Any type of organisation whether being a company or otherwise, it has its own benefits combined with its shortcomings. It is generally accepted principal to convert one form into another whenever the operations and situation demands. Where the shortcomings cannot be resolved through conversion, closing the entity is the other option to end up with the business operations or to convert the company into LLP.
Here, we will be discussing the conversion of Companies. This article will cover following conversions:
- Conversion of OPC to Private Company
- Conversion of Private Limited Company
- Conversion into LLP
- Winding up of the company
The conversion as well as winding up of the company requires the consent of the members accorded by the resolution at the General Meeting of the company.
Conversion of OPC:
Conversion of OPC into Private Limited Company is mandated where the paid up capital or turnover exceeds the threshold limit prescribed in the Act. However, voluntary conversion of OPC into Private Limited Company or conversion of Private Limited Company into Public Limited Company can be made by way of according the consent from the members of the company.
Following events requires mandatory conversion of OPC into Private Limited Company or Public Limited Company:
- Paid-up capital of OPC exceeds Rupees fifty lakh; or
- Average Annual Turnover during relevant period exceeds Rs. Two Crore.
When any of the above threshold limits gets attracted, notice in this regard shall be published in prescribed form within 60 days and the OPC shall be converted into Private Limited Company/ Public Limited Company within 6 months of trigger date.
Voluntary conversion cannot be effected before passing of 2 years after incorporation of OPC. Only after completion of Two Years from incorporation application for conversion of OPC into Private Limited Company can be made to MCA.
Conversion of Private Limited Company:
The increased requirement of the capital with the growth of the company demands the raising funds from public platform for huge funds to be infused on large scale.
Hence, for receiving the deposits from public or issuing securities to public the requirement of conversion of Private Limited Company into Public Limited Company is requisite.
Also, if the number of members of the company increases above the threshold limit of 200 members, the conversion into Public Limited Company will be mandatory requirement.
In this case, if company is not willing to raise funds from public, the company may distribute the shares into close group of people in order to retain control over the company and not to distribute the ownership at public domain.
Conversion into LLP:
In order to avail the higher creditability and temporary needs at the time of formation of business, businessmen start with the company form of organisation.
Yet, due to stringent provisions and continuous compliance requirements the focus of owners may be diverted from the main vision or operation of the company. Here, one can consider the option of conversion of company into Limited Liability Partnership (LLP).
Limited Liability Partnership is the hybrid organisation structure introduced in order to benefit the small scale businesses with the flexibility of Partnership Firms along with limited liability and body corporate structure of Companies.
Winding-Up of the Company:
In a situation where the business the requirement of ceasing the business activities arises whether due to an erroneous decision of choosing the company form of organisation, one can consider the option of sneaking out of this organisation by winding up of the company. At the end of the stated procedure, the existence of the company comes to end.
One more scenario is commonly seen where no business activities are carried on after the registration of the private limited company or others. Here, fast track procedure of winding up of the company is also an option to end up with the company; this procedure is called "Fast Track Exit."
In both procedures of winding up as well as fast track exit, various requirements are to be complied with so that the procedure can be completed without hindrances and delay.
Every form of organisation is paired with number of advantages and disadvantages. Requirement and compatibility of each form varies with involvement of new facts and different activities.
The crucial questions require the involvement of Practising Professional at various stages including continuity of operations of Company in order to take rational decisions when the need of expansion arises and when the conversion or dissolution of business shall be taken care. LegalWiz.in can help you at every phase of life cycle of Limited Company from Incorporation to carry on operations in compliant manner as well as its conversion and dissolution at affordable pricing with free consultancy of experience professionals.
Consult experts at LegalWiz.in at 89806 85509 or drop an e-mail at firstname.lastname@example.org, in case of any query or doubt to convert or dissolve a Private Limited Company. Professionals at LegalWiz.in are happy to guide you!
Tags :Corporate Law