Private Limited Company Conversion to One-Person Company
The Companies Act, 2013 provides a mechanism to convert one category of company into another. Section 18 specifically enables a private limited company that has already been registered to convert into a One-Person Company (OPC). When a Private Company converts to an OPC, the company’s contracts, liabilities and legal obligations continue and the OPC remains responsible for them.
What conditions must be met to become an OPC?
- Company’s balance sheet and books of account are updated.
- All ROC (Registrar of Companies) returns have been filed by the company.
- Share certificates tally with the stamp-duty paid amount and required stamp duty on share certificates has been paid.
- TDS (Tax Deducted at Source) has been properly deducted and all TDS returns submitted.
- Before conversion, applicable VAT/Service Tax/GST dues (as relevant historically) are paid and documentation is in order.
- Company holds up-to-date registrations at its registered office and maintains statutory records and minutes.
- Compliance with Shops & Establishments/Professional Tax or equivalent local laws where the company operates.
- If >20 employees, PF is applicable; if >10 employees, ESIC is applicable—statutory returns and payments must be up to date.
- Paid-up share capital is less than ₹50 lakhs.
- Average annual turnover of the preceding three financial years is less than ₹2 crores (or company is new and hasn’t completed 3 years).
- OPC shareholder must be an individual who is an Indian citizen and resident in India (stays ≥180 days in India).
- Neither the proposed member nor the nominee is already a member/nominee of another OPC.
- A minor cannot be a member or nominee in an OPC.
Required Documents
1) For Form MGT-14
Detailed list of attachments for filing the special resolution for conversion:
- Notice of the Extraordinary General Meeting (EGM) for the special resolution with explanatory statement.
- True certified copy of the resolution passed by shareholders in the EGM.
- Company’s Memorandum of Association and Articles of Association.
- Certified copy of the board resolution.
2) For Form INC-6
- Total list of members and creditors of the company.
- Latest audited balance sheet and profit & loss account.
- NOC letters from all secured and unsecured creditors.
- NOC from all members of the company.
- Board of directors’ sworn declaration that all members & creditors approved the conversion.
How Can a Private Company Apply to Become an OPC?
Step-wise process for the application:
| Step | Action | Explanation | Purpose |
|---|---|---|---|
| 1 | Preparing the Documents | Collect all required statements and attachments for conversion. | Ensure every document is ready. |
| 2 | Placing Form INC-6 | Submit conversion application through Form INC-6 on the MCA portal. | Officially begin the conversion. |
| 3 | Disclosure with Affidavit by Directors | Affidavit by all directors confirming members’/creditors’ consent; paid-up capital < ₹50 lakhs; turnover < ₹2 crores. | Verify pre-requisites. |
| 4 | Affidavits from Members | Members’ affidavits on capital and turnover thresholds. | Confirm financial criteria. |
| 5 | Certificate from Practicing CA | CA certifies paid-up capital and turnover criteria. | Independent verification. |
| 6 | Latest Audited P&L and Balance Sheet | Attach most recent audited financial statements. | Transparent financial position. |
| 7 | NOCs from All Creditors | Collect written no-objection certificates. | Evidence of creditors’ consent. |
| 8 | List of Members & Directors | Provide a complete, updated list. | Stakeholder clarity. |
| 9 | Copy of Board & EGM Resolutions | Attach board resolution approving conversion and the special resolution passed in EGM with notice, agenda & explanatory statement. | Record official approvals. |
| 10 | Modified MOA & AOA | File updated MOA/AOA reflecting OPC changes. | Align constitution with OPC framework. |
Conclusion
Converting a private limited company into an OPC involves meeting financial thresholds, obtaining mandatory approvals and filing specified documents. Done correctly, it preserves all contracts and liabilities while giving a single promoter complete control with limited liability.
FAQ’s
What’s the Companies Act 2013’s rule for conversion?
From 1 April 2014, Section 18 of the Companies Act, 2013 permits a registered private limited company to convert into a One-Person Company (OPC).
Does conversion affect the company’s existing legal obligations?
No. All contracts, liabilities and duties of the private company continue and are enforceable against the OPC after conversion.
What are the financial thresholds for converting?
Paid-up capital must be less than ₹50 lakhs and average annual turnover during the immediately preceding three financial years must be less than ₹2 crores.
Who can own an OPC?
An individual who is an Indian citizen and resident in India; one person can be member of only one OPC at a time.
Can a minor be involved in an OPC?
No. A minor cannot be a member or a nominee in an OPC.
What documents are required for filing Form MGT-14?
EGM notice with explanatory statement, certified copy of special resolution, MOA & AOA, and certified board resolution.
How do you apply to convert to an OPC?
File Form INC-6 on the MCA portal with the prescribed attachments and declarations, obtain RoC approval, and then update MOA/AOA and statutory records.
What’s the key process for application?
Prepare documents → pass board & special resolutions → file MGT-14 → submit INC-6 with affidavits, financials and NOCs → RoC scrutiny → receipt of approval and update corporate records.