The 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 requirements that are necessary for the conversion of OPC are alterations in the Memorandum of Association (MOA) and Articles of Association (AOA) of the OPC (As per the provisions provided in section 18 of the Companies Act, 2013, along with section 122 of the Act).
For incorporating a private limited company there needs to be a minimum of two members and two directors. To apply for conversion of OPC to a private limited company, you need to fill the form INC-6, to the Ministry of Corporate Affairs, Govt. of India.
For converting an OPC into Private Limited Company, the provisions laid down in Section 18 of the Indian Companies Act of 2013, and the Companies (Incorporation) Rules of 2014, in particular, Rule 6, needs to be followed.
The OPC can voluntarily convert itself into any kind of company, including a private limited company at any time without meeting the criteria of paid up share capital and average annual turnover.
The compulsory conversion of OPC upon meeting the criteria of exceeding the minimum paid up capital and average annual turnover was removed in the Budget 2020-21 and subsequently via the Companies (Incorporation) Second Amendment Rules, 2021.
Thus, currently, an OPC can be converted voluntarily into a private limited company by passing a special resolution after increasing the minimum number of members and directors to two. No Objection Certificate (NOC) in written form from the creditors must be obtained for the conversion of OPC to a private limited company.
The following compliances have to be adhered to for converting an OPC into a private limited company:
The concerned 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.
The OPC should hold a general meeting for passing the resolution of appointment of directors and members for meeting the requirements of the private limited company. For converting an OPC to a private limited company, there should be at least 2 members and 2 directors.
Furthermore, a board resolution should be passed for approving the alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) of the OPC.
Once the above steps are completed, the company needs to file an application (e-Form INC-6) to the concerned ROC along with the following documents:
The ROC confirms on the application details filled be correct and fees are being paid against the registration. Then the ROC makes a decision by finally studying the application and other documents thoroughly and issues the certificate of conversion.
The introduction of the One Person Company into the legal system came into existence to encourage entrepreneurs to enter into the corporate world. It will not only enable the individual capabilities to contribute economic growth but will also generate employment opportunities.
The removal of the threshold limit of minimum capital and turnover further enables the OPC to obtain foreign investments without the restriction of conversion. It allows OPC to decide freely to convert voluntarily and not mandatorily upon fulfilment of capital criteria.