All about the conversion of PLC to OPC
March 24, 2023
Conversion of PLC to OPC
Table of Content
In India, Private Limited Companies are the most preferred form of business entity. However, Person Companies (OPCs) have also gained popularity in recent years because of the flexibility they offer to the promoter. In case a Private Limited Company wishes to take advantage of the benefits offered by OPCs, it can convert itself into an OPC. This blog discusses the benefits of Conversion of PLC to OPC, the conditions for conversion, the process of conversion of PLC to OPC, and the documents required for conversion.
Benefits of Conversion of Private Limited Company to OPC
There are a lot of benefits to the conversion of a Private Limited Company to an OPC. Some of them are listed below-:
Single Promoter: One of the primary benefits of an OPC is that it requires only one promoter to set up and run the business. This is in contrast to a Private Limited Company, which requires a minimum of two directors and two shareholders. By converting to an OPC, a single promoter can enjoy the benefits of limited liability without the need to share control of the business with others.
Limited Liability: OPCs enjoy limited liability, which means that the personal assets of the promoter are protected in case of business losses. This is one of the biggest advantages of OPCs and is also available to Private Limited Companies.
Separate Legal Entity: OPCs, like Private Limited Companies, are considered separate legal entities from their promoters. This means that the business can enter into contracts, own assets, and sue or be sued in its own name.
Perpetual Succession: OPCs have perpetual succession, which means that the business will continue to exist even if the promoter dies or becomes incapacitated. The ownership of the business will pass on to the nominee appointed by the promoter.
Tax Benefits: OPCs are taxed at a lower rate than other types of businesses. The current tax rate for OPCs is 25%, while the tax rate for Private Limited Companies is 30%. This is because OPCs are considered small companies and are eligible for tax benefits under the Income Tax Act.
What are the Conditions for conversion of a PLC to OPC?
To convert a Private Limited Company to an OPC, certain conditions must be met. These conditions are as follows:
- The Private Limited Company must have a paid-up share capital of less than Rs. 50 lakhs and an annual turnover of less than Rs. 2 crores at the time of conversion.
- The Pvt. Ltd. Company must have only one director.
- The Pvt. Ltd. Company must have only one shareholder.
- The Pvt. Ltd. Company must appoint a nominee to act as a shareholder in the event of the owner’s death or incapacity.
Process of Conversion of Private Limited Company to OPC
Below is the process of conversion of PLC to OPC-:
1. Board Meeting: The Board of Directors must pass a resolution for the conversion of the PLC to an OPC.
2. Consent of Shareholders: The shareholders of the Private Limited Company must give their consent to the conversion by passing a special resolution.
3. Appointment of Nominee: The promoter of the OPC must appoint a nominee who will take over the ownership of the business in case of the promoter’s death or incapacity.
4. Alteration of Memorandum and Articles of Association: The Memorandum and Articles of Association of the Private Limited Company must be altered to reflect the change in status to an OPC.
5. Intimation to Registrar of Companies (ROC): The Private Limited Company must file Form INC-6 with the ROC within 30 days of passing the special resolution. The form must be accompanied by a copy of the altered Memorandum and Articles of Association, a No-Objection Certificate from all creditors, and a certificate from a practising CA or CS stating that the OPC meets the conditions for conversion.
6. Issue of Fresh Certificate of Incorporation: Upon receiving the application, the ROC will examine the documents and if satisfied, issue a fresh Certificate of Incorporation to the OPC. The conversion is deemed to be effective from the date of issue of the fresh Certificate of Incorporation.
Documents Required for conversion of a PLC to OPC
To convert a Private Limited Company to a One Person Company, the following documents are required:
- Copy of Board Resolution approving the conversion.
- Copy of Shareholders’ Resolution approving the conversion.
- Copy of the NOC obtained from creditors of the Private Limited Company.
- Copy of the MOA/AOA of the Private Limited Company as altered.
- Certificate from a practising Chartered Accountant (CA) or Company Secretary (CS) stating that the OPC meets the conditions for conversion.
- Consent of the nominee appointed by the promoter to act as the nominee of the OPC.
Converting a Private Limited Company to an OPC can be a good option for single promoters who wish to enjoy the benefits of limited liability without the need to share control of the business with others. However, it is important to ensure that the conditions for conversion are met and that all the necessary documents are filed with the ROC. The process of conversion can be time-consuming and requires careful consideration of the legal and financial implications. It is recommended that you seek the advice of a professional to ensure that the process of Conversion of PLC to OPC is smooth and hassle-free.
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