A private company, as defined by the Companies Act, 2013, is a business entity formed with a minimum of two members and a maximum of two hundred members. However, there are instances where a private company desires to transition into a One Person Company (OPC) structure, where a single individual can be the sole shareholder and director. This conversion process offers several advantages and legal benefits to the entrepreneur, such as limited liability and ease of management. In this article, we will explore the conversion process of a private company into an OPC.
The conversion of a private company into an OPC involves certain key steps and compliance requirements. Let us delve into each of them in detail:
Eligibility Criteria: In order to convert a private company into an OPC, the company must satisfy the following eligibility criteria:
- The paid-up share capital of the private company must not exceed fifty lakh rupees or such higher amount as may be prescribed.
- b. The average annual turnover of the company during the relevant period must not exceed two crore rupees or such higher amount as may be prescribed.
- Obtaining Consent: The director of the private company must obtain a No Objection Certificate (NOC) from all the shareholders, debenture holders, and creditors of the company. This NOC ensures that they are aware and consent to the conversion of the private company into an OPC.
- Alteration of Memorandum and Articles of Association: The next step involves amending the Memorandum of Association (MoA) and Articles of Association (AoA) of the private company to reflect the conversion into an OPC. The alteration must be done in compliance with the provisions of the Companies Act, 2013.
- Appointment of Nominee: A nominee must be appointed by the sole shareholder of the OPC. The nominee’s name is mentioned in the Memorandum and Articles of Association, and in case of the sole shareholder’s death or incapacity, the nominee assumes the position of the shareholder.
- Intimation to the Registrar: Within thirty days of the conversion, the private company must intimate the Registrar of Companies (RoC) regarding the conversion, along with the required documents such as altered MoA and AoA, NOC, and other relevant forms prescribed by the RoC.
- Compliance with Statutory Requirements: The OPC must ensure compliance with the statutory requirements applicable to OPCs, such as holding an annual general meeting, filing financial statements, and conducting audits. Failure to comply with these requirements may lead to penalties and legal consequences.
- Change in Name: Upon conversion, the OPC must change its name by substituting the words “Private Limited” with “One Person Company.”
It is important to note that once a private company converts into an OPC, it loses its status as a private company. Additionally, an OPC has certain limitations, such as restrictions on its ability to carry out non-banking financial investment activities, requiring conversion into another type of company if the paid-up capital exceeds the prescribed limit, and more.
In conclusion, the conversion of private limited company to opc provides numerous benefits to entrepreneurs seeking to operate as a single-member entity. However, it is crucial to ensure compliance with the legal requirements and procedures involved in the conversion process. Seeking professional guidance from company secretaries or legal experts can help navigate the complexities and ensure a smooth transition.