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 the conversion of a one-person company to a private limited company, a minimum of two directors and two members are required. The One Person Company to Pvt Ltd conversion does not affect existing debts or liabilities of the OPC.

Conversion can take place in two ways, either voluntary or compulsory. For voluntary conversion, at least 2 years must have passed since the date of incorporation. One may want to convert One person company to pvt ltd co. for omany reasons. It may be because of the level of business needs to increase. Or it may be wanting to convert because the law requires so.

The process for conversion  in detail is explained below:

Process of voluntary conversion One Person Company to Pvt Ltd Co.

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 conversion. 

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

For OPC holding the (EGM) extraordinary general meeting is not mandatory. But it is mandatory to inform about the resolution passed for  conversion to the member of the company. 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 of the special resolution . The attachments in it should include: 

  • Certified copy of the board resolution authorizing 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 accordance with the requirements of the provisions, the ROC will issue the Certificate to the effect of the conversion. 

Process of Compulsory conversion of one-person company into a private Limited company: 

mandatory conversion of OPC, to a private limited company, is under the following conditions: 

A. There’s an increase in the paid-up share capital of the company beyond rupees 50 lakhs. and

B. In the last three years, there has been an increase in the average annual turnover beyond rupees two crores.

Satisfying the above conditions, One Person Company to pvt ltd occurs naturally within six months.

Process of mandatory conversion

Step 1: Board Meeting

     Remains the same as in the case of “process of voluntary conversion.” 

Step 2: Filing forms with ROC

I. 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.

II. 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 turn over.
  • Providing any other relevant information.

III.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.
  • 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 rupees one thousand maybe imposed if such One Person Company to pvt ltd contravension continues.

Conclusion

Henceforth, it may now not be wrong to state that, the conversion of one -person company to a private limited company involves some due procedure of law. Also that such conversion is essential because it is a requirement under the law. For example, when an OPC has paid up share capital that exceeds Rs.50 lakhs and the annual turnover is above Rs.2 crores, then it is necessary for them to convert into a private limited company. 

This Process may not seem simple but has to be followed. Also, every form of business organization has its advantages and disadvantages. With the due passage of time,  decisions have to be taken. Hence, conversion is one such decision. “Though one may not want to take this decision, he has to.” 

Henceforth, it may now not be wrong to state that, the conversion of one -person company to a private limited company involves some due procedure of law. Also, such conversion is essential because it is a requirement under the law. For example, when an OPC has paid up share capital that exceeds Rs.50 lakhs and the annual turnover is above Rs.2 crores, then it is necessary for them to convert into a private limited company.  This Process may not seem simple but has to be followed. Also, every form of business organization has its advantages and disadvantages. With the due passage of time,  decisions have to be taken. Hence, conversion is one such decision. “Though one may not want to take this decision, he has to.” 

After all, taking these decisions, need the utmost effort and thought. Every step has to be taken with caution. Conclusively, the nature and scope of a business play an essential role here.

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