Introduction
A One Person Company (OPC) is a unique business structure introduced under the Companies Act, 2013, to allow a single individual to operate a corporate entity with limited liability and separate legal status. It is ideal for small businesses and individual professionals who seek the advantages of incorporation without needing partners or shareholders. However, the OPC model is designed for relatively small and controlled operations. Once the company’s size or financial scope exceeds certain thresholds, it becomes ineligible to continue as an OPC. This safeguard ensures that larger businesses transition into more accountable and structurally appropriate corporate formats, such as private or public limited companies.

Threshold of Paid-Up Share Capital
One of the key criteria that triggers ineligibility to remain an OPC is the increase in paid-up share capital. If the OPC’s paid-up capital exceeds ₹50 lakhs at any time, the company can no longer continue as an OPC. Paid-up capital is the amount of money received by the company from the shareholders in exchange for shares. When this capital crosses the limit, it indicates business expansion that warrants a more formal and inclusive governance structure. This threshold is designed to transition the company into a model that supports multiple stakeholders and enhanced accountability.

Turnover Exceeding Regulatory Limit
Another condition for ineligibility arises when the average annual turnover of the OPC exceeds ₹2 crores in any of the preceding three consecutive financial years. This average is calculated based on the company’s revenue from operational activities. Surpassing this limit signals that the company has scaled its business substantially, and therefore, it is required to convert into a private or public limited company. The turnover cap ensures that larger commercial activities are subject to broader compliance, including increased transparency, financial reporting, and board oversight.

Requirement to Convert Within Six Months
Once an OPC breaches either the paid-up capital or turnover thresholds, it is required to convert into a private limited or public limited company within six months. This timeframe is provided to allow the company to make necessary structural changes, including the appointment of additional directors, alteration of the Memorandum and Articles of Association, and filing of requisite forms with the Registrar of Companies. Failure to comply with this requirement may result in penalties and regulatory scrutiny.

Regulatory Filing for Conversion
Upon becoming ineligible to remain an OPC, the company must file Form INC-6 with the Registrar of Companies to initiate the conversion process. This form must be accompanied by board resolutions, revised incorporation documents, and other declarations. The Registrar will issue a new Certificate of Incorporation confirming the change in the company’s status. Until this process is completed, the company is prohibited from continuing operations as an OPC, and it must not enter into new contracts or commitments that assume its previous structure.

Ineligibility Due to Shareholder Structure
An OPC must always have only one member. If additional members are added, whether by share transfer or capital allotment, the OPC immediately becomes ineligible to retain its status. The Companies Act does not permit an OPC to have more than one shareholder. In such cases, the company is required to convert into a private limited company to accommodate the expanded ownership structure. Similarly, if the company intends to bring in investors, it must first undergo conversion.

Change in Residency Status of Member
Initially, only Indian citizens residing in India for at least 182 days during the preceding financial year were eligible to incorporate an OPC. While rules have been relaxed to allow certain categories of Non-Resident Indians (NRIs) to form OPCs, if the sole member no longer meets the eligibility criteria due to prolonged absence or a change in citizenship status, the OPC may become ineligible unless corrective measures are taken. In such scenarios, the company may need to either restructure or convert into a more suitable corporate entity.

Violation of Operational Restrictions
OPCs are restricted from engaging in certain activities, such as carrying out Non-Banking Financial Company (NBFC) operations or issuing shares to the public. If an OPC begins engaging in activities that are outside the permissible scope or violates the regulatory provisions of the Companies Act, it may be directed by the Registrar of Companies to convert or take corrective action. Continued non-compliance may result in penalties, disqualification of the director, or dissolution of the company.

Conclusion
The One Person Company structure is an efficient and streamlined model for small businesses and solo entrepreneurs, offering the benefits of corporate identity with minimal compliance burden. However, once the business grows in terms of capital, turnover, or operational complexity, it becomes ineligible to continue as an OPC. Regulatory safeguards, such as the limits on paid-up capital and turnover, are in place to ensure that expanding businesses shift to more robust and inclusive corporate structures. Understanding the conditions under which an OPC becomes ineligible helps entrepreneurs plan proactively, remain compliant, and facilitate a smooth transition to a broader company model as their business evolves.

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