PROCESS FOR CONVERSION OF OPC INTO PRIVATE LIMITED COMPANY
CONTENT OF ARTICLES
A. Background
B. Method of Conversion of
OPC into Private Limited Company.
C. Process of Mandatory
Conversion of OPC into Private Limited Company
D. Penalty
E. Process of Voluntary
Conversion of OPC into Private Limited Company.
F. Post Conversion
Requirements.
BACKGROUND:
The
Introduction of One Person Company into the legal system is a move that would
encourage the entrepreneurs enters into corporate world. This will not only
enable individual capabilities to contribute economic growth, but also generate
employment opportunity. OPC of sole-proprietor and company form of
business has been provided with concessional /relaxed requirements under the
Companies Act, 2013.
The concept of OPC is
still in its nascent stages in India and would require some more time to mature
and to be fully accepted by the business world. With passage of time, the OPC
mode of business organization is all set to become the most preferred form of
business organization especially for small entrepreneurs.
One most
important feature of OPC is that the risks mitigated are limited to the extent
of the value of shares held by such person in the company
There is TWO METHOD for conversion of OPC into
Private Limited Company:
1. Mandatory Conversion of OPC into Private Limited Company.
2. Voluntary Conversion of OPC into Private Limited Company.
A.
Mandatory conversion of OPC into Private Limited:
As per Rule 6 of The Companies (Incorporation)
Rules, 2014:- Conversion of One Person Company to Private Limited Company is
mandatorily required under the Companies Act, 2013.
Mandatory conversion of One Person Company to Private Limited Company is
required in case a One Person Company meets certain parameters
a) Effective date of increase in the paid-up
share capital of a One Person Capital beyond rupees fifty lakhs AND
b) Increase
of average annual turnover during the period of immediately preceding three
consecutive financial years is beyond rupees two crores.
In the
above case, the One Person Company shall be mandatorily required to convert
itself into either a private or a public company Within a Period of Six Months. In this article, we look at the procedure for conversion of
one Person Company into a private limited company or limited company.
STEPS
TO BE TAKEN FOR CONVERSION OF ONE PERSON COMPANY
Process for conversion is given in as Rule 6 of the
Companies (Incorporation) Rules, 2014
S. No.
|
STEPS
|
ACTION
|
A.
|
BOARD MEETING
|
ISSUE NOTICE in
accordance with the provisions of section 173(3) of the Companies Act, 2013,
for convening a meeting of the Board of Directors. Main agenda for this Board
meeting would be:
|
|
|
AGENDA :
Ø To
discuss with directors that Company has crossed the Limits as given above and
there is need to mandatory conversion of OPC into Company.
Pass Board resolution for increase in No. of Directors.
(Minimum 2 Directors)
Pass a board resolution to get in principal approval of
Directors for increase shareholder of the Company.
(Minimum 2 Share holders)
Ø Pass
Resolution to get shareholders’ approval for Alteration in MOA & AOA of
Company.
|
|
There is required to pass
Share holder resolution. But as per Section 122(1) there is no need to hold
EGM by OPC, it shall be sufficient if, in case of OPC, the resolution is
communicated by the member of the company and entered into the minutes books
required to be maintained u/s 188 and signed and dated by member and such
date shall be deemed to be the date of the meeting for all the purpose under
this Act.
|
|
D.
|
ROC FORM FILING
|
For conversion of OPC in Company few E-forms will be filed with
concerned Registrar of Companies at different stages as per the details given
below:
|
|
E- Form INC-5
|
As per Rule 6(4) The Companies (Incorporation)
Rules, 2014:
OPC within 60 days from the period
when Condition as mentioned above attract give notice to ROC informing that
it has ceased to be OPC and that it is now required to convert itself into a
private company or public company.
|
|
|
ATTACHMETN:
I. Certified true copy of board resolution
where person giving notice has been authorized
II. Copy of the duly attested latest
financial statements
III. Certificate from a Chartered Accountant
in practice for calculation of average annual turnover during the relevant
period – This certificate is mandatory to attach if the threshold limit is
exceeded on account of average annual turnover.
IV. Any other information can be provided
as an optional attachment(s).
|
|
E- Form INC-6
|
As per Section 18 of CA-2013
OPC within 6 Month from the date
of exceeding of threshold Limits.
|
|
|
ATTACHMETN:
I. Certified true copy of board resolution
where person giving notice has been authorized
II. Altered copy of MOA & AOA.
III. Copy of the duly attested latest
financial statements
IV. Certified true copy of Special
resolution where person giving notice has been authorized
V. Any other information can be provided
as an optional attachment(s).
|
|
Duty of ROC:
Concerned Registrar of Companies (ROC) will check the
E-forms and attached documents filed by the Company for Conversion of Private
Company into One Person Company (OPC). On being satisfied that Company has
complied with prescribed requirements the Registrar shall issue the
Certificate to the effect of Conversion of Private Company into One Person
Company (OPC).
|
PENALTY:
If One Person Company or any officer of the One Person Company
contravenes the provisions of these rules, One Person Company or any officer of
the One Person Company shall be punishable with fine which may extend to ten
thousand rupees and with a further fine which may extend to one thousand rupees
for every day after the first during which such contravention continues.
B.
Voluntary conversion of OPC into Private Limited:
Ø When a One Person Company gets incorporated, it cannot
convert itself to Private or Public company for a period of not less than two
years from the date of incorporation.
