Converting an OPC to Private Limited Company

The Conversion of a One Person Company is not a choice but is mandatory depending absolute parameters.

 A One Person Company needs to be converted to a Private Limited Company based on the following situations;

  • If there is an increase in the paid up capital of the One Person Company and it exceeds Rs. 50 Lakhs
  • It is also when the average annual turnover during the period of initial three consecutive financial years is more than Rs. 2 crores.

If an OPC fulfils any of the above two situations, it is must to convert the OPC to a Private Limited Company or Public Company. This has to be done within six months.

Before moving onto the Conversion let's have clarity on what is a One Person Company(OPC)?

The OPC is a hybrid form of business which combines features of Sole Proprietorship and Company. A One Person Company needs only one member who is the sole owner/director of the company as well as being a shareholder. As the features of the OPC is similar to the Private Limited Company, it is easy to carry on with the conversion of the same.

What are the type of Conversion?

There are two types of Conversion attached to the Once Person Company;

  • Voluntary conversion of OPC to Private Limited.
  • Compulsory Conversion of OPC to Private Limited.

The Process of Conversion of One Person Company to Private Limited Company is given below;

Informing the Registrar of Company: The information about the conversion needs to be drafted to the RoC also stating the rise in Paid up capital and the annual turnover of the company.

Board Resolutions: It is must for the shareholders of the Company to organize a Board meeting in which the relevant resolutions needs to be passed for the following;

  • Increase in the paid up Capital
  • Number of shareholders
  • The appointments of the director(s)

Above things are to meet the requirements of the Private Limited Company. In case of Voluntary conversion of One person Company to Private Limited Company, you must file MGT-14, by enacting a Special resolution in General Meeting. So, an OPC must make sure it has two directors and two shareholders to carry further on with the Conversion. There is a need to alter the Memorandum Of Association & Article Of Association of the OPC and update with as per the regulations of the Private Limited Company.

Filing the Application of Conversion: After completing the above documents, the One Person Company needs to file the prescribed application Form No.INC-6 along with the required fees and submit to the RoC. In case of Compulsory conversion, you need to file Form INC-5.

Verification by RoC: Once the application is filed then the RoC verifies all the documents. If the Registrar is satisfied with the submitted documents then it issues a fresh certificate of Incorporation to the OPC. And finally the OPC is converted and incorporated as a Private Limited Company.

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