Are you running a private company that is managed by one single person? And, are you wondering if there is a simpler way to structure things. Well then, we must tell you that there actually is a way!
The Companies Act, 2013, gives Indian businesses good flexibility when it comes to restructuring. One option is to convert your Private Limited Company (PLC) into an One Person Company (OPC).
At first, you might feel this to be a big move. But it can actually simplify your life quite a bit.
An OPC offers you the best of both (PLC and OPC). Yes, you still get the limited liability feature and a separate legal identity (which protects your personal assets) under OPC. The other thing is that, you’ll not have to do all the extra paperwork and compliance related activities, that you were doing while managing a private limited company.
Now, in this article, let us have a detailed look at how you can convert your PLC into an OPC under the Companies Act, 2013.
What is a One Person Company (OPC)?
Let us define One Person Company (OPC) in simple terms.
OPC, as the name suggests, is a single person company, with all the formal benefits of a registered company.
That is, you get the benefit of the limited liability and being a separate legal entity, without the requirement of having board of directors or multiple shareholders.
What does this mean?:
- Limited Liability: Under OPC, your personal assets are protected. If something goes wrong with the business, then your personal savings or property won’t be touched.
- Separate Legal Identity: OPC gives separate legal entity to your business. Under OPC your business can own property, sign contracts and do business in its own name.
- Single Ownership and Control: You are the single person in charge, hence you make the decisions. There are no board meetings needed for every small things.
- Less Red Tape: Compared to PLC, OPC has fewer compliance and regulatory requirements.
In the upcoming sections, we will get into the step-by-step process on how to convert. But first, let us make sure your company is eligible.
The Eligibility: Can Your Company Make This Conversion?
Before you move into the details about converting, there are a few things you need to check. Here is what your company needs to qualify for conversion:
You can’t be a Section 8 company
If you have a Private Limited Company that was registered under Section 8 of the Companies Act, then you won’t be able to convert to an One Person Company (OPC).
Written consent from members
To convert into an OPC you must get a consent letter from all your current shareholders. They must agree for you to convert your private limited company. And the consent must be written one.
Written consent from creditors
Not just shareholders, you must also get written consent from anyone who lends money to your company. Creditors would like to make sure that this conversion will not affect their ability to recover what you owe.
Follow the legal requirements
You must do everything in accordance with the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014. No shortcuts must be used.
If your company checks all these boxes, you are good to proceed!
The Step-by-Step Conversion Process
Below are the steps on how to convert your private company into an OPC.
Step 1: Convene a Board Meeting
At first, you need to get your Board of Directors together (even if that’s just you).
Your company’s board members should be given proper notice indicating that a Board meeting is being called. This is as per Section 173(3) of Companies Act, 2013 and called Secretarial Standard-1 (SS-1).
What should be on the agenda for this meeting? Let’s find out:
- Discussion and approval of conversion proposal
- Approval of the draft EGM notice (Before conversion you will need to call a special shareholder meeting (called an Extraordinary General Meeting or EGM) later)
- Fixing the date, time and venue of the EGM
- Letting someone handle the paperwork
Step 2: Get Board Approval
In the board meeting, the board formally approves the proposal for converting to an OPC “in principle.”
What does “in principle” mean? It means that the board is saying “YES” – this is a good idea. And they are recommending it to your shareholders for their approval.
Here you must understand that the board is not making the final decision. They are just recommending it to the shareholders. The final “YES” must come from the shareholders of the company.
Step 3: Sending the Shareholder Meeting Notice
Once the board meeting is done, it is time for the EGM. This is a special meeting, and not a normal one.
Under section 101 of the Companies Act, 2013, your company has to issue a notice of this upcoming EGM to all the directors, members (shareholders) and auditors.
Some rules that you must follow:
- You must send this EGM notice at least 21 clear days before the meeting date.
Can you make it in less than 21 days?:
- Yes, but only if everyone who would attend agrees in writing to be fine with shorter notice.
Now what should the notice consist of?:
- The notice will state the purpose of the meeting, essentially it is asking shareholders to approve the conversion of the company into an OPC. Give them all the information they need to know as to why this is happening.
Step 4: Get Your Shareholders’ and Creditors’ Approval
Now this is one of the crucial steps to note.
