Company Conversion

Conversion of OPC into Public Limited Company

New companies act 2013 introduced the concept of One Person Company that can be formed by a single person. In India, OPC can be formed by a natural person who must be an Indian citizen and resident.

In an OPC, the promoter can be a director as well as the shareholder. the promoter is required to appoint the nominee i.e. the memorandum of the OPC shall indicate the name of the other person as the nominee, with his written consent who shall in the event of the death of the promoter or his incapacity to perform become the member of the company and the same shall be filled to the roc at the time of incorporation of the company along with its memorandum and articles.

Mandatory Conversion

OPC shall cease to continue its business as OPC when the paid-up share capital exceeds fifty lakhs rupees its average turnover of during the relevant period exceeds two crores. OPC shall be required to convert itself into a private company or public company by virtue of its paid-up share capital or average annual turnover.

Then OPC shall

Within 6 months of above situation/event, such OPC shall be required to convert itself into-

a)-a private company with a minimum of 2 members and 2 directors, or

b)-a Public Limited Company with a minimum of 7 members and 3 directors.

it shall give notice to ROC within 60 days in form no. in-5 it has ceased to be an OPC and is required to convert itself into the private or public company.

Key Considerations of a Mandatory Conversion

Under the mandatory conversion, if the OPC (One Person Company) crosses the threshold limits mentioned above, it should mandatorily convert itself within a period of two months.

Section 18, Companies Act 2013

Section 18 of the Companies Act, 2013^[1] provides the procedure for the conversion of the already registered companies. It states the following points –

Also,the said company is required to be follow is the Companies (Incorporation) Rules, 2014.

Voluntary Conversion

It is possible only after the expiry of 2 years from the date of incorporation of OPC.

In case of conversion of OPC into public limited company voluntarily, the procedure shall be the same but the requirement for filing forming-5 shall not be applicable.

On compliance with the above requirement, roc shall close the former registration as One Person Company Registration documents submitted as issue a fresh certificate of incorporation, in the same manner as fresh registration

*conversion shall not affect existing debts, liabilities, and obligation of the company

Key Consideration of a Voluntary Conversion

• This kind of conversion can only take place if a concerned OPC has completed its two years of operation starting from the date of incorporation under Rule 3 sub-rule (7) of the Companies (Incorporation) Rules, 2014.

• The name clause must be amended in order to remove the name of “Private”.

• Adequate steps are need to be taken in order to increase the said number of members and Directors to seven and three as per the prescribed rules. (Rules 6 sub-rule (6)of the Company Incorporation Rules, 2014)

• The Articles of the concerned company are needed to be amended in order to removethe restrictive provisions that are applicable on a private company. Further, a new set of articles are required to be followed in case of a Public Company.

• The Company must not be a defaulter in terms of a timely submission of the annual financial statement or any other documentdue for the filing with the Registrarof Companies (As per Rules 29 sub-rule (1)ofthe Companies (Incorporation) Rules, 2014)

• The Company should not be a defaulter in terms of repayment of matured deposits or debentures or interest on the deposits or debentures. (Rules 29(1) of Companies (Incorporation) Rules, 2014)

What is the Procedure for Conversion of OPC into the Public Company?

Where one person company has only one director

1. following resolutions shall be signed and dated by the director
2. a note about exceeding the threshold limits (in case of compulsory conversion)
3. pass board resolution for giving notice to the registrar in form inc-5

• to pass special resolutions notice along with explanatory statement need to be signed, dated and communicated by the members of the company regarding:
• alteration of articles for conversion
• alteration of a memorandum(name clause)
• Alteration of a memorandum (capital clause), to increase capital if required.
• Alteration of a memorandum to amend the reference of the name of one person and its nominee.

 Where One Person Company has more than one Director?

1. Convene a board meeting to-
2. take note of exceeding the threshold limits (in case of compulsory conversion)
3. pass board resolution for giving notice to the registrar in form inc-5
4. to pass special resolutions notice along with explanatory statement need to be signed, dated and communicated by the members of the company regarding:

• alteration of articles for conversion
• alteration of a memorandum(name clause)
• Alteration of a memorandum (capital clause), to increase capital if required.
• Alteration of a memorandum to amend the reference of the name of one person and its nominee.

1. Obtain from the registrar of companies, a fresh certificate of incorporation consequent upon conversion of the OPC into a Public Limited Company.
2. Copy of special resolution along with explanatory statements to be filed within 30 days with the registrar in form mgt-14 and a copy of altered memorandum and articles shall be attached therewith.
3. obtain a new common seal and adopt the same at a meeting of the board of directors of the company. (now common seal is optional)
4. New stationery with the new name of the company/or affixing rubber stamp of the new name on all the existing stationery items including the share certificates blanks.