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Converting an OPC into a Private Limited Company

Narendra Kumar

| Updated: Feb 13, 2018 | Category: Company Conversion

OPC

One person company (OPC) has been defined under Section 2(62) of the Companies Act 2013. One Person Company can be defined as a company that has only one person as to its member.

The concept of OPC was introduced to support single-person enterprises that are having small businesses with a sales turnover of fewer than 200 lakhs. It was introduced to enable a lone Entrepreneur to start and manage a limited liability entity.

What is a Private Limited Company

Private Limited Company can be termed as a Company which is having private ownership. Private companies may issue shares and have shareholders but their shares do not trade on public exchanges.

Private Company is held by few individuals privately having a separate legal entity. A Private Company should have a minimum number of 2 shareholders and a maximum of up to 200 shareholders.

It should have a minimum number of 2 directors and it can have a maximum number of 15 directors.

Conversion of OPC into a Private Company:

As per the Act, an OPC can be converted into a Private Limited Company in following of the two ways i.e.:

  • Voluntary Conversion.
  • Compulsory Conversion.

If an OPC fulfills any of the situations, then it must convert itself into a Private Company:

  1. If at any time the paid-up capital of the OPC exceeds Rs. 50 Lacs.
  2. If the average turnover in any of the three consecutive financial years is more than Rs. 2 crores.

Compulsory Conversion of OPC

The Company Registration shall be compulsorily converted itself into an OPC if its paid-up share capital exceeds ₹ 50 Lakhs and the annual turnover exceeds ₹ 2 crores, then it is obligatory for them i.e. Company convert itself into a private limited company.

At the time of conversion, the members of the company shall pass a special resolution in the general meeting regarding the conversion of the company.

Before passing a resolution for the conversion of the company a No Objection Certificate shall be required to be taken in writing from the Creditors and the members of the company.

Within fifteen days an application shall be filed to the Registrar along with the copy of the resolution regarding the conversion of the company into a Private company.

After the  Annual filling of LLP of the application and when the fees for the same has been paid the registrar shall verify the documents and shall issue the certificate of conversion to the company.

Voluntary Conversion of OPC To private limited

A One Person Company cannot be converted into a Private Company if two years have not been passed after its incorporation. Section 18 of the Companies Act, 2013 states the procedure of converting an OPC into a private company.

For converting an OPC into a Private Company it is necessary to modify the Memorandum of Association and Article of Association of the Company in accordance with the prescribed provisions.

An application shall be made to the Registrar of Companies along with the relevant documents which are required for the conversion of the company.

If the Registrar is of the view that all the documents are proper then he will issue a certificate of conversion.

After the conversion, the liabilities, debts or obligation of the company shall not be affected in any way.  Hence, the company shall be liable for all its previous obligations.

After the OPC is converted into a Private Limited Company it is obligatory for the company to increase its paid-up share capital to ₹ 50 Lakhs and the annual turnover to 2 Crores or more, if the company fails in complying these provisions it shall covert back itself to an OPC by passing a special resolution.

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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