Procedure for Conversion of One Person Company (OPC) into Private/ Public Limited Company

Aakanksha Singhal

Aakanksha Singhal

Published on: May 11, 2022

Khushboo Sharma

Updated on: Jun 14, 2023

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Introduction

One Person Company (OPC) refers to a form of company that has only one person as a member, unlike a private company where the minimum number of members is two or a public company where the minimum number of members is seven. Section 18 of the Companies Act, 2013 and Rule 6 of the Companies (Incorporation) Rules, 2014, explicitly provide provisions for the conversion of One Person Company (OPC) to other forms of the Company, as the case may be.

Applicable Provisions:

1. Section 12, 13, 15, 18, 122 & 173 of Companies Act, 2013
2. Rule 6, 29 of the Companies (Incorporation) Rules, 2014

One Person Company (OPC) has two ways for conversion into other forms of the Company:

1. Voluntary Conversion: Voluntary conversion into a private/public limited company is not permitted unless two years have expired from the date of incorporation of the One Person Company (OPC). However, if the paid-up share capital of the One Person Company (OPC) exceeds rupees 50 lakhs or if its average turnover exceeds rupees 2 crores then such One Person Company (OPC) could convert itself into a private limited company within two months. In case of voluntary conversion, One Person Company (OPC) has to intimate the concerned Registrar of Companies (ROC) in form INC-5 within 60 days.
2. Mandatory/Compulsory Conversion: One Person Company (OPC) has to mandatorily convert itself into Private/Public in the following scenarios:
   • Paid-up up share capital exceeds Rs. 50 lakhs or
   • The yearly turnover of immediately previous three consecutive financial years is more than 2 Crores rupees
   Such conversion is to be done within a period of 6 months from the date when the paid-up capital exceeds Rs. 50 Lakhs or the related period in which average annual turnover exceeds Rs. 2 Crores.

Mandatory Requirements:

1. Alteration of Memorandum of Association and Articles of Association in accordance with Section 122(3) of the Companies Act, 2013 to give effect to the conversion [Section 18(1) of the Act and Rule 6(1) of the Companies (Incorporation) Rules, 2014]
2. Complying with the minimum requirements for conversion of One Person Company (OPC) to Private Limited company/Public limited company as the case may be [Rule 6(2) of the Companies (Incorporation) Rules, 2014]:
   • Increase the minimum number of directors to two or three as the case may be
   • Increase the minimum number of members to two or seven as the case may be
   • Maintaining the minimum paid-up capital as per the requirements of the Act for such class of company
   • Due compliance with the provisions of section 18 of the Companies Act, 2013.

Procedure:

1. Convene a Meeting of the Board of Directors [As per section 173 & SS-1]:
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. Shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda, and Draft Resolution with the Notice.
   • Hold a meeting of the Board of Directors of the Company and pass the necessary Board Resolution:
     • Appointment of Directors as per the form of company chosen for conversion
     • To fix the day, the date, time, and venue for holding the Extra-Ordinary General Meeting (EOGM) of the Company
     • To approve the draft notice of EOGM along with the explanatory statement annexed to the notice as per the requirement of Section 102 of the Companies Act, 2013
     • To approve the draft Memorandum of Association and Articles of Association
     • To authorize the Director or Company Secretary to sign and issue a notice of the Extra Ordinary General Meeting and to do such acts, deeds, and things as may be necessary to give effect to the Board’s decision.
     • To authorize the Director or Company Secretary to sign and file the requisite form and return to the Registrar of Companies (ROC).
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer to the Procedure for Preparation and Signing of Minutes of Board Meeting]
   • However, in the case of One Person Company (OPC) such resolution shall be considered as approved by entering the same in the minutes-book duly signed and dated by such single director and such date shall be deemed to the be meeting date of Board of Directors meeting [Section 122(4) of the Act]
2. Alteration of Memorandum and Articles [Rule 6(1) of the Companies (Incorporation) Rules, 2014]:
   The memorandum and articles of the One Person Company (OPC) shall be altered by passing a resolution in accordance with section 122(3) of the Act to give effect to the conversion and make necessary changes incidental thereto.
3. Appointment of Directors:
   Further, the One Person Company (OPC) shall endeavor for the appointment of directors as per the minimum statutory requirements viz two or three as the case may be.
   [Refer to the Procedure for Appointment of Directors for a detailed process]
4. Convene General Meeting [Section 96, 100 and Secretarial Standard (SS-2)]:
   Refer to the Procedure for Conducting General Meeting for a detailed procedure.
5. Filing of Form MGT-14 with ROC [Section 117 of the Companies Act, 2013]:
   The Company shall file a copy of the Special Resolution with the Registrar of Companies (ROC) in form MGT-14 within 30 days of passing such resolution.
6. File Form No. INC 6 [Section 18 of the Companies Act, 2013 and Rule 6(3) of the Companies (Incorporation) Rules, 2014]:
   The One Person Company (OPC) shall file an application in Form No. INC 6 within 06 months of mandatory conversion and 30 days of voluntary conversion other than under section 8 of the Act, along with the fees prescribed in the Companies (Registration offices and fees) Rules, 2014 and the following documents:
   • Altered e-Memorandum of association and e-articles of association
   • Copy of Special Resolution
   • List of the proposed members and its directors together with their consent
   • List of creditors
   • Copy of latest duly attested financial statements viz audited balance sheet and profit and loss account
   • Declaration by way of affidavit of Directors duly sworn in confirming that all members and creditors of the company have given their consent for conversion.
7. New Certificate of Incorporation [Section 13(3) of the Companies Act, 2013 and Rule 29(2) of Companies (Incorporation) Rules, 2014]:
   On approval of Form MGT-14 and Form INC-6, the Registrar will issue a fresh Certificate of Incorporation with the Changed name to the applicant company in Form INC-25.
8. Post Conversion Compliances:
   
   • Every Alteration made in the memorandum of the company shall be noted in every copy of the memorandum or articles as the case may be [Section 15(1) of the Companies Act, 2013]
   • Every Company shall:
     • Print the new Altered MoA & AoA with the new Certificate of Incorporation
     • Paint or affix its name and address of its registered office outside every of its place of business and in legible letters [Section 12(3)(a) of the Companies Act, 2013]
     • Have its name engraved in legible characters on its seal, if any [Section 12(3)(b) of the Companies Act, 2013]
     • Get its name, address of its registered office, and Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business letters, billheads, letter papers, notices, and other official publications [Section 12(3)(c) of the Companies Act, 2013]
     • Have its name printed on hundies, promissory notes, bills of exchange, and such other documents [Section 12 (3) (d) of the Companies Act, 2013]
     • Send the new address of its registered office to all the Banks, authorities, and other Basic Utility Service providers as applicable.
9. File Necessary Amendment Application under the following Acts:
   • Goods and Services Act
   • Shops & Establishment Act
   • Factories Act
   • Inter-State Migrant Workmen Act
   • Private Security Agency Act
   • Employees Provident Fund Organization
   • Employees State Insurance Corporation
   • Other Labour Laws
   • Industry-Specific Laws
10. Key Points for One Person Company (OPC):
    • A minor shall not become a member or nominee of the One Person Company.
    • A minor can’t hold shares with beneficial interest into One Person Company.
    • One Person Company can’t be incorporated or converted into a company under section 8 of the Act.
    • One Person Company can’t carry out Non-Banking Financial Investment activities including investment in securities of any Body corporates.