Private Limited Company India is a form of investing under which the ownership shares are transferred to only one person who acts as the owner of all the shares. In this article, we will go through some steps for converting a Private Limited Company to One Person Company India.
In India, a private limited company can be converted into a one-person company (OPC). This is often done to save on costs and simplify the company’s structure. The process is relatively straightforward and can be completed in a few steps.
First, the shareholders of the private limited company must agree to the conversion. Then, the company must file the necessary paperwork with the Registrar of Companies. After that, the company’s name will be changed to reflect its new status as an OPC. Finally, the company’s Articles of Association will need to be updated to reflect the change. Learn how Private Limited Companies become OPCs.
Why Private Limited Companies Should Be Converted to One Person Companies?
There are many reasons why a private limited company might want to convert to a one person company. The most common reason is to save on costs. A private limited company is required to have at least two directors, which can be costly. Additionally, a private limited company is required to have its accounts audited, which can also be expensive. Converting to a one person company can help reduce these costs.
Another reason why a private limited company might want to convert to a one person company is to simplify the management structure. A private limited company typically has a board of directors, which can be time-consuming and complicated. By converting to a one person company, the management structure is simplified and there is only one decision-maker.
Finally, some companies want to convert to a one person company in order to comply with new government regulations. For example, the Indian government has recently introduced regulations that require certain types of companies to have only one director. As a result, many private limited companies are choosing to convert in order to remain compliant with the law.
Differences Between Private Limited Company and One Person Company
Private limited companies are required to have at least two directors and shareholders, whereas one person companies only need one director and shareholder. This makes it easier to set up a one person company, as you don’t need to find someone else to act as your director and shareholder.
Another key difference is that private limited companies must have a minimum paid-up capital of ₹100,000, while there is no such requirement for one person companies. This means that you can start a one person company with less initial investment than what is required for a private limited company.
One person companies are also subject to more restrictions in terms of share transfer and ownership. For instance, you cannot sell more than 49% of the total shares of your one person company to another party. In contrast, there are no such restrictions on share transfer and ownership for private limited companies.
Who Can Convert It and When?
If you’re the only shareholder and director of your company, you can convert it to an OPC.
If you’re thinking of converting your company to an OPC, it’s important to know that this process is only available to certain types of businesses in India. In order to convert your business to an OPC, your company must:
- Have only one shareholder
- Have only one director
- Be a private limited company
If your business meets all of the above criteria, then you may be eligible to convert it to an OPC. However, there are a few other things to keep in mind before you make the decision to do so.
For example, if your company has any outstanding loans or debts, you’ll need to settle these before you can Conversion of private company into OPC. You’ll also need to ensure that all required filings and documents are up to date. Once you’ve done all of this, you’ll be ready to begin the conversion process.
Types of One Person Companies
There are two types of One Person Companies (OPCs) in India- those that are incorporated with the sole purpose of carrying on business or profession, and those that are subsidiary companies. OPCs that are registered as business entities have to mandatorily follow all the rules and regulations applicable to regular businesses, including filing annual financial statements and tax returns. On the other hand, OPCs that are registered as subsidiaries are not generally required to comply with these requirements.
There are several benefits of operating as an OPC, including limited liability protection, ease of formation, and relaxed compliance requirements. Operating as an OPC also gives you the flexibility to convert your company into a Public Limited Company at a later stage, if you so desire.
Benefits of One Person Companies
- Fewer Compliance Requirements: OPCs have simpler compliance requirements than private limited companies. For example, they are not generally required to hold annual general meetings or prepare annual reports.
- Less Paperwork: OPCs also have less paperwork than private limited companies. For example, they are not required to file their accounts with the Registrar of Companies (ROC).
- Greater Flexibility: OPCs offer greater flexibility than private limited companies in terms of decision-making. For example, an OPC can be run by a single director, whereas a private limited company must have at least two directors.
- Easy to Set Up: OPCs are relatively easy to set up and require only one shareholder and director. In contrast, setting up a private limited company can be more complex and time-consuming, as it requires at least two shareholders and directors.
Statistics for One Person Company in India
There are many benefits to having a One Person Company (OPC) in India. For starters, it is easier to set up and manage than a Private Limited Company (PLC). Additionally, an OPC requires only one director and shareholder, making it a more streamlined and efficient business structure.
According to recent reports, the number of registered OPCs in India has been steadily increasing over the past few years. In FY 2016-17, a total of 5,861 OPCs were registered in the country. This figure rose to 7,174 in FY 2017-18, and 8,213 in FY 2018-19.
Myth Busters for One-Person Company Registration in India
Myth #1: Only big businesses can register as OPCs
Fact: Any business, regardless of size, can register as an OPC. The only requirement is that the business must have only one shareholder.
Myth #2: OPCs are not separate legal entities from their shareholders
Fact: OPCs are separate legal entities from their shareholders. This means that they can enter into contracts, sue and be sued, and own property in their own name.
FAQs:
What Is the Conversion Limit for OPC?
The term OPC refers to a One Person Company. As per the Companies Act in India, an OPC must be converted into a private or public company if its paid-up capital exceeds 50 lakh rupees or its average annual turnover exceeds 2 crore rupees during the relevant financial years.
How Much Capital Is Required for OPC?
To incorporate an OPC, there is no minimum paid-up capital requirement. An OPC can be formed with a nominal share capital, allowing entrepreneurs to start a business with limited capital investment.
Can OPC Have 2 Directors?
No, an OPC can have only one director. The concept of OPC revolves around a single individual being the sole shareholder and director. If a company requires multiple directors, it needs to convert into a private or public limited company.
Conclusion
If you’re seeking to convert your private limited company to a one person company in India, the process is actually quite straightforward. Simply follow the steps outlined in this article and you’ll be on your way. Keep in mind that you’ll need to make sure all of your documentation is in order before starting the conversion process. But once everything is ready, converting to a one person company is a great way to streamline your business operations and save on costs.
Also, Read;
