Converting an OPC to a Private Limited Company

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opc compliance

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.

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.

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.

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