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Process for Conversion of Company into One Person Company

Updated on :  

08 min read.

A private limited company is a company that is held privately by a small group of individuals. A private company needs to have a minimum of two directors and members. The maximum number of directors can be 15, and the maximum number of members can be 200 under the Companies Act, 2013.

One Person Company (OPC) is a new concept introduced in the Companies Act, 2013. A single individual can register an OPC. There should be only one member in an OPC. There cannot be more than one member, but it can have a maximum of 15 directors.

The conversion of one company class to another class, i.e. conversion of a private limited company into OPC is provided under Section 18 of the Companies Act, 2013 (‘Act’) and Rule 7 of the Companies (Incorporation) Rules, 2014. The compliance requirements are less in OPC than in private limited companies; thus, private limited companies choose to convert into OPC.

Conditions for Conversion of Company to OPC

  • The member of the new OPC should be a natural person.
  • The member of the new OPC should be a citizen of India, i.e. who has stayed in India for 120 days in the preceding financial year.
  • The member of the OPC should not be a member of any other OPC or be a nominee of any other OPC.
  • A minor cannot be a member or part of OPC.
  • The company to be converted into an OPC should not be established as a Section 8 company.

Process of Converting a Company to OPC

Hold Board Meeting

The company directors must meet and decide on a date for conducting the meeting of the shareholders, known as the Extraordinary General Meeting (EGM). The notice for holding the board meeting should be sent to the members at least seven days before the board meeting date. The board meeting agenda should be stated in the notice. The notice must be passed as a special resolution to be adopted by the shareholders concerning the conversion of a private company to OPC.

The agenda of the board meeting should be:

  • For approval from the directors for the conversion of the private company into OPC.
  • For fixing the place, date, day and time of the Extraordinary General Meeting (EGM).
  • For the approval of the EGM notice along with its agenda and explanatory statement.
  • For authorising any of the directors to issue the approved EGM notice.

Call for Extraordinary General Meeting (EGM)

A notice for the Extraordinary General Meeting (EGM) should be sent to all the company’s directors, members, and auditors. The notice for EGM must be sent at least 21 days before the date of the EGM.

No Objection Certificate (NOC) from Creditors

The company must get a No Objection Certificate (NOC) from the existing creditors and shareholders before passing a special resolution in the EGM. The NOC must be obtained in writing.

Hold Extraordinary General Meeting (EGM)

The EGM must be conducted on the assigned time, date, and place as per the notice. The EGM should be held for the following purposes:

  • Check for the quorum of the meeting.
  • Check for the presence of the company auditor. If the company auditor is not present, check if the leave of absence is granted or not under Section 146 of the Act.
  • Pass a special resolution to get shareholders’ approval for converting a private limited company into One Person Company (OPC) and get the approval for the altered MOA (Memorandum of Association) and AOA (Articles of association).

Form Filing to ROC

The company must file certain e-forms with the Registrar of Companies (ROC) for conversion of a private company into One Person Company (OPC), which are as follows:

  • Form MGT-14: Form MGT-14 should be filed with the ROC within 30 days of passing the special resolution for converting a private limited company into OPC.
  • Form INC-6: The application for converting a private company into OPC should be filed to the RoC in Form INC-6 along with the required documents.

Issue of Certificate

The ROC will verify the submitted e-forms and attached documents filed by the private company for converting into OPC. When the ROC is satisfied that the private limited company has complied with the requirements, he/she will issue a certificate for the conversion of the private company into OPC.

The conversion of a private company to OPC would not affect the contractual obligations and responsibilities of the company before conversion, and such liabilities, claims and obligations will be enforceable by law. The converted OPC will be liable for the liabilities, claims and obligations of the private limited company.

Documents Required for Converting a Company to OPC

The following attachments should be made with the Form MGT-14:

  • The EGM notice with the explanatory statement copy.
  • A true certified copy of the special resolution.
  • The altered MOA and AOA of the company.
  • A certified copy of the board resolution.

The following attachments should be made with Form INC-6:

  • The total list of creditors and members.
  • The latest balance sheet of the company.
  • A copy of the NOC letter of secured creditors.
  • The NOC of creditors and members.
  • The company directors should give a declaration through a duly sworn affidavit confirming that all creditors and members of the company have given their consent for conversion.

Benefits of Converting a Company to OPC

  • Decision making is easy and quick as there is only one person to take the decision. The time saved for taking decisions can be used in other productive assignments.
  • Annual and ROC compliances are significantly less for OPC.
  • Work-related to share certificate, annual filing, etc., are less for OPC.
  • OPC does not have to hold an Annual General Meeting and need not comply with many other legal requirements that are mandatory for a private limited company.

Post-Conversion Requirements by the OPC

  • Arrange for a new PAN card of the OPC.
  • Arrange for new stationery with the name of the OPC.
  • Update company bank account details.
  • Intimate the concerned authorities like GST, Income Tax Department, etc., about the status change.
  • Print the copy of the altered MOA and AOA.

Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.

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