Business means adaptability. Sometimes it is about expanding, and sometimes it is about simplifying. For many entrepreneurs in Chennai, especially solo founders, converting a Private Limited Company (Pvt Ltd) into a One Person Company (OPC) is the right move. But how is that done? What are its benefits, process, and regulations?
We will take you through everything you need to know about converting a Private Limited to OPC - in simple English.
Why Convert a Private Limited Company into an OPC?
At first, it may appear illogical - why change from a company with multiple shareholders/directors in place to a single ownership structure?
Sole ownership: If one of the shareholders is going to run the business by themselves, an OPC is the natural structure.
Less compliance: OPCs are required to comply with fewer regulatory norms than Private Limited Companies.
Easier to operate: With fewer shareholders, the decision-making process is quicker and more streamlined.
Cost-effective: OPCs will save you costs with no audits, compliance filings, or board meetings.
Legal Basis for Conversion
The entire process of converting a Private Limited Company to an OPC is governed by the Companies Act, 2013. More specifically, Section 18 and Rule 7 of the Companies (Incorporation) Rules, 2014 govern the process.
There is a catch, however; you cannot convert a Private Limited into an OPC unless the company has only one shareholder! So, if you have more than one right now, you’ll need to transfer all shares into one individual's name before you begin the conversion process. Also, the paid-up capital cannot exceed ₹50 lakhs, and the annual turnover cannot be more than ₹2 crores.
Who is eligible for conversion?
Companies that are eligible for conversion are those that fulfill the following conditions:
The company has only one shareholder.
The turnover is under ₹2 crore (based on the latest profit and loss account).
The paid-up capital is ₹50 lakh or less.
The company does not fall within the definition of a Non-Banking Financial Company or is involved in charitable activities.
Step-By-Step Process of Conversion in Chennai
Here's how you can convert your Private Limited Company and make it an OPC legally, if you are located in Chennai or Tamil Nadu.
Step 1: Board Meeting
First of all the company needs a Board Meeting to get a resolution for the proposed conversion. In the same meeting:
Discuss and approve the notice for an Extraordinary General Meeting (EGM); and,
Fix the date and time of the EGM.
Step 2: Shareholder Approval
In the EGM approve a special resolution for the conversion into OPC. Once approved, you need to file Form MGT-14 with the Registrar of Companies (ROC) within your permissible period of 30 days.
Step 3: Obtain No Objection Certificate (NOC)
Before starting the legal formalities for conversion, you must obtain all NOCs from the creditors and shareholders (if any).
Step 4: File Application for Conversion
The Form INC-6 is the need for applying for conversion with the Roc. The following documents must be attached/submitted along with the form:
Copy of board and special resolution;
Latest audited financials;
NOC from creditors;
A declaration from directors;
An affidavit certifying the Capital / Turnover condition.
Step 5: Issuing of the certificate
After reviewing and verifying, what is very important is for the ROC to ensure that all the documents provided are valid and that, in the authority of the application and certification, the ROC is satisfied with the object that the application represents.
What do you need?
Check out the list of requirements.
Board Resolution for Conversion
However, you need to have a special resolution passed in an EGM
Director's Declaration and Affidavit
NOC from creditors
Last audited financial statements
MOA and AOA (altered according to OPC structure)
Form MGT-14 and Form INC-6
If you have these documents available, it will help the process run smoothly and correctly.
Post-Conversion Compliance
After you convert your Pvt Ltd business into an OPC, you must do the following:
Update all stationery, bank accounts, PAN, GST, etc., with your new name and structure.
Begin filing all annual compliance reports required for OPCs.
Select the nominee for your OPC (a requirement of the law).
Update the Registrar of Companies (ROC) and other interested parties.
Why Entrepreneurs in Chennai like OPC
Chennai, a core commercial city in India, is seeing a transformation into a startup culture. Over the past few years, freelance consultants and solopreneur businesses are no longer uncommon. Many of these businesses start with a Pvt Ltd structure on a suggestion from their investor or from previous experience with other companies of the same structure.
In summary
Changing a Private Limited Company to a One Person Company is not about reduction; it is about redirection. For solo entrepreneurs in Chennai seeking more control with a lower compliance burden, OPC is an excellent compromise between a proprietorship and a conventional business.
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