC after exceeding prescribed thresholds for paid-up capital or turnover, it must convert into either a Private Limited Company with at least two members and two directors or a Public Company with at least seven members and three directors. Non-compliance may result in fines up to INR10,000 (Indian National Rupees Ten Thousand) and an additional fine of INR1,000 ( Indian National Rupees One Thousand) for each day of continued contravention.
IV. Conclusion
The conversion from an OPC to aPrivate Limited Company enhances business opportunities while ensuringcompliance with legal requirements. The outlined conversion procedure asmentioned above ensures a smooth transition for an OPC to convert itself to aPrivate Limited Company.
