The conversion of an OPC- One Person Company into Private Limited Company as per Section 18 of the Companies Act, 2013 and the provisions of Companies (Incorporation) Rules of 2014 should be discharged by a newly formed Private Limited Company. These rules will not affect the existing debts, liabilities, obligations or contracts of the OPC. There are two ways of converting an OPC into a private limited company either voluntarily or mandatorily.

Under both these type of conversions, the requirements are necessary alterations in the MOA and AOA of the OPC (As per the provisions provided in section 18 of the Companies Act, 2013, along with section 122 of the Act).

The section says to obtain no objection in written form, from the concerned members and creditors; passing a resolution in support of conversion; and it should also satisfy the requirements of the minimum paid-up capital, along with the minimum number of members and directors. For incorporating a private limited company the minimum paid capital recommended is Rs. 1,00,000  and two members and two directors at a minimum. To apply for conversion of OPC to private limited company, you need to fill the formINC-6, to the Ministry of Corporate Affairs, Govt. of India.

Two Types of Conversion

For converting an OPC into Private Limited Company, the provisions laid down in the Section-18 of the Indian Companies Act of 2013, and the Companies (Incorporation) Rules of 2014, in particular the Rule 7(4) of the Companies (Incorporation) Rules, 2014, needs to be followed for both the conditions; voluntarily and under compulsion.

Voluntary Conversion

Voluntary conversion into a private limited company is not permitted unless two years is expired from the date of incorporation of the OPC. Though, if the paid-up share capital exceeds rupees 50 lakhs or if its average turnovers exceed INR 2 crores then within two months, the OPC could convert into a private limited company.

OPC has to communicate voluntary conversion to a registrar of companies in form INC 5 within sixty days.

For converting to a private limited company, OPC is required to have 2 directors and 2 members.

Mandatory/Compulsory Conversion

This is a condition where you need to convert an OPC to private limited company compulsorily.  It is because an OPC has paid up share capital that exceeds Rs. 50 lakhs and the yearly turnover of immediately previous three consecutive financial years is more than 2 Crores rupees, then it is obligatory for anyone to convert. Such company has to compulsorily convert to a private or public limited company within a period of 6 months from the date when the paid-up share capital exceeded 50 lakhs rupees or the last date of the related period in which the average annual turnover surpasses 2 Crore rupees.

The conversion is made by just passing a special resolution in the general meeting. It is checked for a No objection certificate in written from the creditors, and the other members before the resolution are passed.

a. Intimating to ROC

The concerned ROC should first be communicated through the prescribed method that the OPC is now required for converting itself into a private limited company.

b. Passing the Board Resolutions

The shareholders of the OPC should hold a General Meeting for passing the resolution for raising the paid-up capital (if needed), no. of shareholders, and appointment of directors for meeting the requirements of the Private Limited Company. For converting an OPC to a Private Limited Company, there should be at least 2 shareholders and 2 directors.

c. Application for conversion of OPC to Private Limited Company

Once the above steps are completed, the company needs to file an application to the registrar along with a copy of the resolution within fifteen days of passing the resolution. The registrar then confirms on the application details filled to be correct and fees are being paid against the registration. Then the registrar makes a decision by finally studying the application and other documents thoroughly and issues the certificate of conversion.  Nowadays E-Forms are also available with the Registrar of Companies. There will a penalty is this type of conversion if any officer contravenes the provisions of these rules, and will be punished with a fine amounting to Rs.10 thousand and a further fine of one thousand rupees for every day after the first such contravention being continued.

The introduction of One Person Company into legal system came into existence to encourage the entrepreneurs to enter into the corporate world. It will not only enable the individual capabilities to contribute economic growth but will also generate employment opportunity.