A Guide on Conversion of Private Company into OPC

Conversion of a private company into an OPC: Overview

Converting a private company into an OPC (One Person Company) involves certain legal procedures and compliances. An OPC is a type of company structure where a single individual can form and operate a company as a separate legal entity.

Steps for Conversion of Private Limited Company to OPC

Here’s a step-by-step guide on how to convert a private company into an OPC:

Step 1: Check Eligibility: Ensure that your private company meets the eligibility criteria for conversion into an OPC. In most jurisdictions, the following criteria must be met:

• The private company must have only one shareholder.
• The private company must have a paid-up share capital below the specified threshold.
• The private company’s average annual turnover must be within the prescribed limit.

Step 2: Board Resolution: Convene a meeting of the Board of Directors and pass a resolution recommending the conversion of the private company into an OPC. The resolution should also approve any necessary changes to the company’s Memorandum and Articles of Association to comply with OPC requirements.

Step 3: Consent of Shareholder: Obtain the written consent of the sole shareholder of the private company for converting it into an OPC. The shareholder must agree to become the sole member and director of the OPC.

Step 4: Change in Memorandum and Articles of Association: Amend the Memorandum and Articles of Association of the private company to reflect the new structure and comply with OPC regulations. The name of the company should also be changed to include “One Person Company” as part of its name.

Step 5: Application to Registrar of Companies (ROC): Prepare and file the necessary documents with the ROC or the relevant government authority for the conversion. These documents may include:

• Form INC-6 (Application for Conversion of Private Company into OPC)
• Updated Memorandum and Articles of Association
• Affidavit and declaration by the sole shareholder/director stating that he/she meets the criteria and has no other OPC as a member or nominee.

Step 6: Updated Certificate of Incorporation: After verifying the application and documents, the ROC will issue an updated Certificate of Incorporation, indicating the conversion of the private company into an OPC.

Step 7: Update Bank Accounts and PAN Card: Update the company’s bank accounts, PAN card, and other relevant records to reflect the new OPC status.

It’s essential to consult with a qualified company secretary or legal advisor to ensure compliance with all the legal and regulatory requirements during the conversion process. The process may vary slightly depending on the jurisdiction, so it’s crucial to be aware of the specific rules and regulations applicable in your country.

Conversion of a private company into an OPC (One Person Company) Benefits

Conversion of a private company into an OPC (One Person Company) offers several benefits, especially for entrepreneurs and small business owners who wish to have a separate legal entity while operating as a single individual. Here are some advantages of converting a private company into an OPC:

1. Separate Legal Entity: Like a private limited company, an OPC is a separate legal entity distinct from its owner. This means the individual’s personal assets are protected from the liabilities of the company. It provides limited liability protection to the sole owner, similar to a private limited company.
2. Sole Ownership: As the name suggests, an OPC can be owned and operated by a single individual. This is beneficial for entrepreneurs who want to run a business without the need for partners or shareholders.
3. Ease of Formation: The formation and registration process of an OPC is relatively straightforward compared to other types of companies. It requires only one shareholder and one director, simplifying the compliance requirements.
4. Continuous Existence: An OPC has perpetual succession, which means the company continues to exist even if the owner or director changes or passes away. This ensures continuity and stability in the business operations.
5. Business Expansion: Converting to an OPC allows a sole proprietor or entrepreneur to expand their business and take advantage of the benefits of a corporate entity, such as better credibility, easier access to funding, and business growth opportunities.
6. Ease of Compliance: OPCs have less stringent compliance requirements compared to private limited companies. For instance, an OPC is not required to hold Annual General Meetings (AGMs) if there is only one director.
7. Tax Benefits: OPCs enjoy tax benefits and incentives available to small companies, which can help in reducing the overall tax liability.
8. Flexibility in Management: The sole owner has complete control over the decision-making process, enabling quick and flexible decision-making without the need to consult with multiple stakeholders.
9. Limited Statutory Audit: OPCs with a turnover below the prescribed threshold (as per the Companies Act) are exempt from the requirement of conducting a statutory audit, reducing compliance costs.
10. Attractiveness to Investors: Some investors may prefer investing in an OPC as they have more confidence in dealing with a separate legal entity than with a sole proprietorship.

Conclusion:-

It’s essential to consider the specific laws and regulations governing OPCs in your country before deciding to convert your private company. Additionally, consult with a qualified professional, such as a company secretary or a legal advisor.