Last updated: December 2nd, 2024 4:18 PM

Conversion of  OPC to Private Limited Company

If you're considering converting your One Person Company (OPC) into a Private Limited Company, it's a smart step toward expanding your business potential. This conversion allows you to bring in additional shareholders, attract more capital, and enhance your company's credibility in the market. However, it's essential to carry out the conversion in a legal and compliant manner, adhering to the procedures outlined in the Companies Act 2013. Properly navigating this process ensures a smooth transition, safeguarding your company’s reputation and setting it up for long-term growth. At IndiaFilings, we help you convert your One Person Company (OPC) into a Private Limited Company seamlessly and in full compliance with legal requirements. Our team of experts handles every aspect of the conversion process, from preparing and filing the necessary documents to ensuring adherence to the Companies Act, 2013. Ready to expand your business? Convert your OPC into a Private Company with IndiaFilings.

Legal Framework Governing the Conversion of OPC into a Private Company

The conversion of a One Person Company (OPC) into a Private Company is governed by Section 18 of the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014. This conversion process enables an OPC to expand its structure, bringing in additional members and directors without impacting its existing debts, liabilities, obligations, or contracts. The transition offers OPCs enhanced operational flexibility, meeting the requirements of growing business.

Types of Conversion of One Person Company (OPC)

The conversion of a One Person Company (OPC) into other forms of companies, such as a private limited company, can be categorised into Voluntary Conversion and Compulsory Conversion.

Voluntary Conversion of OPC

An OPC can voluntarily convert into a private limited company at any time without meeting prior thresholds for paid-up share capital or average annual turnover. This provision allows OPCs to convert based on strategic business needs rather than financial limitations. Voluntary conversion provides OPCs with the option to expand without waiting for their capital or turnover to reach specified limits.

Compulsory Conversion (Previously Required)

Compulsory Conversion was previously required if an OPC met certain financial thresholds, specifically when the paid-up share capital exceeded ₹50 lakh or the average turnover exceeded ₹2 crore.

• Change in Requirements: Following Budget 2020-21 and the Companies (Incorporation) Second Amendment Rules, 2021, the compulsory conversion requirement was removed. OPCs are no longer required to convert automatically if they exceed these financial thresholds.
• Current Status: Now, OPCs can continue to operate as a one-person entity even if they surpass the financial limits. This amendment offers greater operational flexibility, allowing OPCs to remain as they are or convert at their discretion.

Current Requirements for OPC Conversion into a Private Company

To voluntarily convert an OPC into a private limited company, the following steps must be taken:

Alterations in the MOA and AOA

The  Memorandum of Association (MOA) and  Articles of Association (AOA) of the OPC must be modified as per Section 18 and Section 122 of the Companies Act, 2013. These changes ensure that the legal structure aligns with a private limited company's operational requirements and compliance obligations.

Minimum Membership and Directorship Requirements

For the incorporation of a private limited company, there must be a minimum of two members and two directors. This is essential for meeting the compliance requirements specific to private limited companies, as stipulated in the Companies Act 2013.

Filing Form INC-6 for Conversion Application

The OPC must apply for conversion by submitting Form INC-6 to the Ministry of Corporate Affairs (MCA), Government of India. Form INC-6 is the official application form for converting an OPC to a private limited company and must be accompanied by required supporting documents, such as the revised MOA and AOA.

Procedure for Conversion of One Person Company (OPC)

Steps to Convert a One Person Company (OPC) into a Private Limited Company are as follows:

Notice of Board Meeting

In accordance with Section 173 of the Companies Act and Secretarial Standard (SS-1), a Notice of Board Meeting must be issued to all directors at least seven days in advance. If urgent matters arise, a shorter notice may be issued. The notice should include the Agenda, Notes to the Agenda, Draft Resolutions, and any supporting documents.

