According to the Companies Act, 2013, which implements a mechanism for converting one type of company into another, a private limited company can be converted into an OPC (One Person Company). It is explicitly stated in Section 18 of the Act that a company which is already registered as a private limited company from 1 April 2014 can be converted.
This Conversion of Private Company into OPC would not affect the provisions of the company’s contractual obligations and the responsibilities, liabilities, and claims that existed before the conversion; and, in such case, the OPC would be liable for such claims, liabilities, and obligations as set forth in the law.
When a promoter of a private company chooses to resign from his position, the company’s structure tends to collapse when the promoter chooses to resign from his position. The professional in such a situation suggests that the company be converted to an OPC structure. The OPC is a form of business structure that does not require more than one shareholder in order to become incorporated.
Benefits of One Person Company
1. Decision making: It becomes easier to make decisions when there is only one person to make them. By having only one person to make the decision, the decision-making process becomes faster and time can be utilized to complete other productive tasks.
2. Lesser Compliance: One person companies have minimal ROCs and annual compliances.
3. Reduced workload: One Person Companies have fewer tasks to deal with, such as annual filing, share certificates, etc.
4. No AGM required: Private limited companies are required to hold an annual general meeting at least once a year, as well as comply with many other legal requirements which are mandatory for companies with more than one shareholder.
PLC to OPC Conversion Checklist
For a private limited company to be converted into a one-person company, the following requirements must be followed:
- Both the company’s balance sheet as well as its books of accounts should have been prepared in a timely fashion by the company.
- ROC (Registrar of Companies) returns for the company have been listed and filed.
- During this audit, we will be checking for the purpose of ensuring the company has paid the required stamp duty on the share certificate as well as ensuring that the share certificates have been properly matched to the payment of stamp duty.
- All TDS(Tax Deducted at Source) have been deducted by the company and copies of all TDS returns have been submitted.
- Before initiating the conversion of the company’s VAT and Service Tax to GST, the company had paid the appropriate taxes and filed the appropriate returns.
- It is important to check that the company is maintaining a record of its board meetings, as well as shareholder meetings at its registered office, and updating the company’s records.
- According to state laws, the company operates offices, shops, warehouses, etc., under the shop and establishment acts.
- If applicable to the state in which the company’s registered office is situated and the states in which it has employees, the company complies with the requirements of the professional tax, if applicable to the state in which the company has its employees.
- It is necessary for the company to register under the Employees State Insurance Corporation (ESIC) if it has more than 10 employees, as well as under the Provident Fund when there are more than 20 employees. The company should also be reporting monthly returns and paying dues under both the Provident Fund and the ESIC.
A There are a few provisions that can change a private limited company into a one-person company:
- There is less than 50 lakhs of capital provided by the company.
- As a result of the previous three progressive financial years, it is expected that the company’s turnover will be under the threshold of Rs. 2 crores in the coming financial year. Additionally, if the company is new and has not yet completed three years, then the turnover will be calculated from the date of its incorporation.
- A single individual of Indian nationality shall be the only shareholder of the resulting OPC.
- The shareholder of the OPC is a person who resides in India for 180 consecutive days throughout the calendar year and is a resident of India.
- In order for the OPC to result, its shareholder can’t be a shareholder or candidate of any other OPCs.
- OPCs cannot have minors as members or members.