Convert a Private Limited Company to an OPC
One Person Company (OPC) can be formed with only 1 owner, who acts as both the director as well as a shareholder of the company. There can be more than 1 director, but not more than 1 shareholder. For converting a Private Limited Company to an OPC, your paid-up capital and annual turnover should be less than ₹ 50 lakh and ₹ 2 Crore respectively. To convert PLC to OPC will not affect the existing debts, liabilities, obligations or contracts of the OPC.
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Overview to CONVERT PLC TO OPC
The Companies Act of 2013, which creates a method to convert one class of company into another, allows for convert PLC to OPC (One Person Company). Starting on April 1, 2014, Section 18 of the Act expressly permits converting an existing registered private limited company. The conversion of a PLC to an OPC does not affect the company’s duties or contractual commitments before to conversion; such claims, liabilities, and obligations will be enforceable by law, and the subsequent OPC will be liable for them.
Benefits of conversion from PLC to OPC
1) Limits Director’s Liability
Businesses frequently require financial assistance. Owners of sole proprietorships are personally liable for all debts. If the business cannot repay the loan, the owner may be forced to sell his or her car, home, or jewellery. Only the money used to create the business would be lost in an OPC; all personal property would be secure.
2) Continuous Existence
If a promoter operated as a sole proprietorship instead of an OPC, his or her business would cease to exist at his or her death. Because an OPC has its own legal identity, it will continue to exist after being passed on to the nominee director.
3) Fewer Compliances
Annual filings are limited to share certificates and statutory registers since an OPC can only have one director and one shareholder.
CHECKLIST to Convert PLC to OPC
To convert a private limited business into a one-person firm, the following requirements must be met:
- The company’s books of accounts and balance sheet should have been properly created.
- All ROC (Registrar of Companies) returns have been listed and filed by the corporation.
- Examine whether the corporation has paid the required stamp duty on the share certificate’s outcome and that the share certificates are appropriately matched with the stamp duty payment.
- The company has deducted all TDS (Tax Deducted at Source) and filed relevant TDS returns.
- The company has paid VAT and Service Tax and filed suitable returns before initiating the conversion.
- To check whether the company maintains a record of the meeting minutes for its board and shareholders and keep updated registers at its registered office.
- The company is registered under the shop, and the establishment acts as per the applicable state laws, where they control offices, shops, warehouses, etc.
- If appropriate, in the state where the company’s registered office is located and the states where it has employees, the company complies with the professional tax obligations.
- If the number of employees is more than 20, the firm is registered with PF, and if the number of employees is more than 10, the company is registered with ESIC (Employees State Insurance Corporation), and if the company files monthly returns and pays dues as required by PF and ESIC.
A private limited company can be changed into a one-person company based on the following provisions:
- The provided capital of the company is less than Rs. 50 lakhs.
- During the previous three financial years, the company’s yearly turnover should have been less than Rs. 2 crores. Furthermore, if the company is new and has not been in operation for three years, the turnover will be calculated from the date of formation.
- Only one individual of Indian nationality will be a stakeholder in the resulting OPC.
- The OPC’s shareholder is a person who spends 180 days of the calendar year in India.
- The shareholder of the resulting OPC must not have incorporated any other OPC, or they are not a candidate of any other OPC.
- A minor cannot be a member or part of an OPC.
Documents required to convert PLC to OPC
- Notice to the board of directors.
- Copy of board resolution approving delivery of notice.
- Copy of Altered Memorandum of Association.
- Copy of Altered Articles of Association.
- Declaration from directors.
- List of members.
- Copy of NOC from secured creditors.
- Copy of NOC from detectors and shareholders.
- Last audited financial statements.
procedure for Convert PLC to OPC
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FAQs on Convert PLC to OPC
- A director’s salary.
- Issuing dividend payments from available profits. Taking money out of a limited company, as a director’s loan.
- Claiming expenses for business-related items.
- A one-person corporation is run by a single person, whereas a group of people runs a PLC.
- There is no provision in a PLC for appointing a nominee to a company member. Because there is only one person in OPC when a member is absent, the nominee will assume his or her position.
- In OPC, there is only one director. A private business, on the other hand, has two directors.