Private to One Person Company

Overview:

A One Person Company (OPC) is a new form of business structure introduced in India to provide entrepreneurs with a simpler alternative to the traditional Private Limited company. Unlike a Private Limited company, an OPC can be owned and managed by a single person. At Corporate Raasta Consulting, we provide end-to-end support to help you convert your Private Limited company to an OPC and take advantage of the benefits this structure offers.

What is a private and one-person company?

A Private Company, as per Section 2(68) of the Companies Act, 2013, is a non-public entity with share transfer restrictions in its Articles of Association (AoA), capping membership at 200. Shareholders’ liability is confined to their share value, and they may sell shares if losses occur. The company persists legally despite any member’s death, bankruptcy, or insolvency.

A One Person Company (OPC), defined in Section 2(62) of the same act, is a corporate entity with a single member. It has fewer compliance obligations than other company types. A distinctive OPC feature requires the sole member to designate a nominee during registration, who may inherit or decline the membership upon the member’s demise. OPCs benefit from various privileges and exemptions under the Companies Act, of 2013, unlike other company classes.

Benefits:

Some of the key benefits of converting to an OPC include:

1. Limited liability: As with a Private Limited company, an OPC offers limited liability protection to the owner, ensuring that personal assets are protected in case of any legal or financial issues.
2. Simplified compliance: An OPC has less stringent compliance requirements than a Private Limited company, reducing the administrative burden and costs associated with running the business.
3. Greater control: As the sole owner and manager of the business, the owner of an OPC has complete control over all decisions and operations.

Checklist: Here are some of the steps you should consider when converting from a Private Limited company to an OPC:

1. Obtain shareholder approval for the conversion.
2. Ensure compliance with all legal and regulatory requirements, including obtaining necessary approvals from the Registrar of Companies (ROC) and other regulatory bodies.
3. Prepare and file all required documents with the ROC, including the memorandum of association and articles of association.
4. Obtain a new PAN and TAN number for the OPC.
5. Update all relevant records, licenses, and permits to reflect the new OPC structure.

Process:

The process of converting from a Private Limited company to an OPC involves several steps, including obtaining shareholder approval, ensuring compliance with legal and regulatory requirements, and preparing and filing the necessary documents with the ROC. At Corporate Raasta Consulting, we provide end-to-end support to help you through the process and ensure a smooth transition.

The prerequisites for a Private Company to transition into an OPC include:

• The company’s paid-up share capital must be under ₹50 lakhs.
• The annual turnover for the last three years must not exceed ₹2 crores.
• The sole shareholder must be an Indian citizen and a resident of India, defined as staying in India for at least 180 days within a calendar year.
• The individual must not be associated with another OPC, either as a shareholder or member.
• A minor is not eligible to be a member or part of an OPC.

Conversion process step-by-step guide

The conversion process from a Private Company to an OPC involves several steps. These steps are as follow: 

Step. 1

Board Meeting Notification: Send a notice to all members at least 7 days prior, detailing the meeting’s agenda. This is the first step to start the process of the conversion process from a Private Company to an OPC

Step. 2

Conduct Board Meeting: Gain directors’ approval for conversion, set the EGM details, approve the EGM notice with its agenda, and authorize a director to issue the notice.

Step. 3

EGM Notification: Dispatch an EGM notice to all members, directors, and auditors at least 21 days in advance.

Step. 4

Obtain NOC: Secure a written No Objection Certificate from shareholders and creditors before the EGM’s Special Resolution.

Step. 5

Hold EGM: Ensure quorum, auditor’s presence, or leave of absence as per Section 146 of the Companies Act, 2013.

Step. 6

Form Filing with RoC: File e-Forms with the Registrar of Companies, including:

Form MGT-14: Submit within 30 days of the EGM, attaching the EGM notice, Special Resolution, and altered MoA and AoA.

Form INC-6: Apply for conversion, attaching a list of members and creditors, the latest balance sheet, the NOC, and an affidavit from directors confirming compliance with conversion criteria.

Step. 7

Issuance of Share Certificate: A Share Certificate for the OPC conversion is issued after the RoC verifies the submissions and confirms adherence to requirements.

Documents:

Some of the documents required for converting from a Private Limited company to an OPC include:

1. Memorandum of association and articles of association.
2. Shareholders resolutions.
3. Various other documents required by the ROC and other regulatory bodies.

An OPC offers a simpler management structure with minimal compliance requirements compared to a Private Company. Transitioning from a Private Company to an OPC is advantageous for many stakeholders. Although the conversion process is comprehensive and extensive, our team at Corporate Raasta Consulting comprises seasoned experts ready to guide you through every step, ensuring the successful fulfillment of your conversion objectives.

Features and Differentiation of One Person company from others

One Person Company in India has some distinctive features that set it apart from other types of companies in the country:

1. Ownership:
   • One-Person Company: Owned by a single individual.
   • Other types like Public Limited Companies: These are owned by multiple shareholders, and a minimum of seven shareholders is required to form a public limited company.
2. Minimum Number of Members:
   • One-Person Company: Requires only one person as a member.
   • Other types like Public Limited Companies: Require a minimum of two members for a private limited company and seven members for a public limited company.
3. Limited Liability:
   • One Person Compan: Offers limited liability protection to the sole owner.
   • Other types like Public Limited Companies: Also provide limited liability protection to their shareholders.
4. Annual General Meeting:
   • One Person Company: Not required to hold an Annual General Meeting.
   • Other types like Public Limited Companies: Are required to conduct an Annual General Meeting.
5. Taxation:
   • One-Person Company: Eligible for certain tax benefits as per Indian tax laws.
   • Other types like Public Limited Companies: Are subject to different taxation rules based on their structure.
6. Ease of Setup:
   • Private to One Person Company: Easier and quicker to set up compared to other types of companies.
   • Other types like Public Limited Companies: May have more complex setup procedures and requirements.

In conclusion, a Private to One Person Company (Pvt. Ltd.) in India distinguishes itself through its single ownership, minimal membership requirements, limited liability, tax advantages, ease of establishment, and exemption from certain formalities like Annual General Meetings.