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You are here: Home / company law / When you can convert a One person company to private limited

When you can convert a One person company to private limited

Last modified on February 28, 2019 by CA Bigyan Kumar Mishra

Concept of one person company or OPC has been introduced in India by the Companies act, 2013.

As per the provisions, one member with a nominee can form a OPC by registering it with the ministry of corporate affairs.

Nominee is a person who becomes member of the One Person Company in case of death or any other incapacity of the member.

One person company has certain limitations due to which its generally not a preferred choice among entrepreneurs.

Here is a list of certain important restrictions on OPC:

  • Not allowed to carry out Non-Banking Financial Investment activities including investment in securities of any body-corporate.
  • Should not have more than Rs 50 lakh paid-up share capital or Rs 2 Crore turnover. Beyond this limit, status of OPC will be lost.
  • Can’t have more than one investor or member.
  • Can’t be converted to a section 8 company (charitable).
  • Can’t have more than 15 directors.

May be due to these restrictions or for some other reason, you may decide to convert a one person company to private limited.

If you have decided, then you can do so by following procedures as specified in companies act, 2013.

As per companies act, 2013, a OPC or one person company can get converted to a private limited in following two ways:

  • Mandatory conversion
  • Voluntary conversion

Mandatory conversion of OPC to Pvt Ltd

If paid up share capital of a OPC is increased beyond 50 Lakh rupees or its average annual turnover during the relevant period exceeds Rs 2 Crore, then it has to compulsorily get converted to a private limited.

This means, a OPC can’t have paid-up share capital of Rs 50 Lakhs or average annual turnover of Rs 2 crore during the relevant period.

If the one person company crosses this limit, then it has to invariably file forms with the registrar of companies for conversion to a private limited company, with in a period of 6 Months on breaching the above threshold limits.

Average turnover for the relevant period as stated above, should be considered for the period immediately preceding 3 consecutive financial year.

Voluntary conversion of One Person Company to private limited

A One Person Company or OPC has option to get converted to a private limited. But, it can not be convert voluntarily into any kind of company unless two years have expired from the date of incorporation.

After completion of 2 years from the date of incorporation, you can start the process of conversion.

For instance, if OPC’s date of incorporation is 01-01-2018, then it can be converted to a private limited after 01-01-2020. You can find your date of incorporation from the certificate issued by Government. Or else, you can search MCA database to get it from your company’s master data available to public for verification.

If you are willing to convert a OPC to private limited before the completion of 2 years, then paid up share capital has to be increased to more than Rs 50 lakhs or turnover should be more than 2 crore.

Please note, it’s not necessary that a One Person Company or OPC should only be converted to a private limited. You can also convert it to a public limited.

After satisfying the criteria of conversion, you can apply to registrar to get converted to private limited.

Categories: company law

About the Author

CA. Bigyan Kumar Mishra is a fellow member of the Institute of Chartered Accountants of India.He writes about personal finance, income tax, goods and services tax (GST), stock market, company law and other topics on finance. Follow him on facebook or instagram or twitter.

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