Title: Simplified Guide to Conversion of Private Limited Company to One Person Company (OPC)
Introduction:
As businesses evolve and operational dynamics change, the need for a more flexible and easily manageable structure may arise. In such cases, converting a Private Limited Company into a One Person Company (OPC) can be a viable option. An OPC is a type of company introduced in the Companies Act, 2013, which allows a single individual to enjoy the benefits of limited liability while maintaining complete control over the company's operations. In this article, we will explore the step-by-step process of converting a Private Limited Company to an OPC, highlighting the legal requirements and important considerations.
1. Understanding One Person Company (OPC):
An OPC is a hybrid form of business entity that combines the benefits of both a sole proprietorship and a Private Limited Company. It allows a single individual to be the sole shareholder and director, ensuring complete control and limited liability. However, an OPC is subject to certain restrictions, such as the prohibition from having more than one member and limitations on its capital.
2. Eligibility for Conversion:
To convert a Private Limited Company into an OPC, certain eligibility criteria must be met:
a. A Private Limited Company can only be converted into an OPC if it has a paid-up capital of less than or equal to ₹50 lakh and an annual turnover of less than or equal to ₹2 crores. If it exceeds these limits, it must first reduce its capital and turnover to meet the eligibility criteria.
b. The company should have a sole member who will become the sole shareholder and director of the OPC post-conversion.
c. The company should not be involved in any non-banking financial activities, or any other activities as notified by the Central Government.
3. Obtaining Director Identification Number (DIN) and Digital Signature Certificate (DSC):
Ensure that the sole member has a DIN and DSC, as these are essential for all directors of the OPC.
4. Board Meeting and Passing Resolutions:
Convene a board meeting to propose the conversion and pass the necessary board resolutions. The board must also authorize a director to apply for the name approval of the new OPC.
5. Application for Name Approval:
Apply for the approval of the new OPC's name to the Registrar of Companies (ROC). The proposed name should comply with the naming guidelines prescribed by the Ministry of Corporate Affairs (MCA).
6. Filing of Conversion Application:
File Form INC-6 (Application for One Person Company) with the ROC, along with the required documents, including the resolution for conversion, NOC from creditors, and other prescribed forms.
7. Issuance of Certificate:
Upon successful verification of the application and documents, the ROC will issue a fresh Certificate of Incorporation with the new name, confirming the conversion of the Private Limited Company into an OPC.
8. Updated Memorandum and Articles of Association:
After the conversion, the company must adopt a new Memorandum of Association (MOA) and Articles of Association (AOA) in line with the requirements of an OPC.
9. Updating Other Registrations and Licenses:
Post-conversion, update all registrations, licenses, and permits with the new OPC details, including GST registration, bank accounts, and any other applicable registrations.
Conclusion:
Converting a Private Limited Company to a One Person Company (OPC) can be a strategic move for individuals seeking greater control and limited liability in their business ventures. However, it is crucial to meet the eligibility criteria and adhere to the legal requirements throughout the conversion process. Seeking professional guidance from legal and financial experts is advisable to ensure a smooth and compliant transition to the OPC structure.