Ø If the time period has elapsed and two years time period
is over, a One Person Company can apply for converting itself to Private Limited Company or Public limited company.
Ø The Conversion process should be done as per the rules and
regulations laid down by the Companies Act, 2013 under Section 18, and Rule
7(4) of the Companies (Incorporation) Rules, 2014.
Section 18 of the Companies Act, 2013:
Ø A company of any class registered
under this Act may convert itself as a company of other class under this Act by
alteration of memorandum and articles of the company in accordance with the
provisions of this Chapter.
Ø Where the conversion is required to
be done under this section, the Registrar shall on an application made by the
company, after satisfying himself that the provisions of this Chapter applicable
for registration of companies have been complied with, close the former
registration of the company and after registering the documents referred to in
sub-section (1), issue a certificate of incorporation in the same manner as its
first registration.
Ø The registration of a company under
this section shall not affect any debts, liabilities, obligations or contracts
incurred or entered into, by or on behalf of the company before conversion and
such debts, liabilities, obligations and contracts may be enforced in the
manner as if such registration had not been done.
STEPS TO BE TAKEN FOR CONVERSION OF ONE PERSON COMPANY
Process for conversion is given
in Section 18 of Companies Act, 2013 and Rule 7(4) of the Companies
(Incorporation) Rules, 2014 which are reproduced for your reference:
S. No.
|
STEPS
|
ACTION
|
B.
|
BOARD MEETING
|
ISSUE NOTICE in
accordance with the provisions of section 173(3) of the Companies Act, 2013
and SS-I for convening a meeting of the Board of Directors. Main agenda for
this Board meeting would be:
|
|
|
AGENDA :
Ø To
discuss with directors that Company want to convert into OPC into Private
Limited Company.
Ø Pass
Board resolution for increase in No. of Directors. (Minimum 2 Directors)
Ø Pass a
board resolution to get in principal approval of Directors for increase
shareholder of the Company.
(Minimum 2 Share holders)
Ø Pass
Resolution to get shareholders’ approval for Alteration in MOA & AOA of
Company.
|
|
There is required to pass
Share holder resolution. But as per Section 122(1) there is no need to hold
EGM by OPC, it shall be sufficient if, in case of OPC, the resolution is
communicated by the member of the company and entered into the minutes books
required to be maintained u/s 188 and signed and dated by member and such
date shall be deemed to be the date of the meeting for all the purpose under
this Act.
|
|
E.
|
ROC FORM FILING
|
For conversion of OPC in Company few E-forms will be filed with
concerned Registrar of Companies at different stages as per the details given
below:
|
|
E- Form INC-6
|
As per Section 18 of CA-2013
OPC within 30 days of passing of
Special Resolution file form with ROC.
|
|
|
ATTACHMETN:
VI. Certified true copy of board resolution
where person giving notice has been authorized
VII. Altered copy of MOA & AOA.
VIII. Copy of the duly attested latest
financial statements
IX. Certified true copy of Special
resolution where person giving notice has been authorized
X. Any other information can be provided
as an optional attachment(s).
|
|
Duty of ROC:
Concerned Registrar of Companies (ROC) will check the
E-forms and attached documents filed by the Company for Conversion of Private
Company into One Person Company (OPC). On being satisfied that Company has
complied with prescribed requirements the Registrar shall issue the
Certificate to the effect of Conversion of Private Company into One Person
Company (OPC).
|
POST CONVERSION REQUIREMETNS
|
|
A.
|
Arrange new PAN No. of the
company
|
B.
|
Arrange new stationary with new name of the Company
|
C.
|
Update company bank account
details
|
D.
|
Intimate all the concerned authorities like Excise and sales
tax etc about the status change
|
E.
|
Printed copy of new MOA &
AOA.
|
IMPORTANT
POINT TO BE KEPT IN MIND WHILE CONVERSION
|
Ø Only a
natural person who is an Indian citizen and resident in India shall be
eligible to act as a member and nominee of an OPC.
|
Ø resident
in India" means a person who has stayed in India for a period of not
less than one hundred and eighty two days during the immediately preceding
one financial year
|
Ø A person
can be member in only one OPC.
|
Ø Where a
natural person, being member in One Person Company becomes a member in another
OPC by virtue of his being a nominee in that OPC, then such person shall meet
the eligibility criteria of being a member in only one OPC within a period of
one hundred and eighty days, i.e., he/she shall withdraw his membership from
either of the OPCs within one hundred and eighty days.
|
This brief write up an attempt has been made to unlock the
technicalities related to Conversion of Private Company into One Person Company
prescribed under Companies Act, 2013. I believe that the procedure for Conversion
of Private Limited Company into One Person Company through this article would
be of some help for you all.
Conversion of status of company from private to OPC would become
effective form the date of receipt of the approval of the Registrar through the
change of name would become effective on the issue of fresh Certificate of
Incorporation.
The Companies Act, 2013 was expected to simplify the provisions
but on the contrary it brought lot of restrictions on doing business. Therefore
the private companies are converting themselves into One Person Company.
A One Person company can be easily managed with less compliance
to be followed, conversion of the Sole Proprietor firm or Partnership or
Private Limited Company to One Person Company would benefit most people.
(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer: This Document is a copyright of Divesh Goyal. The entire contents of this document have been developed on the basis of relevant statutory provisions. Thought the author has made utmost efforts to provide authentic information however, the author expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this documents. This is only a knowledge sharing initiative and author does not intend to solicit any business or profession…
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