Conversion of a One Person Company (OPC) into a Private Limited Company

A One Person Company (OPC) can be converted in to a Private Limited Company as per Section 18 of the Companies Act, 2013. There are two ways through which a One Person Company (OPC) can be converted into a Private Limited Company i.e. voluntarily conversion or mandatorily conversion. In any of these conversions, the Memorandum of Association and Article of Association of the One Person Company (OPC) needs to be changed as per the section 18 and section 122 of the Companies Act, 2013.

As per Section 18 Companies Act, 2013 following conditions need to me made:

• Get written consent from all the creditors
• Pass the resolution of conversion
• Minimum paid-up capital requirement of Rs 1,00,000 to be met
• Minimum number of 2 directors and 2 members need to be met

Form INC-6 is to be filed to the Ministry of Corporate Affairs for conversion of One Person Company (OPC) into a Private Limited Company.

Two Types of Conversion

For converting a One Person Company (OPC) into a Private Limited Company both voluntarily conversion and mandatory conversion, the provisions of Sec 18 of the Indian Companies Act of 2013, and the Rule 7(4) of the Companies (Incorporation) Rules of 2014 needs to be followed.

Voluntary Conversion

Voluntary conversion of a One Person Company (OPC) into a Private Limited Company is only allowed after two years from the date of incorporation have been completed. However, if the paid-up share capital of the One Person Company (OPC) is more than Rs. 50 lakhs or if the average turnover is more than Rs. 2 crores then within two months of the phenomenon occur, the One Person Company (OPC) can be converted into a Private Limited Company.

One Person Company (OPC) has to file form INC 5 for informing the registrar of companies about voluntary conversion within sixty days.

Compulsory Conversion

The Companies Act, 2013 laid down certain conditions if a One Person Company (OPC) meets, the OPC needs to be compulsorily converted into a Private Limited Company within 6 months of meeting the following conditions:

• The paid capital of the One Person Company (OPC) exceeds Rs. 50 lakhs and
• The annual turnover of is more than Rs 2 Cr in three immediate previous consecutive financial years

The conversion is made by just passing a special resolution in the general meeting. It is checked for a No objection certificate in written from the creditors, and the other members before the resolution are passed.

Process

Board Resolutions

• Shareholders of the One Person Company (OPC) hold a general meeting and pass the resolution to increase the number of directors and shareholders.
• To convert a One Person Company (OPC) to a Private Limited Company, there should be at minimum 2 shareholders and 2 directors.
• Shareholders pass a resolution to alter the Memorandum of Association and Articles of Association of the One Person Company (OPC).
• File the e-form INC-5 with registrar of companies within 60 days of crossing the threshold limits of the paid-up capital or the turnover, informing that it has ceased to be a One Person Company (OPC).
• Further file e-Form INC-6 on the website of MCA within 6 months from the date of conversion
• The introduction of One Person Company (OPC) into legal system came into existence to encourage the entrepreneurs to enter into the corporate world. It will not only enable the individual capabilities to contribute economic growth but will also generate employment opportunity.

Provisions of Companies (Incorporation) Rules of 2014 followed by the newly formed Private Limited Company. The existing debts, liabilities, obligations or contracts of the One Person Company (OPC) remain the same.