Conversion of Private Company into OPC

Conversion of Private Company into OPC – An Overview

The conversion of a Private Limited Company (PLC) into an One Person Company (OPC) is governed by the Companies Act, 2013. This Act allows for the conversion of one class of company into another, specifically granting the conversion of a registered private limited company since 1st April 2014.

During the conversion process, the responsibilities and contractual obligations of the company before the conversion remain unaffected. All claims, liabilities, and obligations will continue to be enforceable by law, and the resulting OPC will be liable for them. The conversion presents an opportunity for entrepreneurs to enjoy the benefits of an OPC structure while preserving the existing legal standing of the company.

Benefits of Conversion from Private Limited Company (PLC) to One Person Company (OPC):

• Limited Liability: Provides limited liability protection, separating personal assets from company liabilities.
• Sole Ownership: Owner becomes the sole shareholder and director, ensuring complete control and decision-making authority.
• Reduced Compliance: Fewer compliance requirements with only one shareholder and director, reducing administrative burden.
• Flexibility: More operational flexibility with no requirement for annual general meetings or additional directors.
• Separate Legal Entity: OPCs are distinct legal entities, enhancing credibility and creating a separate business identity.
• Easier Fundraising: Conversion can facilitate fundraising and attracting investors due to the structured legal entity.
• Continuity of Business: Business operations continue seamlessly with the same assets, liabilities, and legal standing.
• Tax Benefits: OPCs can benefit from corporate tax rates and deductions available to private limited companies.
• Enhanced Image: OPC status can enhance the company’s image, especially in dealings with clients, vendors, and financial institutions.
• Ease of Succession Planning: Straightforward succession planning, allowing the sole owner to transfer ownership rights to a nominee easily.

Checklist Requirements For The Conversion Of Private Company Into OPC:

• Eligibility: Ensure that the Private Company is eligible for conversion into an OPC as per the Companies Act, 2013.
• Minimum Requirements: Confirm that the Private Company has only one member/shareholder and one director, as required for an OPC.
• No Debts: Ensure that the Private Company has no outstanding debts or liabilities that could hinder the conversion process.
• Board Resolution: Obtain a board resolution approving the conversion and authorizing a director to initiate the process.
• Shareholder Consent: Obtain written consent from the sole shareholder to convert the Private Company into an OPC.
• Director Consent: Obtain written consent from the proposed director of the OPC.
• NOC from Creditors: Obtain a No Objection Certificate (NOC) from creditors, if applicable.
• Notice to ROC: File the notice of conversion with the Registrar of Companies (ROC) within 30 days of passing the board resolution.
• Special Resolution: If the Private Company has more than one member, pass a special resolution for conversion in a general meeting.
• Application for Conversion: Prepare and file the application for conversion in the prescribed format along with the required documents to the ROC.
• Certificate of Incorporation: Obtain the Certificate of Incorporation as an OPC from the ROC.
• Update MOA and AOA: Amend the Memorandum of Association (MOA) and Articles of Association (AOA) to reflect the changes in the structure.
• New PAN and TAN: Apply for new PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) for the OPC.
• Bank Account Update: Inform the bank about the conversion and update the bank account details with the new OPC structure.
• Update Statutory Registrations: Update all statutory registrations, licenses, permits, and approvals with the new OPC status.
• Intimate Other Authorities: Inform other relevant authorities about the conversion, such as GST registration, if applicable.
• Compliance Checklist: Create a new compliance checklist for the OPC and ensure all necessary compliances are met.
• Share Certificate: Issue new share certificate(s) to the sole member of the OPC.
• Compliance Officer: Appoint a Company Secretary or Chartered Accountant as the Compliance Officer, if required.
• Miscellaneous: Update all company records, stationary, website, etc., with the new OPC details.

