Private to One Person Company

Convert PLC to OPC

As per the Companies Act 2013, the conversion of a PLC (Private limited company) into an OPC (One Person Company) is allowed. This Act implements various mechanisms to convert one class of company into another. An existing private limited company can be converted to a public limited company starting on 1 April 2014, as defined in section 18 of the Act.

There will be no effect on the responsibilities and contractual obligations of the company before conversion. All the claims, liabilities, and obligations shall be enforceable by law, and the resulting OPC shall be liable for them.

Benefits of conversion from PLC to OPC

Limits Director’s Liability

Businesses often borrow money from sources to carry out operations. In the case of sole proprietorships, proprietors are personally liable for all the debt. If the business fails to repay the debt, then the proprietor will have to sell their car, house or jewelry for the repayment. In contrast, if it is an OPC, then only the money invested at the start of the business will be lost, and personal property will be safe.

Continuous Existence

An OPC continues to exist even after the death of the director as it is a separate legal identity, unlike a sole proprietorship which comes to an end in the event of the death of the operator. The ownership of OPC will pass on to the nominee director and keep existing.

Fewer Compliances

 Annual filings are limited to share certificates, and statutory registers, as an OPC can only have one director and one shareholder.

Checklist requirements for the conversion of PLC to OPC

Below are some requirements to be met in order to convert the private limited company into a one-person company:

• The books of accounts, as well as its balance sheet, must be prepared carefully.
• The company’s ROC returns must be filed and paid on time.
• To examine whether the company has paid the requisite on the result of the share certificate and whether the share certificates are properly matched with the payment of stamp duty.
• The TDS must be deducted along with TDS Returns duly paid by the company.
• The company’s VAT and Service Tax, or GST, must be paid and filed suitable returns.
• To check whether the company is maintaining a record of minutes of the meeting for its board and shareholders and keep updated registers at its registered office.
• As per the applicable state laws, the company is registered under the shop, and the establishment acts, where they control offices, shops, warehouses, etc.
• In the state of the registered office of the company and in the states where it has employees, the company complies with the requirements of any professional tax.
• In case the number of employees is more than 20, The company is registered under Provident Fund; if the number of employees is more than ten, then with ESIC (Employees State Insurance Corporation), the monthly returns must be duly paid under the respective scheme.

The following provisions must be met in order for a private limited company to be changed into a one-person company:

• The capital of the company must not exceed 50 lakhs.
• The annual turnover of the company should be less than Rs. 2 crores during the past three progressive financial years. Additionally, if the company is new, and has not completed three years, then the turnover shall be considered from the date of its incorporation.
• The forming OPC’sOPC’s shareholder must be an Indian Citizen.
• The shareholder of OPC but be an Indian resident of at least 180 days every year.
• The shareholder of the resulting OPC must only be incorporated by the OPC in question and no other OPC.
• The OPC’sOPC’s member should not be a minor.

Procedure to convert a private limited company to a one-person company?

Call a board meeting.

• It is up to the directors of the company to decide when to call the shareholders’ meeting. Also known as an Extraordinary General Meeting.
• This notice must be drafted to shareholders along with a draft resolution. It must be passed by the shareholders as a special resolution regarding the conversion of the private limited company to an OPC.

Issue notice of EGM

• A notice of the EGM should be sent to all company members, directors, and auditors. Notice of the EGM must be issued at least 21 days before the meeting.
• An informative statement should be included with the notice and the agenda, along with the draft resolution.

No objection from all creditors

• In the first instance, all creditors of the company must provide a No Objection Certificate (NOC) before the EGM.
• A copy of the creditors’ approval must be submitted before the EGM.

Conduct of EGM

• In accordance with the notice, the EGM must be conducted on the assigned date, time, and location. A special resolution may be passed at the EGM to approve altered MOA (Memorandum of Association) and AOA (Article of Association).

Filing of resolution with the ROC

• Members must register all special resolutions declared by them with the ROC in Form No MGT-14 within 30 days of the approaching date, along with directed attachments.
• The ROC records the resolution after it endorses the MGT-14.

The issue of the certificate of conversion

• The application for conversion is examined by the ROC holding jurisdiction, and if it is complete, he or she approves it and issues a certificate of One Person Company.

How to apply for conversion?

Form – INC 6 is used to apply for the conversion of a private limited company into a one-person company. The following statements are included:-

• It must contain an affidavit signed by all directors that the company’s shareholders and creditors have consented to the conversion into an OPC, as well as a declaration of the company’s paid-up capital. The turnover must be less than Rs. 2 crores, and the company’s paid-up capital must be less than Rs. 50 lakhs.
• Members’Members’ affidavits confirming that the company’s paid-up capital is less than Rs. Fifty lakhs and its average turnover has been less than two crores over the past three years.
• Confirmation that the paid-up capital of the company does not exceed Rs. 50 lakhs and the turnover isn’t above two crores should be provided by a Chartered Accountant in practice in the form of a certificate
• Company’sCompany’s latest profit and loss account and balance sheet, duly audited
• Every Creditor’s consent in the form of No Objection Certificates.
• A list of company’s directors and members
• The resolution was taken at the EGM’sEGM’s copy, along with its notices, agenda, and informative statement.
• A modified copy of MOA and AOA, along with the clauses for the OPC

Frequently Asked Questions