Legal Advisor

Are you a sole owner of a private company and looking for ways to unlock the benefits of a One Person Company (OPC)? Converting your private company into an OPC could be a viable option to consider. In this article, we will provide you with a comprehensive guide on how to convert your private company into an OPC and explore the benefits that come with it.

What is a One Person Company (OPC)?

A One Person Company (OPC) is a type of company that is owned and managed by a single person, who acts as the sole shareholder, director, and manages the affairs of the company. It is a separate legal entity with limited liability, which means that the personal assets of the owner are not at risk in case of any liabilities or debts of the company. OPCs are regulated by the Companies Act, 2013 in India.

How to Convert Your Private Company into an OPC?

Converting your private company into an OPC involves a series of legal and procedural steps. Here’s a step-by-step guide on how you can do it:

1. Obtain Director Identification Number (DIN) and Digital Signature Certificate (DSC): If you don’t already have a DIN and DSC, you need to obtain them. DIN is a unique identification number required for all directors of a company, and DSC is an electronic signature that is used for signing documents electronically.
2. Check Eligibility: According to the Companies Act, 2013, only private companies with a paid-up share capital of up to Rs. 50 lakhs and an average annual turnover of up to Rs. 2 crores for the preceding three financial years are eligible to convert into an OPC. Make sure your private company meets these criteria.
3. Pass Resolution: Hold a board meeting and pass a resolution approving the conversion of the private company into an OPC. This resolution should be filed with the Registrar of Companies (ROC) within 30 days of passing it.
4. File Form INC-6: File Form INC-6 with the ROC for the conversion of your private company into an OPC. This form requires you to provide details such as the name and address of the OPC, the particulars of the shareholder and the nominee, and a declaration by the subscriber and the nominee.
5. Obtain NOC from Creditors: Obtain a No Objection Certificate (NOC) from all the creditors of your private company. This NOC should be filed with the ROC along with Form INC-6.
6. Update Memorandum and Articles of Association (MOA and AOA): Update the MOA and AOA of your private company to reflect the changes after conversion into an OPC. The MOA and AOA should be filed with the ROC within 30 days of passing the board resolution.
7. File Form INC-5: File Form INC-5 with the ROC declaring that your private company has only one person as a member, and no other person holds any beneficial interest in the company’s shares.
8. Issue Share Certificate: Issue a share certificate to yourself as the sole shareholder of the OPC, and update the shareholding pattern of the company in its records.
9. Update Other Registrations and Licenses: Update other registrations and licenses of your private company, such as PAN, GST, etc., with the relevant authorities to reflect the change in the company’s status as an OPC.

Benefits of Converting into an OPC

Converting your private company into an OPC can offer several benefits, including:

1. Limited Liability: As the sole owner of the OPC, your personal assets are protected from any liabilities or debts of the company. Your liability is limited to the extent of your investment in the company.
2. Ease of Management: Being the sole director and shareholder of the OPC, you have complete control over the decision-making process and can manage the company’s affairs more efficiently without having to consult with other shareholders or directors.
3. Legal Entity Status: OPC has a separate legal entity status, which means it can enter into contracts, sue or be sued, and own assets in its own name. This provides credibility to your business and enhances its ability to enter into contracts and engage in business transactions.
4. Continuity of Business: OPC enjoys perpetual existence, which means that the company continues to exist even in the event of the death or incapacitation of the sole owner. This ensures continuity of the business and minimizes disruption.
5. Tax Benefits: OPCs are eligible for various tax benefits, such as availing lower tax rates under the Income Tax Act, 1961, and claiming deductions for business expenses. This can result in significant tax savings for the sole owner.
6. Minimal Compliance Requirements: OPCs have lesser compliance requirements compared to private companies, as they are exempt from certain provisions of the Companies Act, 2013. This includes not having to hold annual general meetings, and having relaxed audit and financial reporting requirements.
7. Increased Access to Funding: Conversion into an OPC can enhance the company’s credibility and make it eligible for funding from banks, financial institutions, and investors. This can provide the necessary capital for business expansion and growth.

Conclusion

Conversion of Private Company into OPC can offer several benefits, including limited liability, ease of management, legal entity status, continuity of business, tax benefits, minimal compliance requirements, and increased access to funding. However, it is important to carefully evaluate your company’s eligibility, requirements, and legal obligations before proceeding with the conversion process. Seeking professional advice from legal and financial experts can be helpful in ensuring a smooth and successful conversion. Unlock the benefits of OPC and take your business to new heights with this advantageous legal structure.