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A Private Company is a type of entity which is privately held by small group of people. One of the main advantages of Private Limited is that it limits owner’s liability to their share and restricts shareholders from trading their shares publicly but due to more compliance to be followed by Private Limited Companies than One Person Company (OPC) or other necessary reason like one of the Promoter leaving the organization, there might be necessary requirement for converting a Private Limited Company into One Person Company (OPC) as in case of Private Limited Companies, there should be at least 2 subscribers. Apart from lesser number of compliances to be followed in case of One Person Company (OPC), it also has some other benefits which are as follows:
- Legal validity: Like Private Limited Company, One Person Company (OPC) also holds legal status which helps the entrepreneur to stand and hold a Corporate Designations like Directorship, Chairman or Managing Director etc.
- Limited Liability: The liability of shareholder of One Person Company is also limited to the amount of shares unpaid by them like in case of Private Limited Company.
- Organized Business: One Person Company will help an entrepreneur to do business in an organized manner as doing business as sole proprietor is not considered as organized form. It allows a Proprietor to do a business in a regulated form which will further help him to take loans easily from Banks or Financial Institutions.
- Limited Compliances: As mentioned above, One Person Company has lesser Compliances than any other type of entity. It has given certain exemptions and privileges, one of the privilege is not to convene an Annual General Meeting.
- Entire control with single owner: The entire control of OPC is held by single person which will help the organization to take faster decisions.
- Tax Savings: It gets many tax benefits like remuneration paid to Director is allowed as deduction in Income tax.
- Direct Access to Target market: Such type of entities allows the entrepreneur to directly access to market and helps them to set up a Company without sharing their profits to middlemen as in case of proprietor small entrepreneurs like weavers needs to share their profits with middlemen which tends to lower their profits.
Apart from the above mentioned benefits, there are many other benefits of incorporating a One Person Company (OPC) or converting a Private Limited Company to One Person Company (OPC). A Private Company could voluntarily convert itself into One Person Company if its paid up capital during the relevant period is less than INR 50 Lakhs or whose average annual turnover is less than INR 2 Crore by taking Shareholders approval. Procedure for Converting Private Limited Company into One Person Company (OPC) is as follows:
- Convene a Board Meeting and the agenda of the Board Meeting are as follows:
- To get in-principle approval of Directors for Conversion
- To fix date, time and venue for holding Extra Ordinary General Meeting for obtaining shareholders’ approval for conversion.
- To approve EGM Notice
- To authorize any of the Director of the Company to issue Notice of EGM
- Issue Notice of Extra-Ordinary General Meeting to all the Directors, members and Auditors of the Company.
- Hold the Extra-Ordinary General Meeting on decided date and venue and pass the Special Resolution for conversion.
- File MGT-14 within 30 days of passing Special Resolution along with the following attachments:
- Altered Memorandum of Association
- Altered Articles of Association
- Notice of EGM along with Explanatory Statement
- Certified Copy of Special Resolution
- Certified Copy of Board Resolution (Optional attachment)
- File Form INC-6 for conversion of Private Limited Company into One Person Company (OPC) along with the following attachments:
- Affidavit by all the Directors of the Company stating that the paid up capital during the relevant period is less than INR 50 Lakhs or whose average annual turnover is less than INR 2 Crore and all the members and creditors of the Company have given their consent for conversion.
- Latest Financial Statement
- Altered Memorandum of Association and Articles of Association
- Certified Copy of Board Resolution for conversion and authorizing any of the Director for giving notice of EGM
- List of members and creditors
- No objection certificate from secured creditors
- Consent of Nominee in Form INC-3
- PAN, ID and Address Proof of Members and Nominee
- Certified Copy of Special resolution (Optional attachment)
MGT-14 is mandatorily required to be filed before filing INC-6 as SRN of the same have to be entered in INC-6. Further, after filing INC-6 the department will verify all the documents and after being satisfied that all the documents filed by the Company are accurate, it will issue new Certificate of Registration for giving effect to Conversion of Private Limited Company into One Person Company (OPC).
We have tried to conclude all the points related to conversion of Private Limited Company into One Person Company (OPC) and filing requirements, in case you need support for conversion of Private Limited Company into One Person Company (OPC) return filing, you can reach to us email@example.com or post your query here.