Conduct the Board Meeting

At the board meeting, essential resolutions will be passed to facilitate the OPC conversion process. Key resolutions include:

• Appointment of Additional Directors: Appoint directors as needed for the company’s new structure after conversion.
• Schedule the Extra-Ordinary General Meeting (EOGM): Set the date, time, and venue for the EOGM.
• Approval of EOGM Notice and Explanatory Statement: Approve the draft notice and explanatory statement as required by Section 102 of the Companies Act, 2013.
• Approval of MOA and AOA Drafts: Review and approve draft versions of the Memorandum of Association (MOA) and Articles of Association (AOA).
• Authorise Issuance of EOGM Notice: Empower the Director or Company Secretary to sign and issue the EOGM notice and handle necessary actions to implement the Board’s decision.
• Authorisation to File Forms with ROC: Authorize the Director or Company Secretary to sign and submit the required forms and filings to the Registrar of Companies (ROC).

Prepare and Distribute Draft Minutes

Within 15 days of concluding the Board Meeting, prepare the Draft Minutes and circulate them among the directors for their feedback. This can be done via Hand Delivery, Speed Post, Registered Post, Courier, or E-mail. Follow company procedures for properly preparing and signature the Board Meeting Minutes. Note: For an OPC, the resolution is considered approved once entered in the minute book, signed, and dated by the sole director. As per Section 122(4) of the Companies Act, the entry date in the minute book is considered the official date of the Board Meeting.

Alteration of MOA and AOA

In accordance with Rule 6(1) of the Companies (Incorporation) Rules, 2014, the Memorandum of Association (MOA) and Articles of Association (AOA) of a One Person Company (OPC) must be altered by passing a resolution as specified under Section 122(3) of the Companies Act, 2013.   

Appointment of Directors

For the conversion of a One Person Company (OPC) into a private limited company, the OPC must appoint directors to meet the minimum statutory requirements. This typically requires the appointment of at least two directors, though specific cases may necessitate three, depending on the nature and structure of the company post-conversion 

Convening a General Meeting for the Conversion of an OPC to a Private Limited Company

To formally convert a One Person Company (OPC) into a Private Limited Company, a General Meeting must be convened following these steps:

Issue Notice

Send a Notice of the General Meeting to all shareholders, detailing the date, time, and location of the meeting. This notice should be sent to each shareholder’s registered address, and the notice period must adhere to the timeline specified by the Companies Act.

Attach Agenda and Explanatory Statement

Along with the notice, include the Agenda for the meeting, explicitly listing the conversion of the OPC to a Private Limited Company as a discussion item. Attach an Explanatory Statement as per Section 102 of the Companies Act, 2013, outlining the reasons for the proposed conversion, its implications, and its benefits.

Seek Shareholder Approval

During the General Meeting, the resolution for the OPC’s conversion will be presented. Shareholders will discuss the proposal and vote on it. The resolution must be approved by the requisite majority as mandated by the Companies Act 2013.

Prepare Minutes of the Meeting

After the meeting, prepare Minutes of the General Meeting to record discussions, decisions, and the outcome of the vote. These minutes should be signed and properly maintained to meet all legal documentation requirements.

Filing of Forms for the Conversion of OPC to a Private Limited Company

After the General Meeting approving the conversion of a One Person Company (OPC) to a Private Limited Company, specific forms and documents must be filed with the Registrar of Companies (ROC) within the prescribed timelines to complete the legal process.

Filing of Form MGT-14

Form MGT-14 must be filed to submit a copy of the Special Resolution passed during the General Meeting with the ROC. This form is a critical step in documenting shareholder approval for the conversion.

Filing of Form No. INC 6

Form INC 6 is required under Section 18 of the Companies Act, 2013, and Rule 6(3) of the Companies (Incorporation) Rules, 2014, specifically for OPCs. Timeline for Filing: Under the latest regulations, there's no longer a specific timeline for filing the conversion from a One Person Company (OPC) to a Private Limited Company. Ensure you submit Form INC 6 with the necessary documents as mandated by the Companies (Registration Offices and Fees) Rules, 2014. Along with Form INC 6, the following documents must be submitted as per the Companies (Registration Offices and Fees) Rules, 2014:

• Altered Memorandum of Association and Articles of Association: Updated versions of the OPC’s MOA and AOA are required, reflecting the changes made to facilitate the company’s new private limited status.
• Copy of Special Resolution: A copy passed by shareholders indicating their consent to the conversion. This confirms that the requisite majority has approved the conversion.
• List of Proposed Members and Directors: A list of the company’s new members (shareholders) and directors post-conversion, along with their consent to assume their respective roles.
• List of Creditors: An itemised list of the OPC’s creditors, specifying all individuals and entities to whom the company has outstanding debts or obligations. This ensures transparency regarding financial commitments.
• Copy of Latest Duly Attested Financial Statements: The most recent audited financial statements, including the profit and loss account and balance sheet, must be submitted to provide an accurate picture of the OPC’s financial standing.
• Declaration by Directors: A declaration in the form of an affidavit by the directors affirming that all members and creditors have consented to the conversion.

