Conversion of OPC into Pvt Ltd Company in India
Introduction
Converting an OPC to a Private Limited Company boosts business growth, enhances flexibility, and strengthens credibility. You can do it voluntarily or under specific conditions. In this blog, we discuss all the essential details you need to know before making the conversion.
OPC into Pvt Ltd Company
As per the Companies Act, 2013, One Person Company is allowed to convert to be a Private Limited Company. There is no affect to the company’s current situation due to a conversion. OPC’s MOA and AOA needs to be changed for conversion. This conversion is beneficial in its own way. Company will get more benefits, and also it will help to expand the business.
Types of Conversion of OPC into Private Limited Company
There are two types to convert your OPC to Private Limited Company.
Voluntary conversion
In this case, the OPC voluntarily chooses to convert itself after two years from the date of incorporation. By amending MOA and AOA in compliance with the provisions, the One person Company can be converted into any other company. An OPC can covert into private limited company at anytime without meeting any specific requirements such as thresholds for paid-up share capital or average annual turn over.
It is not mandatory for an OPC to convert based on financial limitations. Any liabilities, debts, or obligations do not affect the company before or after conversion.
For conversion, the Company must submit the application to the registrar with the required documents. The registrar has authority to issue the certificate after completion of all paperwork.
Compulsory conversion
Earlier, OPCs had to convert upon meeting financial thresholds. When the paid-up share capital exceeded ₹50 lakh or the average turnover surpassed ₹2 crore, OPCs had to convert compulsorily. However, the Companies (Second Amendment) Rules, 2021, removed the requirement for compulsory conversion.
Now, OPC can continue to work as a one person company even if it surpass the financial limits.
We provide expert services for OPC annual return filing, OPC into pvt ltd company and register Pvt Ltd company, simplifying the company closure process while ensuring compliance with all legal requirements.
Procedure for Conversion of OPC into Pvt Ltd company
Board Meeting and Resolution
- Call a Board Meeting to decide on converting the One Person Company (OPC) into a Private Limited Company. Pass a Special Resolution approving:
- The voluntary conversion of OPC into a Private Limited Company.
- Changes to the Memorandum of Association (MoA) and Articles of Association (AoA).
- Increasing the number of directors as a Private Limited Company must have at least two directors.
Filing Forms with the ROC
- File Form DIR-12 to add at least one more director to the company.
- File Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing the special resolution.
- Attach the revised MoA and AoA.
- Include a copy of the special resolution.
Note: Ensure you have appointed a second director before filing MGT-14 as a Private Limited Company must have at least two directors.
Filing INC-6 for Final Conversion
After submitting MGT-14, file Form INC-6 within the next 30 days to apply for conversion officially. Company has to attach the below documents along with the form;
- NOC from creditors (if applicable).
- Affidavit from the existing member (declaring their consent for conversion).
- Any additional supporting documents (if required).
Registrar’s Approval and New Incorporation Certificate
The ROC will review the entire application extensively. Once it verifies the information and documents, it will make the decision. If there is no error found, ROC will issue the certificate of conversion.
What documents are required for conversion?
- The list of creditors and members.
- Current audited balance sheet and profit and loss account.
- A copy of No-Objection Certificate (NOC)
- An affidavit which confirms; all members and creditors have consent for conversion, Company’s paid-up share capital less than ₹50 lakhs, Its average turn over is less than ₹2 crore.
- The nominee’s consent
- Proof of residence and identity of nominee or member
Benefits of conversion of OPC into Pvt Ltd company
Separate Legal Entity
A Private Limited Company is a separate legal entity, meaning it can own property, make decisions, sue, and be sued in its own name. Assets and liabilities of both companies and directors are different.
Tax Benefits
A Private Limited Company is eligible for several tax benefits, such as deductions for business expenses and lower tax rates, which are beneficial for an individual.
No minimal paid capital
After the changes of the companies act, 2013, Pvt Ltd Companies does not require a minimal paid-up capital. It can be registered with a nominal authorized share capital.
Key Consideration
- A private limited company requires a minimum of two directors and two shareholders.
- New director must obtain DSC (Digital SIgnature Certificate) and DIN (Director Identification Number).
- Must update company records with PAN, GST and other registrations.
Conclusion
Conversion of OPC into Pvt Ltd company provides better growth opportunities and legal advantages. With the ability to have multiple directors and shareholders, a company can attract more investment and expand the operations in the business world. Once the company is converted, it starts getting benefits like separate legal identity, taxation benefits, and no minimal capital requirement. A private Limited company is ideal for businesses planning to grow and operate on a larger scale.
Suggested Read :
Voluntary vs Involuntary Strike Off
Tax Structures for Pvt ltd Company
LLP Vs Private limited company
Legal Consequences of Strike Off OPC
FAQ
1. What is the minimum turnover for a private limited company?
A Private Limited Company in India does not need a minimum turnover.
2. What is the turnover limit for a One person company?
An annual turnover of OPC should not exceed ₹2 crores or its paid-up capital should not surpass ₹50 lakhs.
3. What is the minimum curing period for OPC?
An OPC requires a minimum waiting period of 7 days.
4. How can OPC save tax?
An OPC does not have any special tax benefits compared to other types of companies.
5. What is the major benefit of One person company?
OPCs with an annual turnover of up to ₹250 crores qualify for a lower corporate tax rate of 25%.
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