Analysis of Union Budget 2017 provisions of Income Tax Service Tax Excise Duty Custom Duty with Budget Highlights Commentary Speech, Notification, News & Articles.
CA Dipen Shah
In recently passed Companies bill 2012, new concept of One Person Company has been introduced. It is considered as revolutionary step taken by government to encourage unorganized proprietorship business to enter in to organized corporate world. The concept “one person company” is widely accepted in developed countries and neighbor country -china. Minimum two members are required to form a private company and minimum seven members required for public company under prevalent law. This is looked as barrier in forming private limited company by businessmen who do not want any participant in business. To remove this difficulty it was practice adopted to allot minimum share to someone in family or friend. But with introduction of OPC it will be possible to form a company with only one member. OPC provides benefit of both form of business- Proprietorship and Company. With OPC business can be run same way as proprietorship, of course by complying with law, and keeping liability of the member limited by share or guarantee, as the case may be. At the same time it has casted responsibility on the society and market players to recognize OPC as company and not another form of proprietorship business. Because much public interest not involved in OPC, many relaxations have been granted to OPC in compliances and procedural aspects. It will enable them to attain natural growth. Some of the provisions favorable to OPC are discussed below.
• Detailed procedure to form OPC has been described in clause 3(1)( c) of Companies bill 2012. As reference of OPC has been made in definition of private limited company given vide clause 2(68), OPC shall be private limited company in all respect except OPC can be formed by single subscriber to the MOA. To comply with basic requirement of perpetual succession and golden rule “member may come and go, but company must go on” provision has been made in the law to appoint nominee of original subscriber. Company has to file with registrar, consent of one other person (nominee) who shall become member of the company in the case of death or incapacity of original subscriber of the company. Such nominee can withdraw consent by following procedure which shall be prescribed in rules. At the same time subscriber can also change the nominee by giving prescribed notice. Upon changing the nominee member shall give intimation to company and company in turn shall inform to registrar within time limit to be prescribed by rules made in this behalf. Minimum share capital shall be same as in the case of private limited company-Rupees One Lakh.
Three types of company can be formed as OPC
1. Company limited by shares
2. Company limited by guarantee
3. Unlimited company
• Proviso to clause 12(3) requires that word “One person company” shall be mentioned in brackets below name of company.
• As per clause 149(1)(a) minimum one director required in OPC. However there bar on appointment of more than one director. Until director(s) appointed individual being member shall be deemed director of the company-clause 152(1).
• Annual return in other companies shall be signed by director and company secretary whereas in the case of OPC annual return shall be signed by CS and if no CS, it shall be signed by director of the company.
• By virtue of clause 96(1) OPC are exempted from holding AGM.
• As per clause 122(1) provision of clause 98, 100 to 111(both inclusive) pertaining to procedural aspect of general meetings and voting at general meeting are not applicable to OPC. Clause 122(3) and 122(4) of the bill has created deeming fiction for holding of general meeting and board meeting respectively. In respect of business required to be transacted only at General Meeting through special or ordinary resolution, member of the company shall communicate the resolution to the company, enter it into minutes book, sign and date. Meeting shall be deemed to have been held on the date so entered.
• In the case of OPC having only one director, compliance with provisions of conducting of Board meeting impracticable, hence it is made not applicable. In that case business which required to be transacted at board meeting shall be sufficient if resolution is entered in to the minutes book, signed and dated. Such date shall be deemed to be the date of meeting of board of directors.
• As per clause 134 every company is required to place financial statements along with directors’ report and auditors’ reports before members in general meeting. Directors’ report must include explanation and information required under clause 134(3). However in the case of OPC Directors’ report shall include only explanation on qualification, reservation, disclaimers or adverse remarks of the auditors if any. All other information as required under clause134(3) need not be given in directors’ report of OPC.
• By virtue of clause 2(68) OPCs have been relaxes from preparing Cash Flow Statement and they have to prepare profit and loss account, balance sheet and explanatory notes only. Moreover as per clause 134, Financial Statement shall be signed by only one director and submitted to the auditor for his report thereon.
• Time limit of 180 days from the closure of financial statement has been granted to OPC to file financial statement with Registrar.-proviso 3 to clause 137(1).
• 3rd proviso to clause 173(5) states that provisions related to minimum board meeting to be conducted during the year by a company and minimum quorum at board meeting shall not apply to OPC having only one director. In case OPC has more than one director, it shall conduct at least one board meeting in each half year and time gap between two meetings should be minimum 90 days.
• When OPC enters into contract which is not entered into in ordinary course of business with its member who is also director of OPC, it should ensure that contract is in writing. If such contract is not made in writing, OPC should ensure that terms of the contract are contained in memorandum or recorded in minutes books. Such minutes should be adopted in next board meeting.- Clause 193 of companies bill 2012.
Relaxations and exemptions granted and benefits available to OPC will surely encourage small and mid size business houses to carryon business in corporate form. It is seen as move of unorganized proprietorships towards organized corporate domain. It is seen as rise of new era.
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