In the case of a promoter resigning from his position in a private company, it is very common for the structure to collapse when the promoter resigns. The professional in this situation suggests that the private limited company should be converted to an OPC in order to avoid this problem. For an OPC to be formed, one shareholder is required to be the sole shareholder.
What is the Concept of Private Limited Company?
- 1 What is the Concept of Private Limited Company?
- 2 What is the Concept of One Person Company?
- 3 Benefits of Conversion of Private Limited Company to OPC
- 4 Procedure for Conversion of Private Limited Company to One Person Company
Private Limited Companies (PLCs) are a privately-owned business structure. As a result of its limited liability features, members of the company are limited in their liability to the extent of their shares. It is generally the case that individuals who have high aspirations and goals opt to form a private company for the purpose of starting a business.
In accordance with the Companies Act, 2013, a private company can be formed by at least two individuals and at maximum of two hundred, depending on the number of shareholders. A private limited company requires two, and at most fifteen, directors to run business operations, with foreign nationals and Non-Resident Indians being eligible to become directors. Furthermore, foreign nationals/NRIs can become directors as well.
As There has been a reduction in the minimum capital requirement for private limited companies in compliance with the Companies (Amendment) Act, 2015.
What is the Concept of One Person Company?
A One Person Company (OPC) or a One Person Company is a new concept that has only recently begun to be mainstream in the Indian corporate sector. It only requires the incorporation of one individual, however, any one individual cannot incorporate more than one OPC at a time.
One Person Companies differ from sole proprietorships in that proprietorships are not separate legal entities. There is a significant distinction between the two, in that a proprietorship firm does not constitute its own legal entity. On the other hand, an OPC constitutes its own legal entity. Also, a nominee cannot be a nominee for more than one company at the same time.
Benefits of Conversion of Private Limited Company to OPC
Private Limited Companies can benefit from converting to OPCs in the following ways:
Annual Returns are easy to file
When it comes to annual and ROC compliance, an OPC involves comparatively fewer requirements than any other business structure and the director is not required to seek approval from the Company Secretary for the filing of the Annual Returns.
Making decisions is easy
Managing the daily needs of an OPC is easy because it entails swift and quick decision making compared with any other kind of business structure.
You do not need an AGM
Due to the very different provisions regarding OPCs and a private company, the rules concerning the conduct of an OPC are not as strict as those concerning a private company. Therefore, it is not mandatory for an OPC to hold its Annual General Meeting.
Procedure for Conversion of Private Limited Company to One Person Company
Private limited companies can convert to OPCs by following the following steps:
Convene Board Meeting
There should be at least seven days prior to the date of the meeting that the board of directors should send a notice for the meeting, along with the agenda of the meeting as an attachment to the notice.
Hold Board Meeting
As part of the Conversion of Private Limited Company to OPC process, the Board of Directors needs to pass a resolution approving the proposed conversion. They will also be required to consider the following items:
- Determine the date, place, and time of the EGM (Extraordinary General Meeting);
- Notice of EGM to be approved;
- The agenda and explanation statement of the EGM are approved;
- An extraordinary general meeting notice shall be issued by the directors;
A notice for the Annual General Meeting (EGM) must be sent to the Company’s shareholders, auditors, and directors at least 21 days prior to the EGM date; they should send it to the members, auditors, and directors as well.
NOC from Creditors
The company is required to obtain in writing from its creditors as well as its shareholders a No objection certificate from them.
To convert a private limited company to an OPC, shareholders must pass a special resolution.
Must be filed within thirty days from the date of passing the resolution by the company’s directors. The company’s directors must submit the following along with the MGT-14 to the ROC:
- Explanatory statement and notice of EGM;
- The special resolution must be certified;
- Association Memorandum altered;
- The Articles of Association have been amended;
- Board Resolution certified by the board.
Should now be filed as the application for the Conversion of Private Company into OPC. In addition to the application, the following attachments should be included:
- Listed below are the members;
- Creditors’ list;
- Balance Sheet as of the latest audit;
- Statement of Profits and Losses updated;
- Receiving a notice of creditor consent;
- Shareholders’ nod of approval;
- The following is a statement from the directors:
- All creditors have approved the transaction;
- Currently, the company has 50 lakhs of paid up shares;
- Approximately Rs 02 crores is the company’s annual turnover.
Issuance of Certificate
ROC issues a certificate of conversion for private limited companies to OPCs after scrutinizing documents.