In India, a Public Limited Company (PLC) is a popular choice for businesses seeking to raise capital through public offerings and have multiple shareholders. However, as businesses evolve and circumstances change, there may be instances where converting a PLC to a One Person Company (OPC) becomes a viable option. This article explores the reasons behind such a conversion and provides a step-by-step guide on how to convert a PLC to an OPC.
Reasons to Convert a PLC to an OPC
- Simplified Compliance Requirements: One of the key reasons for converting a PLC to an OPC is the reduced compliance burden. OPCs are subject to fewer regulatory requirements compared to PLCs, as they have only one member and are exempted from holding annual general meetings and other formalities that apply to PLCs. This conversion can save time, effort, and costs associated with compliance.
- Enhanced Control and Decision-making: Converting a PLC to an OPC allows the sole member to have complete control over the company’s affairs. This increased control enables quicker decision-making, streamlines the decision-making process, and facilitates the implementation of strategic initiatives without the need for obtaining consent from multiple shareholders.
- Personal Liability Protection: By converting to an OPC, the sole member gains limited liability protection. This means that their personal assets are safeguarded in case of any legal liabilities or financial obligations of the company. This protection provides peace of mind to the sole member, who can focus on business operations without the constant concern of personal liability.
- Easier Succession Planning: In a PLC, ownership shares can be transferred or sold to multiple shareholders. However, in an OPC, there is only one member. Converting a PLC to an OPC simplifies succession planning, as the sole member can easily transfer ownership to a nominated person through a will or other legal mechanisms.
How to Convert a PLC to an OPC
Step 1: Director Approval
Obtain the approval of the board of directors to initiate the conversion process. This requires convening a board meeting and passing a resolution approving the conversion and authorizing the filing of necessary documents.
Step 2: Consent from Members
Obtain consent from the shareholders of the PLC for the proposed conversion. This consent is obtained through a special resolution passed during an extraordinary general meeting (EGM).
Step 3: Application Preparation
Prepare the necessary documents for conversion, including a memorandum of association (MOA), articles of association (AOA), and an application for conversion in the prescribed form. Ensure that the MOA and AOA comply with the requirements of an OPC as specified under the Companies Act, 2013.
Step 4: Approval from Registrar of Companies (ROC)
Submit the application for conversion to the ROC along with the required documents. The ROC will review the application and, if satisfied, issue a fresh certificate of incorporation. This new certificate of incorporation reflects the conversion of the PLC into an OPC.
Step 5: Transfer of Assets and Liabilities
Following the conversion, transfer the assets and liabilities of the PLC to the OPC. This includes updating the bank accounts, licenses, permits, contracts, and agreements in the name of the OPC.
Step 6: Update Registrations and Licenses
Update the registrations, licenses, and permits obtained by the PLC to reflect the new OPC structure. This includes updating registrations such as Goods and Services Tax (GST), Import-Export Code (IEC), and other applicable licenses.
Conclusion
Conversion of Private Company into OPC offers several advantages, including simplified compliance requirements, enhanced control, personal liability protection, and easier succession planning. By following the step-by-step process outlined in this guide, businesses can successfully convert their PLC into an OPC.