Conversion of Private Limited Company to One Person Company

Manage Your
Company Conversion

Private Limited Company to One Person Company

Private limited company is a limited liability entity that can have a maximum of 200 shareholders whereas a One Person Company is a limited liability company with only one shareholder. One Person Company has minimal compliances, limiting their liability thereby. The main benefits of conversion include ease of management and comparatively lesser compliances to be followed. 

Conversion of a private limited company into a one-person company can be undertaken subject to a few conditions:

    • The paid-up capital of the Private Limited Company should be less than Rs. 50 Lacs
    • The annual turnover of the Private Limited Company must be less than Rs. 2 crores during the past three consecutive financial years. 
    • The shareholder of the resulting One Person Company shall be only one individual, a citizen and resident of India who has not incorporated any other One Person Company. Also, he/she cannot be a nominee of any other One Person Company.

Conversion does not mean that the Private Limited Company gets exempted of its existing liabilities. The liabilities, contractual obligations and debts of the company that existed prior to conversion shall remain enforceable by law even after conversion. The resulting One Person Company will be liable for them.  

Procedure for Conversion

Proposal for conversion needs to be approved by the board members. Notice will be issued to all members of the company. Date and time will be fixed in the board meeting to convene an extra ordinary general meeting. No Objection Certificate (NOC) from all the creditors of the company has to be obtained.

An extra-ordinary general meeting is convened to pass special resolutions for alteration of articles for conversion and alteration of memorandum. 

Copy of special resolution along with explanatory statement needs to be filed with the RoC in form MGT-14. Copy of altered Memorandum and Article shall be attached as well.

Upon acceptance of the application for conversion, the ROC issues a fresh certificate of incorporation. The Private Limited Company will be re-incorporated as One Person Company.

FAQ

Private limited company is a limited liability entity that can have a maximum of 200 shareholders whereas a One Person Company is a limited liability company with only one shareholder.

One Person Company has comparatively lesser compliances to follow. Ease of Management is another advantage inherent of the conversion. 

Yes, there is. The paid-up capital of the Private Limited Company should be less than Rs. 50 Lacs to be eligible for the conversion.

The annual turn over of the company should be less than Rs. 2 crores during the past three consecutive financial years. 

No, the resulting One Person Company will be liable for the pre-conversion liabilities, contractual obligations and debts of the Private Limited Company. 

error

Here's how you can share it