Conversion of One Person Company (OPC) to Private Limited Company

One Person Company (OPC) is a preferred business structure for individual entrepreneurs, offering the benefits of limited liability and a separate legal entity. However, as the business grows, an OPC may need to transition into a Private Limited Company to accommodate additional investors, increase operational flexibility, and comply with statutory requirements. The Companies (Incorporation) Second Amendment Rules, 2021, under Rule 6, lay down the procedure for such conversion.

Eligibility for Conversion

An OPC can be voluntarily converted into a Private Limited Company if the following conditions are met:    

• The OPC has completed at least two years from the date of incorporation.
• There are at least two directors and two shareholders for the new Private Limited Company.
• Amendments are made to the Memorandum of Association (MOA) and Articles of Association (AOA) to reflect the new status of the company.
  
  Alternatively, mandatory conversion is required if:
• The paid-up share capital of the OPC exceeds ₹50 lakh.
• The annual turnover in any financial year surpasses ₹2 crore.
  
  Step-by-Step Procedure for Conversion
  
  1. Board Meeting & Resolution
  
  The first step is to convene a Board Meeting to approve the voluntary conversion of the OPC into a Private Limited Company. The resolution should include:
• Approval of voluntary conversion.
• Amendments to MOA and AOA.
• Appointment of additional directors if required.
  
  2. Special Resolution & Shareholder Approval
  
  Since an OPC has only one member, the resolution is recorded in the minute book and signed by the sole member as approval. A Special Resolution must be passed, covering:
• Approval for voluntary conversion.
• Amendments to MOA and AOA.
• Appointment of at least one additional director to meet the requirement of a Private Limited Company.
  
  3. Filing of Necessary Forms with Registrar of Companies (ROC)
  
  Post approval, the company must file the following forms with the ROC:
• Form DIR-12: Filed for the appointment of additional directors.
• Form MGT-14: Filed within 30 days of passing the Special Resolution to notify ROC about the resolution.
• Form INC-6: Application for conversion of OPC into a Private Limited Company. This form requires supporting documents, including:
• • Certified copies of MOA and AOA with amendments.
  • Resolution copy approving conversion.
  • Latest audited financial statements.
  • List of proposed directors and shareholders.
    
    

4. ROC Verification & Approval

The ROC reviews the application, documents, and compliance. Upon approval, a new Certificate of Incorporation is issued, confirming the change in status from an OPC to a Private Limited Company.

Compliance After Conversion

Once the conversion is complete, the following compliances must be fulfilled:

• Updating PAN & TAN details with the new company structure.
• Banking & statutory registrations: Informing banks, GST, and other regulatory bodies about the change.
• Shareholding adjustments if new shareholders are added.
  
  

Benefits of Conversion

• Greater Capital Raising Capacity: A Private Limited Company can issue shares and attract investors.
• Limited Liability Protection: Liability remains limited to the company’s assets.
• Better Credibility: A Private Limited Company is more recognized and trusted in business transactions.
• Multiple Directors: Allows for efficient management and decision-making.
  
  The conversion of an OPC to a Private Limited Company is a strategic move for business expansion, investor attraction, and compliance enhancement. By following the prescribed legal framework and submitting the required forms to the ROC, entrepreneurs can seamlessly transition to a more scalable business structure.