Your members (shareholders) will need to consider the conversion proposal at the EGM and approve it. This cannot be a simple majority vote. They have to pass something called a Special Resolution. A Special Resolution is passed by a much larger majority, usually at least 75% of the votes.
At this same time, you also need to get the No Objection Certificates (NOCs) from your creditors.
As we mentioned before, anyone who lends money to your company needs to formally agree that they don’t object to the conversion.
Also, get written consent from your members. All shareholders need to confirm in writing that they agree to this conversion.
Step 5: Submit Form MGT-14 to the Registrar
Once the Special Resolution is passed and all the required approvals are obtained, the next step is to notify the government by filing form MGT-14.
It is similar to formally giving a notice to ROC (Registrar of Companies). This form should be submitted within 30 days of the date of passing of the Special Resolution.
What do you attach to MGT-14 form?
- A copy of the Special Resolution passed by your shareholders, the notice of the EGM and explanatory statement as to why you are converting.
Step 6: Filing of Form INC-6.
Now it is time to complete (and file) a few formal applications to complete the conversion.
The Form INC-6 is specially designed for conversion of Private Company into an OPC. This form along with the fees mentioned is to be filed with the Registrar of Companies.
What is included in this application?
- All the supporting documentation that proves you did everything right.
- MGT-14 is the “Hey, we doing this” notification. INC-6 is the “Here is our formal request to change” application.
- Your amended Memorandum of Association (MOA) and Articles of Association (AOA) form the foundation of your company, so they must be revised for OPC status.
Do not miss this cut-off date! The 30 day window is fixed and you have to file this with ROC office in your state.
Step 7: Wait for approval from the Registrar
So now we come to the final step. You don’t have a role in this step. Mostly it is beyond your control.
The Registrar of Companies will review your application and all the supporting documents.
They’re going to make sure that:
- all is good,
- you have abided by the rules and
- you have all the right clearances.
They will approve the conversion when they are happy and issue a new Certificate of Incorporation. This new certificate will reflect the status of your Company as an OPC.
The most important thing to know is – this new Certificate of Incorporation is the proof that your conversion of business is effective as of the date shown.
Why Would You Want to Make This Change?
So let’s find out what are you actually getting out of this conversion.
- As we discussed initially, under OPC you will have fewer regulatory requirements compared to a private company. It also reduces your administrative work.
- Not just that, under OPC you get single ownership and control. There is no need to convince other shareholders or get board approvals for normal decisions.
- Along with this full control comes a extra bonus, just like a company an OPC have separate legal title. Your company remains as a legally recognised entity that can own things under it’s own name.
- Further, OPC also give you limited liability protection. This means that your personal assets remains separate from the company’s debts and liabilities.
- Essentially, you’re keeping all the professional legitimacy of a registered company while cutting out all the bureaucratic complexity. It’s the best of both worlds if you’re already running things solo.
Your Conversion Checklist
Here’s everything you’ll need to have ready:
Documentation you need to prepare:
- Board meeting notice and minutes
- EGM notice and the explanatory statement
- Copy of the Special Resolution passed by your members
- Written consent/NOCs from all creditors
- Written consent from all members
- Updated Memorandum of Association (MOA)
- Updated Articles of Association (AOA)
- Form MGT-14 (filled out completely)
- Form INC-6 (filled out completely)
- Prescribed fees for INC-6
Timeline to keep in mind:
- Call the board meeting → Get board approval
- Prepare and send EGM notice (at least 21 days before the meeting)
- Hold the EGM → Pass the Special Resolution, collect creditor NOCs, get member consents
- File Form MGT-14 within 30 days of the Special Resolution
- File Form INC-6 with prescribed fees
- Wait for ROC approval and the new Certificate of Incorporation
Conclusion
Converting your Private Limited Company into a One Person Company is a smart strategic move if you’re already operating as a solo owner.
The process is clear, well-defined, and followed by many entrepreneurs. As long as you follow each step carefully, get the necessary approvals, and file everything on time, you could get the application approved easily.
Yes, there is paperwork involved. Yes, you need to coordinate with shareholders and creditors. But once you are done, you will have a simpler structure that allows you to focus on what matters.
Ready to explore whether this is right for your company? Start by checking that checklist, or get in touch with our team here at MSA. We can walk you through the specifics for your situation.
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