These documents, along with the completed Form INC 6 and applicable fees, must be filed with the relevant authority to officially recognise the OPC’s conversion into a private limited company.

Issuance of a New Certificate of Incorporation

Upon application submission and payment of the required fees, the Registrar of Companies (ROC) will review the details provided in the application, along with all accompanying documents, to ensure accuracy and compliance. After a thorough examination, the ROC will issue a Certificate of Conversion if everything is in order. According to Section 13(3) of the Companies Act, 2013 and Rule 29(2) of the Companies (Incorporation) Rules, 2014, when the ROC approves Form MGT-14 and Form INC-6 (submitted for a company’s name change or conversion), a new Certificate of Incorporation (Form INC-25) will be issued. This certificate confirms the company’s new status as a Private Limited Company and reflects the updated name. The issuance of this certificate serves as the official confirmation of the company’s incorporation under its new structure and name, solidifying its legal status as a private limited entity.

Post-Conversion Compliances for OPC to Private Limited Company

Once a One Person Company (OPC) has successfully converted into a Private Limited Company, it must adhere to several post-conversion compliances to ensure all records and operations reflect the new structure. 

Noting Alterations in the Memorandum

As per Section 15(1) of the Companies Act, 2013, any modifications to the company’s Memorandum of Association (MOA) must be recorded in every copy of the MOA and Articles of Association (AOA) to ensure consistency and legal accuracy.

Printing Altered MOA & AOA with New Certificate of Incorporation

The company must print updated versions of its MOA and AOA and the newly issued Certificate of Incorporation. These documents should reflect all changes made during the conversion process to align with private limited company standards.

Displaying Company Name and Registered Office Address

In line with Section 12(3)(a) of the Companies Act, 2013, the company must display its registered name and office address prominently outside every place of business in legible letters.

Engraving Company Name on Seal

If the company uses a seal, its name should be engraved in legible characters, as Section 12(3)(b) requires. This ensures the seal reflects the company’s updated legal status.

Updating Company Information on Official Documents

As per Section 12(3)(c), the company should update all official documents to include its name, registered office address, Corporate Identity Number (CIN), contact information (telephone, fax, email), and website (if applicable). These updates must appear on all business letters, billheads, letter papers, notices, and publications.

Printing Names on Financial and Legal Documents

The company’s name should be printed on all relevant financial and legal documents, such as hundies, promissory notes, and bills of exchange, as specified under Section 12(3)(d). This measure ensures that all transactional documents reflect the new company structure.

Notifying Banks and Utility Providers

The company must inform all relevant banks, utility service providers, and authorities of the new address of its registered office to maintain consistent communication and legal compliance.

Filing Amendment Applications Under Relevant Acts

Following conversion, the company must file amendment applications with various regulatory bodies and acts, which may include:

• Goods and Services Act
• Shops & Establishment Act
• Factories Act
• Inter-State Migrant Workmen Act
• Private Security Agency Act
• Employees Provident Fund Organization
• Employees State Insurance Corporation
• Other labor laws and industry-specific regulations

By fulfilling these post-conversion requirements, the newly converted private limited company ensures that all records, documents, and legal obligations are current and aligned with its new corporate identity, supporting compliant and efficient operations.

Seamless Conversion of OPC to Private Company with IndiaFilings Experts

IndiaFilings experts are here to assist you with the seamless conversion of your One Person Company (OPC) into a Private Limited Company. Our team provides comprehensive support through each step of the process, ensuring compliance with legal requirements, updating necessary documents, and handling all ROC filings. With IndiaFilings, you can confidently navigate the conversion process and position your business for growth and new opportunities. Ready to elevate your business? Convert your OPC to a Private Limited Company with IndiaFilings and enjoy expert guidance every step of the way.