CONVERSION OF PRIVATE LIMITED COMPANY INTO ONE PERSON COMPANY (OPC)

One Person Company (OPC), as the name itself suggests, is that company in which there is only one shareholder along with one nominee. A One Person Company can be incorporated as a company limited by shares, limited by guarantee or an unlimited liability company. The words “ONE PERSON COMPANY” shall form part of its name.

THRESHOLD LIMITS FOR FORMING ONE PERSON COMPANY

A person desirous of forming One Person Company has to adhere to certain threshold limits which are enumerated as follows:

1. Paid-Up share capital of Rs. 50 Lakh, or
2. Average Turnover of Rs. 2 Crore

during the three consecutive previous financial years.

Under Companies (Incorporation) Second Amendment Rules, 2021 dated 1^st February, 2021 applicable w.e.f 1^st April, 2021, the threshold limits for forming One Person Company are done away with. That means the threshold limits are completely removed.

CONDITIONS FOR FORMING ONE PERSON COMPANY

Only natural person can form One Person Company i.e. A person resident of India and an Indian Citizen. Further, the number of days for calculating the status of person resident in India shall be One Hundred and Eighty-two Days (182 days).

But, under the Companies (Incorporation) Second Amendment Rules, 2021 dated 1^st February, 2021 w.e.f. 1^st April, 2021 following are the amended conditions:

1. Only natural person can form One Person Company
2. A person Resident in India or otherwise.

Further, the number of days for calculating residential status are reduced from One Hundred and Eighty-Two days (182 days) to One Hundred and Twenty Days (120 days).

PROVISIONS FOR CONVERSION OF ONE PERSON COMPANY (OPC)

The options available to OPC to convert itself into Pvt Ltd Company are:

• Mandatory Conversion
• Voluntary Conversion

MANDATORY CONVERSION: If an OPC breaches any of the threshold limits, then it has to mandatorily convert itself into any other form of Company (Private Limited or Public Limited Company) other than Section 8 Company. Thus, the company has to intimate the ROC, within a period of 6 months of such breach of threshold limits, in form INC-5 that such company has ceased to be One Person Company.

VOLUNTARY CONVERSION: An OPC can convert itself into Private Limited Company and Public Limited Company voluntarily (without paid-up capital and turnover conditions) only after expiry of 2 years from the date of incorporation.  The Company shall intimate ROC within a period of 30 days of such conversion in Form INC-6.

With the introduction of Companies (Incorporation) Second Amendment Rules, 2021 dated 1^st February, 2021 w.e.f. 1^st April, 2021, since there is no threshold limits for incorporation of OPC, thus there is no mandatory conversion. Simply, an OPC can convert itself into any other form of company except Section 8 Company and has to intimate ROC of such conversion within a period of 30 days in form INC-6. It can be said that MCA has completely removed filing of FORM INC-5.

CAN A PRIVATE/PUBLIC LIMITED COMPANY CONVERT ITSELF INTO A ONE PERSON COMPANY?

Definitely Yes. It can be vice- versa. If an OPC can convert itself into Private / Public Limited Company, it holds true for vice-versa too.

PROCESS FOR CONVERSION OF PRIVATE/PUBLIC LIMITED COMPANY INTO A ONE PERSON COMPANY

• Convene a Board Meeting to decide
• the agenda for conversion of Pvt/ Public Ltd Company into One Person Company.
• Decide about the member and nominee of OPC after such conversion.
• to decide for the day, date, time and venue for holding Extra-Ordinary General Meeting of the shareholders
• To approve the notice of the General Meeting along with the explanatory statement for conversion of Pvt/ Public Limited Company into OPC.
• to authorize one or more director(s) or Company Secretary to issue notice for convening Extra-Ordinary General Meeting.
• Issue the notice of the general meeting to all the shareholders of the company giving in clear 21 days’ notice.
• Convene the Extra-Ordinary General Meeting and check:
• Quorum of the Meeting
• Whether Auditor is present in the meeting. If not, whether leave of absence is granted or not.
• Pass Special Resolution to obtain shareholders approval for such conversion
• Obtain approval for alteration of MOA.
• File Form MGT-14 within 30 days of passing Special Resolution with necessary attachments along with prescribed fees. Following are the attachments to form MGT-14:
• Notice of EGM along with explanatory statement
• Certified copy of Special Resolution
• Altered Memorandum of Association
• Altered Articles of Association
• Certified copy of Board Resolution may be attached as an optional attachment.
• File form INC-6 with the ROC within 30 days, upon such conversion, necessary attachments as enclosures along with prescribed filing fees. Following are the attachments to Form INC-6:
• Altered Memorandum of Association
• Altered Articles of Association
• Copy of duly attested latest Financial Statements
• Copy of Board Resolution giving of notice
• Certified True Copy of Minutes
• List of Creditors
• List of Members
• Copy of NOC of every Creditor
• Consent of Nominee in Form INC-3
• Copy of PAN Card of nominee and Member
• Identity Proof of Nominee and Member (Copy of Adhar Card/ DL/ Voter Card/ Passport of each)
• Residential proof of Nominee and Member (Copy of Bank Statement/ Electricity Bill/ Telephone Bill / Mobile Bill of each which should not be older than 2 Months)
• Declaration from the authorized person that he is authorized to sign and submit various forms.