Conversion of an OPC to Private Limited Company can be voluntarily or by compulsion. In both the cases, there is a need to follow proper procedure. And shall require necessary alterations in the MOA and AOA of the OPC. However, it may be noted that the conversion of an OPC into a Private Limited Company as per Section 18 of the Companies Act, 2013 and the rules of Companies (Incorporation) Rules of 2014, shall not affect the existing debts, liabilities, obligations or contracts of the OPC. In addition, these will inevitably be discharged by the newly formed private limited company. Further, there may be two scenarios to convert OPC into Pvt Ltd Company.
- Compulsory Conversion
- Voluntary Conversion
Compulsory Conversion of an OPC into Pvt Ltd
It is mandatory for an OPC to convert into a Pvt Ltd Company within 6 months if it surpasses the below-given parameters:
- Paid up share capital of an OPC exceeds Rs.50 lakhs and
- Average annual turnover of immediately preceding three consecutive financial years exceeds 2 crores.
During the conversion, the members have to just pass a special resolution in the general meeting. Further, obtain No Objection Certificate from creditors and other members before passing the resolution.
Process for Compulsory Conversion
- Convene a general meeting and pass Resolution for increase in the number of Directors and shareholders.
- For converting an OPC to a Private Limited Company, there should be at least 2 shareholders and 2 directors.
- Furthermore, shareholders shall pass a resolution for approving the alteration of the Memorandum of Association (MOA) and Articles of Association (AOA) of the OPC.
- File E- form INC-5 with ROC within 60 days of exceeding threshold limits, informing that it has ceased to be OPC. And now it requires to convert itself into a private company.
- Further file E-Form INC-6 on the MCA Website within 6 months of conversion.
Voluntary Conversion
- OPC cannot convert itself into a Private Limited Company for a period of two years from the date of incorporation.
- Further when two year time period is over OPC can apply for converting itself into Private Limited Company.
- OPC has to communicate voluntary conversion to a ROC in Form INC-5 within sixty days.
- For conversion pass a resolution to increase the number of directors and shareholders.
- For converting to a private limited company, OPC should have minimum of 2 directors and 2 members.
FAQs
No, the One Person Company can have only one member and therefore the Company cannot increase the members before conversion. However, after conversion, it shall increase the number of members to meet the minimum compliance requirement.
The conversion shall not affect, the liabilities, debts or obligation of the company in any way. Therefore, the company shall be liable for all its previous obligations.