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Benefits of Conversion from Private Limited Company to One Person Company

As defined under Section 2(68) of the Companies Act, 2013, Private Limited Companies are privately owned companies whose shares cannot be traded publicly. As per Section of the Articles of Association, the number of members is limited to 200 and liability for each member is limited to the value of their shares. The shares of the company can be sold if the company suffers a loss. Shareholders may be able to sell their own shares if a loss occurs.

Specifically, in Section 2(62) of the Companies Act, 2013, a company with only one member is referred to as an One Person Company. As a result, the requirements of the Act are less than those of other companies, which means the One Person Company is unique in that the sole member of the company has to mention a nominee at the time of registration of the company. Consequently, if a sole member dies, the nominee can determine whether or not she will become a member of OPC or not. It is important to remember that under the Companies Act, 2013, one-person companies enjoy several privileges and exemptions.

Conversion of Private Limited  Company to One Person Company

It is possible to Conversion of Private Company into OPC with a paid-up share capital of 50 lakhs and with a turnover of not more than 2 crores into a One Person Company.

  1. An Extra-Ordinary General Meeting (EGM) is required in order for the new members and creditors of a Private Limited Company to be able to approve the resolution before it be passed to the shareholders. In order to do so, a No Objection Certificate must be obtained from the existing members and creditors.
  2. There is no requirement that the shareholder of the proposed One Person Company be a natural person. The shareholder should be a resident of India and he or she should have lived in India for a minimum of 182 days in the previous year.
  3. In order to form a One Person Company, the Private Limited Company must appoint a Nominee through its Memorandum of Association, and consent must be obtained from the nominee prior to the appointment taking place.
  4. One Person Company does not accept nominations from minors.
  5. If the shareholder of One Person Company has incorporated any other One Person Company or has been nominated by another One Person Company, then that shareholder must not have done so in the past

Benefits of conversion from Private Limited Company to One Person Company  

1. Limited liability:

Many sole proprietors borrow money from an individual or a financial institution. Because of this, the sole proprietor is personally responsible for all his or her debts and is therefore able to repay them with their personal assets, such as car, house, jewelry, etc., if they are unable to repay them through the business. As the liability of the One Person Company is limited and the personal assets of the individual are not at risk, this is not the case.

2. Continuous Existence:

When the promoter had been a sole proprietor instead of a one person company, the business would have ended when the sole proprietor passed away. It is important to note that One Person Companies have their own legal existence and will continue to exist upon the death of their founders. This will continue to exist after their death.

3. Less Compliances:

It is important to keep in mind that there will only be one director and shareholder in One Person Company, so compliance requirements are fewer, such as sharing certificates and statutory registers, to name two.

4. Quick decision-making:

In a company where there is just one person managing it, the decision-making process is very quick. This is because if you make a decision, it does not need to be discussed with another person for approval. This saves a lot of time. In One Person Company, decisions are made in real-time, and resources are optimally utilized.

5. No Annual General Meeting required:

One Person Companies do not have the same stringent regulations as Private Limited Companies, so an Annual General Meeting is not mandatory.

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