Conversion of OPC into Private Company

Published On: Jun 21, 2019Last Updated: Jul 26, 20224.4 min read

A private company is a type of company that offers limited liability or legal protection for its shareholders. It also places certain restrictions on its ownership. For converting a one-person company to a private limited company, a minimum of two directors and two members are required. The conversion of opc into private company does not affect existing debts or liabilities of the OPC.

Conversion of opc into private company can take place in two ways, either voluntarily or compulsorily. For voluntary conversion, at least 2 years must have passed since the date of incorporation. One may want OPC to Private Limited conversion for many reasons. It may be because the business wants to expand. Or, it may have to do an opc to private limited conversion because the law requires it to do so. The compulsory conversion of opc into private company takes place when:

  • There is an increase in the paid-up capital of the company beyond 50 lakhs rupees, or
  • In the last three years, there has been an increase in the average annual turnover beyond two crore rupees.

Subject to the above conditions, conversion of opc into private company has to be done within six months.

The process for conversion of opc into private company is explained below in detail:

Process of Voluntary OPC to Private Limited Conversion

This process of conversion of opc into private company may be complex, but should be done when required. Every form of business organization has its advantages and disadvantages. For example, a private limited company can provide opportunities to pursue benefits like raising funds. You can read more about the difference between an OPC and Private Company. With expansion of business, conversion of opc into private company may be advisable to the business.

Step 1: Board Meeting

Convening a meeting of the Board of Directors is necessary by issuing notices for the same. The agenda for the meeting should be the OPC to private limited conversion. 

  • Passing a board resolution for the increase in the number of directors and shareholders is necessary. (Minimum 2) 
  • To obtain NOC from members and creditors.
  • Alteration of MOA and AOA. 

For an OPC, holding the Extraordinary General Meeting (EGM) is not mandatory. But it is mandatory to inform the members of the company about the resolution passed for conversion. The decision must be recorded in the minute book of the company.

Step 2: Filing forms with ROC

File E-form MGT-14 and then File E-form INC-6 within 30 days of passing the special resolution. The attachments in it should include: 

  • A certified copy of the board resolution authorizing the giving of notice. 
  • An altered copy of the Memorandum of Association and the Articles of association. 
  • The latest copy of the financial statements of the company.
  • Any other information can also be provided as an optional attachment if demanded, or that the company deems essential to attach. 

Step 3: Finality 

The Registrar of Companies will verify the E-forms. It will also check the validity of the attachment. On confirming that everything is in order, and in accordance with the requirements of the provisions, the ROC will issue the Certificate to the effect of the opc to private limited conversion. 

Process of Mandatory Conversion of OPC into Private Company

Step 1: Board Meeting

Remains the same as process of voluntary conversion of opc into private company. 

Step 2: Filing forms with ROC

1. File E-form MGT-14 within 30 days of passing resolution, and E-form INC-5 within 60 days of attracting the condition. OPC has to give notice of the same to the ROC.

2. The attachments in it should include:

  • Certified copy of the board resolution authorizing giving of notice
  • A copy of duly attested latest financial statements.
  • Certification from a chartered accountant in practice for calculation of average annual turnover.
  • Documents providing any other relevant information.

3. E-form INC-6 has to be submitted within six months from the breach of limit as mentioned above. 

     Necessary attachments include the following:

  • Certified copy of the board resolution authorizing giving of notice.
  • The altered copy of the Memorandum of Association and the Articles of Association.
  • Copy of the latest financial statements.
  • Documents providing any other relevant information.

Step 3: Finality 

The Registrar of Companies will verify the E-forms. It will also check the validity of the attachment. Then, upon the satisfaction that everything is in order, and under the requirements of the provisions, the ROC will issue the Certificate of conversion. 

NOTE: Non-observance of a provision is punishable with a fine. Moreover, a further fine of one thousand rupees may be imposed if such One Person Company to Pvt ltd contravention continues.

Conclusion

Hence, the conversion of of opc into private company involves some due procedure of law. Such conversion may be voluntary or essential under the law. When an OPC has paid-up capital that exceeds Rs.50 lakhs, or the annual turnover is above Rs. 2 crores of the last three financial years, then opc to private limited conversion is necessary.  The process of conversion of opc into private company can be quite difficult. So if you choose to convert OPC to private limited company, contact us now and leave all your worries with us!

Looking to convert your OPC to Pvt Ltd?
Contact experts at Legalwiz.in!

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Shubham Ojha
About the Author

Shubham Ojha

Final year law student also pursuing CS (2nd level) and completed ICWA (level 1). Have a passion towards reading and writing new content.

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