Your Expert Guide For OPC to Pvt. Ltd Conversion

To expand your business, converting your One Person Company (OPC) into a Private Limited Company (Pvt Ltd) is a smart step. It allows you to attract more capital, bring more shareholders, and enhance the credibility of your company in the market.

Considering this, the OPC to Pvt Ltd conversion can be done under section 18 of the Companies Act, 2013, and the provisions of the Companies (Incorporation) Rules of 2014. Further, properly navigating this process certifies a smooth transition, safeguards the reputation of your company, and sets it up for long-term development. 

To help you out, this comprehensive blog provides you with the complete process of OPC to Pvt Ltd conversion, stating the legal structure and procedural requirements. So read on and get all the information. 

Conversion of OPC to Private Company

The conversion of OPC to a private limited company is regulated by section 18 of the Companies Act, 2013, and Rule 6 of the Companies (Incorporation) Rules of 2014. Considering this, an OPC can convert itself into any type of company, a public or private limited company, at any time. It does not need to fulfill the paid-up share and average annual turnover criteria.

After meeting the minimum paid-up capital and average annual turnover criteria, the mandatory conversion of OPC was removed in the Budget 2020-21. It was subsequently made via the Companies (Incorporation) Second Amendment Rules, 2021. 

Therefore, currently, an OPC, by passing a special resolution after increasing the number of directors to two and the minimum number of members, voluntarily converts itself into a private limited company. Additionally, for the OPC to Pvt Ltd conversion, you need to obtain a No Objection Certificate (NOC) in written form from the creditors. 

This was all about the conversion of OPC to a private limited company. Moving ahead, let's know the types of conversion available for OPC. 

Types of Conversion of One Person Company (OPC)

There are two ways by which you can convert the One Person Company to a private limited company. These are as follows:

Voluntary Conversion of OPC

Under this, without meeting the average annual turnover and prior thresholds for paid-up share capital, an OPC can voluntarily convert itself to a Pvt Ltd. This method, rather than financial limitation, allows OPC to convert itself based on the strategic needs of the business. In simple words, voluntary conversion provides OPC the option to expand itself without waiting for the turnover or capital to reach specified limits. 

Compulsory Conversion (Required Previously)

Compulsory conversion was required previously when an OPC met a certain threshold. It was specifically when the average turnover reached INR 2 crore, and the paid-up share capital exceeded INR 50,00,000. 

• Change in Requirements: The compulsory conversion requirement was removed in the Budget 2020-21 and the Companies (Incorporation) Second Amendment Rules, 2021. Considering this, if OPC exceeds the financial threshold now, they don't need to convert themselves.
• Current Status: Now, OCPs are allowed to work as a one-person entity even after exceeding certain financial limits. This provision provides more operational flexibility to OPC. Additionally, allows it to remain as it is or convert itself as per their choice.

These are different types of conversion methods available for OPC. Moving further, let's know the current requirements for OPC conversion into a private company. 

Current Requirements for OPC Conversion into a Private Company

You need to fulfill the following requirements to voluntarily convert OCP into a private limited company:

• Alterations in the MOA and AOA: According to sections 18 and 122 of the Companies Act, 2013, the memorandum of association (MOA) and articles of association (AOA) should be modified. These changes certify that the legal structure matches the operational requirements and compliance obligations of a private limited company.
• Minimum Membership and Directorship Requirements: For the incorporation of a private limited company, there should be at least two directors and two members. This is vital for meeting the compliance requirements specific to private limited companies as stated in the Companies Act 2013.
• Filing Form INC-6 for Conversion Application: The OPC should submit Form INC-6 to the Ministry of Corporate Affairs (MCA), Government of India, to apply for conversion. It is an official application form used for OPC to Pvt Ltd conversion. Additionally, the form should be accompanied by supporting documents like the revised MOA and AOA. 

These are some of the key requirements for the OPC to Pvt Ltd Conversion. Moving ahead, let's know the procedure for the conversion of OPC to a private limited company. 

Procedure for Conversion of One Person Company (OPC) to Private Limited Company

Follow the steps below to convert a One Person Company (OPC) to a private limited company:

Step 1: Convene a Board Meeting: The first step of the conversion includes convening a board meeting to

• Pass a resolution approving the OPC to private limited conversion. 
• Appoint at least one additional director.
• Approve changes to the name of the company, MOA, and AOA.
• To execute the necessary documents, authorize designated individuals.

Step 2: Prepare and File Necessary Documents: You need to prepare and file the following documents with the Registrar of Companies (ROC):

• Form INC-6: Official application for OPC to Pvt Ltd conversion.
• Altered MOA and AOA: Revised constitutional documents showcasing the new structure of the company.
• Board Resolution: Photocopy of the resolutions approving the OPC to private limited conversion.
• Declaration: Regarding the compliance with all requirements, declaration from the directors.
• List of New Shareholders and Directors: Details of additional directors and shareholders being introduced.
• Consent Letters: From new directors and shareholders, obtain a written consent.
• Form DIR-12: Particulars of appointment of directors. 

Step 3: Obtain Digital Signatures for New Directors: All new directors need to obtain a Director Identification Number (DIN) and a Digital Signature Certificate (DSC). 

Step 4: Pay Requisite Fees: Conversion fees vary according to the authorized capital of the company. Through the MCA portal, the payment should be made electronically.

Step 5: Review and Certificate Issuance: After payment and document submission, ROC reviews your application. If the ROC is satisfied with the compliance, a new Certificate of Incorporation is issued by it. It contains the status of your company as a private limited entity.

Step 6: Post-Conversion Compliance: After a successful OPC to Pvt. Ltd conversion, ensure:

• Update the letterhead, official documents, and stationery of the company.
• Notify the relevant stakeholders about the status change of the company.
• Modify the bank accounts and other financial records.
• Stay compliant with additional regulatory requirements that apply to a private limited company.

By fulfilling the requirements, you can simply convert OPC to a private limited company without much effort. 

Final Thoughts

Lastly, the OPC to Pvt. Ltd conversion is a structured process governed by the Companies Act, 2013. You can convert it voluntarily or mandatorily after exceeding a certain threshold limit. The conversion process includes passing board resolutions, changing the MOA & AOA, filing out necessary forms with the ROC, and updating business registrations. Additionally, post-conversion, the company should follow the Pvt. Ltd regulations, such as updating the letterhead, stationery, and official documents of the company, and more. 

Further, being an NRI are you also want to take your business to the next level? Contact Savetaxs today and get guidance from the experts on OPC to Pvt. Ltd conversion. Our experts specialize in restructuring companies and offer complete assistance throughout the conversion process, ensuring compliance with legal formalities.