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CONVERSATION OF OPC TO PRIVATE/PUBLIC

CONVERSION OF OPC TO PRIVATE/PUBLIC

INTRODUCTION

An One Person Company (OPC) can be converted into a Private Limited Company (Ltd) or a Public Limited Company (Ltd) under the Companies Act 2013. There are two ways in which an OPC can be converted:

  • Voluntary Conversion: An OPC can voluntarily convert into a Pvt Ltd or a Public Ltd after two years of its incorporation. However, there are certain conditions that need to be met before an OPC can be voluntarily converted. These conditions are:
    • The paid-up share capital of the OPC should not exceed Rs. 50 lakhs.
    • The average annual turnover of the OPC should not exceed Rs. 2 crores.
    • The OPC should have at least two directors.

 

  • Compulsory Conversion: An OPC is required to convert into a Pvt Ltd or a Public Ltd if:
    • The paid-up share capital of the OPC exceeds Rs. 50 lakhs.
    • The average annual turnover of the OPC exceeds Rs. 2 crores.

The process of converting an OPC into a Pvt Ltd or a Public Ltd is as follows:

  1. The OPC needs to pass a special resolution in its board meeting to approve the conversion.
  2. The OPC needs to file an application for conversion with the Registrar of Companies (RoC).
  3. The OPC needs to amend its Memorandum of Association (MoA) and Articles of Association (AoA) to reflect the conversion.
  4. The OPC needs to issue new shares to the new shareholders.
  5. The OPC needs to appoint new directors.

Some Of the Advantages and Disadvantages of Converting a Private Limited Company to A Public Limited Company:

Advantages:

  • Increased access to capital: A public limited company (PLC) can raise capital by issuing shares to the public. This can be a significant advantage for companies that need to raise large amounts of capital to grow their business.
  • Increased liquidity: The shares of a PLC can be traded on a stock exchange, which gives shareholders the ability to easily sell their shares if they need to. This can increase the liquidity of the company’s shares and make them more attractive to investors.
  • Enhanced credibility and reputation: A PLC is generally considered to be more credible and reputable than a private limited company. This is because a PLC has a wider shareholder base and is subject to more stringent regulatory requirements.
  • Increased opportunities for growth: A PLC can more easily acquire other companies or expand into new markets. This is because a PLC has access to a wider pool of capital and can raise funds more easily.

Disadvantages:

  • Increased regulatory compliance: A PLC is subject to more stringent regulatory requirements than a private limited company. This can increase the cost of compliance and make it more difficult to manage the company.
  • Loss of control: When a company converts to a PLC, the founders and early investors may lose control of the company. This is because the shares of a PLC can be traded by the public, which means that anyone can buy shares in the company.
  • Increased scrutiny: A PLC is subject to more scrutiny from the media and the public. This can make it more difficult to keep confidential information confidential.

Some Of The Key Points To Consider When Converting A Private Limited Company To A Public Limited Company:

  • Increased access to capital: A public limited company (PLC) can raise capital by issuing shares to the public. This can be a significant advantage for companies that need to raise large amounts of capital to grow their business.
  • Increased liquidity: The shares of a PLC can be traded on a stock exchange, which gives shareholders the ability to easily sell their shares if they need to. This can increase the liquidity of the company’s shares and make them more attractive to investors.
  • Enhanced credibility and reputation: A PLC is generally considered to be more credible and reputable than a private limited company. This is because a PLC has a wider shareholder base and is subject to more stringent regulatory requirements.
  • Increased opportunities for growth: A PLC can more easily acquire other companies or expand into new markets. This is because a PLC has access to a wider pool of capital and can raise funds more easily.
  • Increased scrutiny: A PLC is subject to more scrutiny from the media and the public. This can make it more difficult to keep confidential information confidential.
  • Loss of control: When a company converts to a PLC, the founders and early investors may lose control of the company. This is because the shares of a PLC can be traded by the public, which means that anyone can buy shares in the company.
  • Increased regulatory compliance: A PLC is subject to more stringent regulatory requirements than a private limited company. This can increase the cost of compliance and make it more difficult to manage the company.