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Conversion of One Person Company into Private Limited Company

Conversion of One Person Company into Private Limited Company

Conversion of One Person Company into Private Limited Company can open avenues to pursue additional benefits such as fund raising. A One Person Company into Private Limited Company by two ways:

  1. Voluntary Basis.
  2. Mandatory/Compulsory Basis.

 

(a) Voluntary Conversion

An OPC cannot convert voluntarily into Private Limited Company unless Two years is expired from the date of incorporation of the OPC. For Conversion an application is made to Central Government after alteration of MOA and AOA of the OPC.

After the Conversion the legal existence, rights and liabilities of the Company remain same. And for fulfil the minimum requirement of Private Limited Company, minimum 2 shareholders and 2 directors must be appointed.

OPC has to communicate voluntary conversion to the ROC in E-Form INC-5 within 60 days.

 

 (b) 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-

(a) paid up share capital that exceeds Rs. 50 lakhs or

(b) Or its average annual turnover during the relevant period exceeds Rs. 2 crore.

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-

(a) the paid-up share capital exceeded 50 lakhs rupees or

(b) Or its average annual turnover during the relevant period exceeds Rs. 2 crore.

 

Process of Conversion:

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.

  1. Passing the Special Resolution

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.

  1. 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.

The one-person company shall file copy of the special resolution with the Registrar of Companies within thirty days from the date of passing such resolution in Form No. MGT.14.

  1. Application for conversion of OPC to Private Limited Company

The company shall file an application in Form No. INC. 6 within 6 months of mandatory conversion to ROC.

Benefits of Conversion :

01
Easier to Raise Funds

Raising funds as a private limited company is a comparatively easy task as it gives an opportunity for raising shares and has many ways to raise funds in the form of private equity and Banks and Financial Institutions.

02
Limited Liability of Owners

The obligation or debts of the company does not create a charge over the owner’s personal assets. Their liability is limited only to the subscribed capital unpaid by them.

03
Separate Legal Existence

A Private Limited Company is registered, a legal entity is born in eyes of law, which is separate from its owners and managers. The company can operate in its own name from opening a bank account to own assets and enter into a contract with parties. This also provides the capacity to sue third parties.

How to Conversion of One Person Company into Private Limited Company

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Documents Required For Conversion of One Person Company into Private Limited Company

  • PAN CardPAN Card of shareholders and Directors. Foreign nationals must provide a passport.
  • Identity ProofVoter ID/ Passport/ Driving License of Shareholders and Directors
  • Address ProofTelephone Bill /Electricity Bill/ Latest Bank Account Statement of Shareholders and Directors
  • PhotographLatest Passport size photograph of Shareholders and Directors
  • Business Address ProofLatest Electricity Bill/ Telephone Bill of the registered office address
  • Financial StatementsDuly certified copy of latest audited Finacial Statements
  • Incorporation documents of the OPCCertificate of Incorporation, MoA & AoA to be provided
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Frequently asked questions on Conversion of One Person Company into Private Limited Company

1.1. Can OPC be converted to Pvt Ltd?

Ans. One Person Company can be converted in to a Private Limited Company according to the provisions of the Companies Act. OPC can be converted in to Private Limited after two years of setup, or even before that if its turnover is more than Rs 2 crore and paid share capital surpasses Rs 50 lakhs in a financial year.

2.Is there any high qualification required to become a director or shareholder in the private limited company?

No, professional or educational qualification is required to become a shareholder in the private limited company. Any individual in the capacity of the person, with the sound of mind, can start a company.

3. Is a foreign entity allowed to be Director or shareholder of the private limited company?

Ans. Yes, any foreign nationals, entity or an NRI can become a director or shareholder of a private limited company in India.

4. What are the forms that are required for Private Limited Company Registration in India?

Ans. . Ministry of Corporate Affairs has introduced a new form called the SPICe INC- 32 forms for the faster company incorporation. Apart from this, to register a private limited company, an e- MOA (INC-33) and e- AOA (INC- 34) are also to be submitted with the above form.

5. Can private limited company invites the general public for shares?

Ans. No, a private limited Company cannot invite the general public top to subscribe to the company shares.

6. How many directors are required for company registration?

A private limited company needs a minimum of 2 directors and a maximum of 15 directors to register a company.

7. Can Private Limited Company has FDI or Foreign direct investment?

Ans. Yes, a private company is allowed to have foreign direct investment in their company.

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