What is the meaning of OPC and Pvt Ltd Co.?
One Person Company means a Company which has only one person as its member. An OPC is effectively a company that has only one shareholder as its member.
A private Limited Company is the form of the company where minimum two members are required and maximum number of members can be 200. The liability of the members of a Private Limited Company is limited to the amount of shares held by them.
Comparison between OPC and Private Limited Company
There are few similarities as well as a few differences between the OPC and Pvt. Ltd. Co. Let us discuss both here for your better understanding.
Similarities Between OPC and Pvt. Ltd. Company:
- Separate legal entity: Both of them have separate legal entity. That means OPC or Private Ltd Co. is treated as a different individual in the eyes of law.
- Benefits on taxes: To the both types of business structures tax benefits are given. The tax benefits would be 25% from the profits.
- Limited Liability: In case of OPC the Sole owner and in case of Pvt. Ltd. Co. the shareholders have limited liability to the extent of their shares.
- Registration Process: Both the companies are required to be registered with the Ministry of Corporate Affairs.
CONVERSION OF ONE PERSON COMPANY INTO PRIVATE LIMITED COMPANY
Section: – Section 17 of the Companies Act, 2013
Rule: – Rule 7(4) of Companies (Incorporation) Rules, 2014
Requirements: For converting to a private limited company, OPC is required to have 2 directors and 2 members.
Two Ways of conversion:
a) Voluntary Conversion.
b) Mandatory Conversion.
Voluntary Conversion
Voluntary conversion into a private limited company is not permitted unless- Two years is expired from the date of incorporation of the OPC.
Though, if the paid-up share capital exceeds rupees 50 lakhs or if its average turnovers exceed INR 2 crores then
within two months, the OPC could convert into a private limited company even before expiry of 2 years. (Rule 3(7))
Alteration of Memorandum and Articles: – The OPC shall alter its memorandum and articles by passing resolutions to give effect to the conversion and to make necessary changes thereto.
Procedure for Voluntary Conversion:-
| STEPS | PROCEDURE |
| 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.
– To discuss with directors that Company want to convert the OPC into Private Limited Company. – Pass Board resolution for increase in Number of Directors (Minimum 2 Directors) – Pass a Board resolution to get in principal approval of Directors for increase shareholder of the Company (Minimum 2 Shareholders) – Pass Resolution to get shareholders’ approval for Alteration in MOA & AOA of Company. |
| SHAREHOLDER’S MEETING | There is required to pass Shareholder resolution.
Note:- 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 |
| ROC Form Filling |
As per Section 18 of the Companies Act, 2013 OPC within 30 days of passing Special Resolution file form with ROC
– Certified true copy of board resolution where person giving notice has been authorized – Altered copy of MOA & AOA. – Copy of the duly attested latest financial statements – Certified true copy of Special resolution where person giving notice has been authorized – Any other information can be provided as an optional attachment(s) |
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).
Mandatory Conversion
As per Rule 6 of the Companies (Incorporation) Rules, 2014 deals with mandatory conversion of OPC to private limited company. Mandatory conversion of One Person Company to Private Limited Company is required in case:-
(a) Effective date of increase in the paid-up share capital of a One Person Capital beyond rupees 50 lakhs AND
(b) Increase of average annual turnover during the period of immediately preceding three consecutive financial years is beyond rupees 2 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.
Procedure for Mandatory Conversion:-
| STEPS | PROCEDURE |
| 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.
– 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 Shareholders). – Pass Resolution to get shareholders’ approval for Alteration in MOA & AOA of Company |
| SHAREHOLDER’S MEETING | There is required to pass Shareholder resolution (SR).
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 |
| ROC Form Filling |
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
– Certified true copy of board resolution where person giving notice has been authorized – Copy of the duly attested latest financial statements – 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. – Any other information can be provided as an optional attachment(s)
As per Section 18 of the Companies Act, 2013 OPC within 30 days of passing Special Resolution file form with ROC
– Certified true copy of board resolution where person giving notice has been authorized – Altered copy of MOA & AOA. – Copy of the duly attested latest financial statements – Certified true copy of Special resolution where person giving notice has been authorized – Any other information can be provided as an optional attachment(s) |
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 for default:-
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.
Note- -These conversions shall not affect the existing debt, Liabilities, Contracts, or Obligations of the OPC
– Section 173(3) states that a board meeting shall be called by giving not less than seven days’ notice in writing to every director at his address registered with company and such notice shall be sent by hand delivery or by post or by electronic means.
Provided that a meeting of the Board called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting
Provided further that in case of absence of independent directors from such a meeting of the board, decision taken at such meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any.
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