Converting an OPC to a Private Limited Company

Last Updated at: Dec 23, 2020
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The recent Companies Amendment Bill, 2020 has suggested certain amendments to various provisions of the Companies Act. In one such proposal, the applicability of section 446B (relating to ‘Lesser penalties for OPCs and other small companies) is sought to be extended to all provisions of the Act. 

 

There are a couple of ways to convert a One Person Company into a Private Limited Company. This can be done voluntarily but the right procedure for the same has to be followed. The OPC can be fulfilled provided a few situations are met. You will get to know about compulsory and voluntary conversions from here.

There are two ways of converting a One Person Company into a Private Limited Company as per the act. The conversion can be a voluntarily one or by compulsion but cases a proper procedure is to be followed.

Check out some of the articles below to find step by step information on company registration, iso registration or income tax related services and avail our resources to help you through the process.We are one of the best online service providers in the market for tax registrations and legal documentation.

 

If an OPC fulfils any of the situations given below, then it must convert to a Private Limited Company.
1. If the paid up capital of the OPC exceeds Rs. 50 lakh.
2. If the average turnover in any three consecutive financial years is more than Rs. 2 crore.

Compulsory Conversion:

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 obligatory for them to convert into a private limited company.

During the conversion, the members have to just pass a special resolution in the general meeting.

Before the resolution is passed, a No objection Certificate has to be taken in writing from the creditors, and the other members.

Within fifteen days of the passing of the resolution, company needs to file an application to the registrar along with a copy of the resolution.

After the application is filled and the fee payed, the registrar then makes a decision after studying the documents and issues the certificate of conversion.

Note: E-Forms are now filed with the Registrar of Companies.

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Voluntary Conversion

When an OPC is incorporated, the conversion cannot happen before two years. The procedure of voluntary conversion of an OPC into a private limited company falls under the section 18 of the Companies Act.

The company can convert into another company coming under the same act by the modification of the memorandum of the association and articles of the association in accordance with the provisions.

An application has to be made by the company to register along with the relevant documents which are essential for the conversion.

On submission of all relevant documents, the registrar has the power to issue a certificate of incorporation.

The registration of the company under this act will not affect any liabilities, debts, or obligation before and after the conversion.

After the conversion is done, it is obligatory for a private limited company to have a paid up share capital of Rs. 50 lakh and also an annual turnover should not be less than 2 crores, failing which, it can convert back to an OPC by passing of a special resolution.

From above, you would have got to know the requirements to convert a One Person Company to a Private Limited company. Basically, you should know that for a voluntary conversion, you need to wait for a couple of years from the incorporation of the OPC. After the conversion, it can still be converted to an OPC on a specual resolution.

Click here: private limited company registration

A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.