Why must you convert a Private Limited Company to an OPC?

A private Limited Company is one of the most popular business entities in India. It’s reliable, has the trust of most entrepreneurs and the support of the government. However, there are times when conditions aren’t aligned to make it grow. During those times, you must look for ways to salvage your business and converting it into a One Person Company provides a way.

But is that the only reason? Aren’t there more reasons to Convert Private Limited To OPC a better way to operate a business? Let’s discuss.

How can a Pvt Ltd Company become an OPC?

The process of conversion of a Pvt Ltd Company to an OPC contains the following steps:

Hold a board meeting

Hold a board meeting. Consult with your directors and get their in-principal approval to convert your ltd company to an OPC.  At this meeting, you’ll also decide the time and date to conduct a extraordinary general meeting.

Holding an Extra Ordinary General meeting

First, you must convene an Extra Ordinary General Meeting. It’s said so because you’re going to be taking the extra ordinary decision to transform your multi-director company into a One Person Business entity. Pass a special resolution to initiate the conversion.

File MGT-14

After you’ve passed the special resolution, file it using the MGT-14 and submit it to the Registrar of Companies. It will intimate the Registrar about the proposed conversion and start the official procedure of conversion.

Submitting the documents

Fill form INC 6 and submit it to the RoC alongside the following documents:

1. Director’s declaration
2. Declaration pertaining to the paid-up capital share of the company
3. List of members and creditors of the company
4. Audited Balance sheet and profit and loss account statement
5. Copy of NOC signed by the creditors of the Private Limited company\

Conversion to a One Person Company

Once you submit the relevant documents, the RoC will start assessing them. If he or she finds your documents satisfactory, your conversion request will have the approval

But why bother taking these many steps just to take a step down from a private limited company?

Also Read About: OPC To PVT Ltd

Why convert your Private Limited Company to an OPC?

Following are the reasons a entrepreneur might have to convert a private limited company to a One person company:

1. Autonomous decision Making: As a One Person Company, only a single director has the say in what goes on in business. Thus, if you’re someone who believes that you can single-handedly take the right decisions to push your company forward, you can choose One Person Company as your business entity.
2. Low annual turnover: Sometimes, the annual turnover of a private limited company is not enough to sustain both the directors. In such instances, it’s better to switch to a modest business entity so that the business can survive.
3. Dealing with business stress: Courtesy of the size of business of a private limited company, stress is eminent. So, if you want to relieve yourself from some of that, you can convert to a One Person Company.
4. Local Penetration: If you want to penetrate a local market, you have a better chance if you appear as a modest company than a big private limited company. As a one person company, you can establish your business in regions where people value an individual more than they value an organization.

Conclusion

A One Person Company exists because MCA understands the need to promote solo-entrepreneurs. However, it also acts as a safety net for private limited companies who have suffered from a great business loss. By converting your Pvt ltd company into an OPC, you can salvage your business to have better beginnings.

If you want more details, please reach out to Registrationwala.