Documents Required for Conversion of Private Company into OPC:

• Memorandum of Association (MOA) and Articles of Association (AOA) of the Private Company.
• Board Resolution: Certified copy of the board resolution approving the conversion.
• Consent of Shareholder: Written consent of the shareholder agreeing to the conversion.
• Consent of Director: Written consent of the proposed director of the OPC.
• Affidavit and Declaration: Affirmation of eligibility and compliance by the sole member/shareholder and proposed director.
• NOC from Creditors: If applicable, a No Objection Certificate (NOC) from creditors.
• Copy of PAN Card: PAN cards of the sole member/shareholder and proposed director.
• Passport-sized Photographs: Passport-sized photographs of the sole member/shareholder and proposed director.
• Proof of Identity and Address: Identity and address proof of the sole member/shareholder and proposed director.
• Address Proof of Registered Office: Proof of address for the registered office of the OPC.
• Digital Signature Certificate (DSC): DSC of the sole member/shareholder and proposed director.
• Application for Conversion: Form INC-6 (Application for Conversion of a Company into an OPC).
• Notice of Conversion: Form INC-27 (Conversion of Public Company into Private Company or Private Company into One Person Company (OPC)).
• Updated ROC Forms: Ensure all ROC forms, returns, and filings are up to date.

How to Convert Private Limited Company into One-Person Company (OPC):

• Board Meeting and Director Consent:
  • Hold a board meeting and pass a resolution proposing the conversion to OPC.
  • Obtain written consent from the director agreeing to become the sole director of the OPC.
• Shareholder Consent:
  • Obtain written consent from the shareholders approving the conversion to OPC.
• Affidavit and Declaration:
  • Submit an affidavit and declaration affirming eligibility and compliance with OPC requirements.
• NOC from Creditors:
  • If there are outstanding debts or liabilities, obtain a No Objection Certificate (NOC) from creditors.
• Application for Conversion:
  • File Form INC-6 (Application for Conversion of a Company into a One Person Company) with the ROC.
• Notice of Conversion:
  • File Form INC-27 (Conversion of Public Company into Private Company or Private Company into One Person Company) with the ROC.
• New MOA and AOA:
  • Prepare new Memorandum of Association (MOA) and Articles of Association (AOA) reflecting the OPC structure.
• Director Identification Number (DIN):
  • If the director does not have a DIN, apply for DIN using Form DIR-3.
• Digital Signature Certificate (DSC):
  • Obtain a Digital Signature Certificate (DSC) for the director and shareholder.
• Approval and Certificate:
  • ROC will issue a fresh Certificate of Incorporation for the OPC after reviewing the application.
• Update Registrations:
  • Update PAN, TAN, and other registrations, licenses, permits, and approvals with the new OPC details.

How to Apply for Conversion of Private Company into OPC:

• Hold a Board Meeting: Convene a board meeting of the PLC and pass a resolution proposing the conversion to OPC. Authorize a director to make the application and take necessary actions for the conversion.
• Obtain Shareholder Consent: Obtain written consent from the shareholders of the PLC, approving the conversion to OPC. Shareholders may give their consent through a shareholder resolution.
• Director Consent and Affidavit: The director of the PLC must provide written consent to become the sole director of the OPC. Additionally, both the director and the shareholder should submit an affidavit and declaration affirming their eligibility and compliance with the requirements of an OPC.
• Obtain NOC from Creditors (if applicable): If the PLC has any outstanding debts or liabilities, obtain a No Objection Certificate (NOC) from the creditors to proceed with the conversion.
• File Form INC-6: Prepare and file Form INC-6 (Application for Conversion of a Company into a One Person Company) with the Registrar of Companies (ROC). Include details of the OPC, consent of the director, and other required information.
• Pay Fees: Pay the necessary fees for filing Form INC-6. The fees may vary depending on the authorized capital of the company.
• File Form INC-27: File Form INC-27 (Conversion of Public Company into Private Company or Private Company into One Person Company) with the ROC. This form notifies the ROC about the proposed conversion.
• New MOA and AOA: Prepare new Memorandum of Association (MOA) and Articles of Association (AOA) to reflect the OPC structure. Ensure compliance with the Companies Act, 2013.
• Obtain Director Identification Number (DIN): If the director of the PLC does not have a DIN, apply for DIN using Form DIR-3.
• Obtain Digital Signature Certificate (DSC): Obtain a Digital Signature Certificate (DSC) for the director and the shareholder. This is used for online filing of forms.
• Approval and Certificate: After reviewing the application, the ROC will issue a fresh Certificate of Incorporation for the OPC, completing the conversion process.
• Update PAN, TAN, and Other Registrations: Update the PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) with the new OPC details. Update all other registrations, licenses, permits, and approvals with the new OPC status.