The conversion of a private company into a One Person Company (OPC) in India involves transforming a private limited company with multiple shareholders into a company owned and operated by a single individual. This option is available to entrepreneurs who want to operate as a separate legal entity and enjoy the benefits of limited liability while being the sole owner of the company.
BENEFITS
LIMITED LIABILITY
The owner of an OPC enjoys limited liability, which means their personal assets are protected in case of any liabilities or losses incurred by the company.
SEPARATE LEGAL ENTITY
An OPC is considered a separate legal entity distinct from its owner, providing credibility and a professional image to the business.
SOLE OWNERSHIP
The owner has complete control and ownership over the company, enabling quicker decision-making and operational efficiency.
MINIMAL COMPLIANCE
OPCs have less stringent compliance requirements compared to private limited companies, reducing the burden of regulatory obligations.
EASY CONVERSION AND MAINTENANCE
The process of converting a private company into an OPC is relatively simple and requires fewer formalities. Additionally, OPCs have fewer compliance requirements, making it easier to maintain and manage the company.
ACCESS TO FUNDING AND INVESTMENTS
OPCs have better prospects for raising funds and attracting investments from banks, financial institutions, and potential investors due to their legal structure.
PROCEDURE FOR CONVERTING A PVT LTD TO OPC
As of my knowledge cutoff in September 2021, the online procedure for the conversion of a private company into a One Person Company (OPC) in India involves the following steps:
- OBTAIN DIGITAL SIGNATURE CERTIFICATE (DSC):The first step is to obtain a DSC for the proposed director(s) of the OPC. A DSC is required for online filing and signing of documents.
- APPLY FOR DIRECTOR IDENTIFICATION NUMBER (DIN):If the proposed director(s) do not have a DIN, an application for DIN must be made through the Ministry of Corporate Affairs (MCA) website.
- NAME APPROVAL: Once the DIN is obtained, the next step is to apply for the availability and approval of the desired name for the OPC. This can be done through the MCA's RUN (Reserve Unique Name) web service.
- CONVERSION PROCESS: After name approval, the conversion process begins. This involves filing the necessary forms, such as Form INC-6, which is used for the conversion of a private company into an OPC. The form must be filled accurately and submitted along with the required documents, including the memorandum and articles of association.
- SUBMISSION AND PAYMENT:The completed form and documents are then uploaded to the MCA portal, and the requisite fee must be paid online.
- VERIFICATION AND APPROVAL: Once the application is submitted, the Registrar of Companies (RoC) will verify the documents and may request additional information or clarification. Upon successful verification, the RoC will issue the Certificate of Incorporation, confirming the conversion of the private company into an OPC.
DOCUMENTS REQUIRED
- Memorandum of Association (MoA) and Articles of Association (AoA) of the OPC: These documents outline the purpose, objectives, and rules governing the company's operations.
- Board Resolution: A board resolution passed by the directors of the private company approving the conversion into an OPC and authorizing a director to make the necessary applications and filings.
- Affidavit and Consent: The proposed director of the OPC must submit an affidavit declaring their consent to act as a director and confirming their eligibility. They may also need to provide a declaration of non-disqualification and no involvement in any other OPC.
- Proof of Identity: Copies of the proposed director's PAN card (Permanent Account Number) or passport are typically required as proof of identity.
- Proof of Address: Documents such as Aadhaar card, passport, voter ID, or driver's license can be submitted as proof of address for the proposed director.
- NOC from Shareholders: A No Objection Certificate (NOC) may be required from all the shareholders of the private company, stating their no objection to the conversion of the company into an OPC.
- Financial Statements: The latest audited financial statements of the private company, including the balance sheet, profit and loss statement, and annual return, may be required.
- Digital Signature Certificate (DSC): The proposed director(s) must have a valid DSC, which is used for online filing and signing of documents.
FAQs
No, only a private company with a paid-up capital of up to 50 lakh rupees and an annual turnover of up to 2 crore rupees can be converted into an OPC.
No, conversion into an OPC is optional. A private company can continue to operate as a private limited company even if it meets the criteria for OPC conversion.
There is no minimum share capital requirement for an OPC. It can be registered with any amount of authorized and paid-up capital.
Yes, an OPC can be converted back into a private limited company if it no longer meets the eligibility criteria for being an OPC or if the owner wishes to have more than one director.