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A One Person Company is a limited liability entity with only one shareholder, and a Private Limited Company is a limited liability entity that can have a maximum of 200 shareholders. A One Person Company can be converted into a Private Limited Company voluntarily.
The One Person Company is required to have 2 directors and 2 members for converting itself into a Private Limited Company. The Registrar of Companies needs to appraise of the voluntary conversion in form INC 5, within 60 days.
The compliances that a Private Limited Company has to follow are different from that of a One Person Company’s. To begin with, a Private Limited Company requires more number of shareholders and directors. A general meeting will be held for the shareholder of the One Person Company for passing a resolution pertaining to meeting the requirements stipulated for a Private Limited Company. A board resolution will also be passed for amending the existing MoA and AoA of the One Person Company.
The One Person Company shall intimate the Registrar of Companies that the company is required to convert itself into a Private Limited Company.
Within 30 days of passing the special resolution for company conversion, the One Person Company shall file a copy of the same with the Registrar of Companies in Form No. INC. 6.
Post due verification, the ROC approves the application. The One Person Company will be re-incorporated as Private Limited Company.
A One Person Company is required to have 2 directors and 2 members for converting itself into a Private Limited Company.
Yes, it is essential. However, it is not just the MoA that needs alteration, but the AoA as well. Despite of the conversion being voluntary or mandatory, the MoA and AoA of the One Person Company requires necessary amendments.
Ease of raising funds, limited liability of owners and separate legal existence are the major benefits inherent of the conversion. Also, the conversion encourages entrepreneurs to enter into the corporate world.
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