What is a One Person Company?

One Person Company (OPC) 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. It is totally a revolutionized concept brought by the Companies Act, 2013 where a single person can easily form a company of his own enjoying both the benefits of sole ownership as well as corporate identity.

What is a Private Company?

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.

Conversion to a Private Limited Company

A one person company is permitted to convert only if it has completed two years from the date of incorporation. 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.

The Section 18 of the Companies Act, 2013 lays down the rules and procedure for conversion of an OPC. It provides that the OPC can voluntarily convert itself into any kind of company, including a private limited company at any time without meeting the criteria of paid up share capital and average annual turnover.

The compulsory conversion of OPC upon meeting the criteria of exceeding the minimum paid up capital and average annual turnover was removed in the Budget 2020-21 and subsequently via the Companies (Incorporation) Second Amendment Rules, 2021.

Thus, currently, an OPC can be converted voluntarily into a private limited company by passing a special resolution after increasing the minimum number of members and directors to two. No Objection Certificate (NOC) in written form from the creditors must be obtained for the conversion of OPC to a private limited company.

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]:
3. Increase the minimum number of directors to two or three as the case may be
4. Increase the minimum number of members to two or seven as the case may be
5. Maintaining the minimum paid-up capital as per the requirements of the Act for such class of company

Procedure:

1. Convene a Meeting of the Board of Directors [As per section 173 & SS-1]:
2. 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.
3. Attach Agenda, Notes to Agenda, and Draft Resolution with the Notice.
4. Hold a meeting of the Board of Directors of the Company and pass the necessary Board Resolution:
5. Appointment of Directors as per the form of company chosen for conversion
6. To fix the day, the date, time, and venue for holding the Extra-Ordinary General Meeting (EOGM) of the Company
7. 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
8. To approve the draft Memorandum of Association and Articles of Association
9. 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.
10. To authorize the Director or Company Secretary to sign and file the requisite form and return to the Registrar of Companies (ROC).
11. 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]
12. 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]
13. 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.
14. 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]
15. Convene General Meeting [Section 96, 100 and Secretarial Standard (SS-2)]: Refer to the Procedure for Conducting General Meeting for a detailed procedure.
16. 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.
17. 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:
18. Altered e-Memorandum of association and e-articles of association
19. Copy of Special Resolution
20. List of the proposed members and its directors together with their consent
21. List of creditors
22. Copy of latest duly attested financial statements viz audited balance sheet and profit and loss account
23. 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.
24. 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.
25. 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:

1. Print the new Altered MoA & AoA with the new Certificate of Incorporation
2. 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]
3. Have its name engraved in legible characters on its seal, if any [Section 12(3)(b) of the Companies Act, 2013]
4. 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]
5. Have its name printed on hundies, promissory notes, bills of exchange, and such other documents [Section 12 (3) (d) of the Companies Act, 2013]
6. Send the new address of its registered office to all the Banks, authorities, and other Basic Utility Service providers as applicable.

1. File Necessary Amendment Application under the following Acts:
2. Goods and Services Act
3. Shops & Establishment Act
4. Factories Act
5. Inter-State Migrant Workmen Act
6. Private Security Agency Act
7. Employees Provident Fund Organization
8. Employees State Insurance Corporation
9. Other Labour Laws
10. Industry-Specific Laws
11. Key Points for One Person Company (OPC):
12. A minor shall not become a member or nominee of the One Person Company.
13. A minor can’t hold shares with beneficial interest into One Person Company.
14. One Person Company can’t be incorporated or converted into a company under section 8 of the Act.
15. One Person Company can’t carry out Non-Banking Financial Investment activities including investment in securities of any Body corporates.