In 2013, the Companies Act introduced one person company(OPC) where a company can be incorporated by a single person. The Ministry has also laid down guidelines for the conversion of a one-person company into private limited company in the Companies (Incorporation) Second Amendment Rules, 2021. In this article, we look at the definition of one person company and the procedure for Conversion of One Person Company into Private Limited Company, and the recent amendments.
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Section 2(62) of the Companies Act defines OPC as a company having only one member. These companies get funds easily. The Companies Act gives ample exemptions to OPCs and easy incorporation and management.
A private limited company has a minimum two-member and a maximum of 200 members. The liabilities of these members are limited to the amount of shares held by them.
Under Companies (Incorporation) Second Amendment Rules, 2021 and Companies (Incorporation) Rules, 2014, a natural person who is an Indian citizen whether resident in India or otherwise can incorporate an OPC. He shall be the nominee for the sole member of OPC. A resident in India in this context means a person who has stayed for a period of 120 days in India during the preceding year. This natural person should not be a member of more than 1 OPC at any given time. Additionally, he should not be a nominee of more than 1 OPC. These companies cannot be incorporated or converted into section 8 companies. Neither can they carry non-banking financial investment activities.
Rule 6 in Companies (Incorporation) Second Amendment Rules, 2021 prescribe the Conversion of One Person Company into Private Limited Company-
The following are the required documents to be furnished for the conversion of One Person Company into private limited company.
Before proceeding further with the conversion of one person company into private limited company, the members pass the board resolution for the approval of the conversion of OPCs into private company. Additionally, the members of the company need to approve the Alteration of MOA, AOA, and conversion of company into public or private limited company.
The sole member receives an intimation about the board resolution. The director has to sign and submit e-form INC-6 for the conversion of the company.
After the approval from the directors, the shareholders receive a copy of the resolution along with the notice of passing the resolution. Upon approval by the shareholders, the board proceeds further with the application.
There is no effect of conversion of a one-person company into a private limited company. Therefore the company is liable for all its previous obligations.
The sole purpose of introducing OPCs in India was to boost entrepreneurship. It enables people to contribute to the economic growth of India. One Person Companies can convert to a private limited company after qualifying the criteria laid down by the Companies Act. The 2021 amendments have removed the stringent conditions associated with conversions of OPCs to cater to the growth of OPCs in India.
Yes, it is possible to convert an OPC into a private limited company. If the paid-up share capital exceeds Rs, 50 lakhs, or if its annual turnovers exceed Rs. 2 crores, then within a time span of two months, the OPC can be converted into a private limited company.OPC has to communicate about the voluntary conversion to companies’ registrar in Form INC-5 within sixty days.
One Person Company means any Company which has only one person as to its member. An OPC is effectively a company that has only one shareholder as its member. A private Limited Company in the form of a company where a minimum of two members are required and a maximum number of members can be 200
Companies Act 2013 has included the clause of one Person Company. According to this, only one person can start a company. As per one Person Company, there will be only one owner and one shareholder. Generally, they will be the same person.
OPC shall be liable to convert into a private limited company where the paid-up share capital of OPC exceeds Rs. Fifty lakhs or the average turnover exceeds Rs. 2 crores. It shall cease to function as a one-person company. OPC can be converted into Private Limited Company after two years from the date of incorporation.
The following compliances must be followed after conversion of OPC into Private Limited Company:
• Alter its memorandum of Association (AOA) and Articles of Association by passing a special resolution.
• Intimate to ROC within 30 days that it ceased to be OPC.
• Increase the number of directors and the number of members up to seven.
The naming guidelines that are applicable to Private Limited Company will be applied to a converted OPC.
Yes, an OPC can be sold to another person.
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