INTRODUCTION
A one-person company (OPC) can be converted into a private limited company (PLC) as per Section 18 of the Companies Act, 2013 (‘Act’) and the provisions of Companies (Incorporation) Rules of 2014 (‘Rules’). The conversion of OPC into a private limited company will not affect the existing debts, liabilities, obligations, or contracts of the OPC.
The alteration toward the OPC’s Memorandum of Association (MOA) and Articles of Association (AOA) are required for the conversion (As per the provisions provided in Section 18 of the Companies Act, 2013, along with Section 122 of the Act).
A minimum of two members and two directors are required to form a private limited company. To convert an OPC to a private limited company, fill out the INC-6 form and submit it to the Ministry of Corporate Affairs, Government of India.
Definition of one person company
Section 2(63) of Companies Act 2013 defines about the OPC as one-person company means a company which has only one person as member.
- TYPES OF CONVERSION
(a) Mandatory conversion
(b) Voluntary Conversion
(a)Mandatory Conversion
In following situation, it is compulsory required to convert One Person Company to private company:
(a) Effective date of increase in the paid-up share capital of a One Person Capital beyond rupees fifty lakhs, and/or
(b) Increase of average annual turnover during the period of immediately preceding three consecutive financial years is beyond rupees two crores.
In either of the above case, the One Person Company shall be mandatorily required to convert itself into either a private or a public company within a period of six months.
(b) Voluntary Conversion
An OPC may convert itself into a private limited company after the expiry off 2 years from the date of incorporation. If there is more than one director is appointed in a company, then the board meeting will be required to be held to consider the proposal of conversion. Pursuant to provisions of section 122, the provisions of section 100 are not applicable to OPC
- Documents Required
The following are the required documents to be furnished for the conversion of One Person Company.
- The directors of the company would be given a declaration by an affidavit by confirming that all the members and creditors of the company have provided their consent for the conversion, the paid-up share capital company is Rs. 50 lakhs rupees or average annual turnover is less than Rs. 2 crores rupees, as the case may be;
- The list of members and creditors;
- The recent Audited Balance Sheet and the Profit and Loss Account;
- The copy of No Objection Certificate of secured creditors.
- PROCESS OF CONVERSION OF OPC
To convert an OPC into a private limited company, the following conditions must be satisfied:
- INTIMATION TO ROC
The Registrar of Companies (ROC) should first be communicated through the prescribed method that the OPC is now required for converting itself into a private limited company.
- PASSING THE BOARD RESOLUTIONS
The OPC should organize a general meeting to pass a resolution appointing directors and members to meet the private limited company’s standards. At least two members and two directors are required to convert an OPC to a private limited company. A board resolution should also be passed to approve changes to the OPC’s Memorandum of Association (MOA) and Articles of Association (AOA).
- APPLICATION FOR CONVERSION OF OPC TO PRIVATE LIMITED COMPANY
After completing the preceding stages, the company must submit an application (e-Form INC-6) to the ROC, along with the required documents:
(a)Altered MOA and AOA
(b)Copy of special resolution
(c)The list of proposed members and its directors along with consent
(d)List of creditors
(e)The latest audited balance sheet and profit and loss account.
(f)Copy of NOC of every creditor with the application for conversion
(g)Consent of the nominee
(h)Copy of PAN card of the nominee and member
(i)Proof of identity of the nominee and member
(j)Residential proof of the nominee and member.
(k)The ROC verifies that the application information is correct and that the registration fees have been paid. The ROC then takes a decision after thoroughly reviewing the application and supporting documents, and issues the certificate of conversion.
A one-person company was formed in the legal system to encourage entrepreneurs to enter the corporate sector. It will not only allow individuals to contribute to economic growth, but it will also create job prospects.
The removal of the minimum capital and turnover thresholds allows the OPC to obtain international investments without conversion restrictions. It allows OPC to convert voluntarily rather than mandatorily after capital requirements are met.
From the above, you would have understood the requirements to convert a one-person company to a private limited company. Basically, you should know that for a voluntary conversion, you need to wait for a couple of years from the incorporation of the OPC. After the conversion, it can still be converted to an OPC on a special resolution.