One person company (OPC) is an entity which consists of only with one person and is considered as a private company for all legal purposes. This concept was introduced in India through the Companies’ Act 2013.
The OPC has only one share holder who is citizen of India. The shareholder can nominate another person to take over in case of death or incapacity. This will be done with the consent of the other person. The nominee should also be an Indian citizen.
Director:
The company can have a minimum of one director who can also be the sole share holder. A maximum of 15 directors are allowed.
Terms and conditions to follow while starting an OPC:
A person cannot start more than one OPC or become a nominee in more than one such organization.
A minor cannot be a member or nominee of the one person company or cannot hold any share with beneficial interest.
A one person company cannot be incorporated or converted into a company under section 8 of the act
An OPC cannot convert voluntarily into any other type of organization until the expiry of two years starting from the date of incorporation of the company. This condition has an exception; if the share capital of the company crosses INR 50 lakh or the annual turnover of that particular year crosses INR 2 crore then the company has to file ROC for conversion in to a private company within a period of 6 months after exceeding the threshold limits. Form INC-5 has to be filled for this conversion.
Incorporating a OPC
Obtain Digital Signature Certificate (DSC) for the proposed director. And also obtain digital identification number (DIN).
Digital signature certificate (DSC)
It is the digital equivalent of physical certificates. It is issued by the office of controller of certifying authorities (CCA) to Certifying Authorities (CA). CA issues DSC to end user.
Director Identification number (DIN)
It is an unique identification number issued by the ministry of Corporate Affairs for an existing director or a person who has applied for being the director of a company
Name reservation
To check the availability of name of the company, form INC-1 should be filled. The proposed name will end with private limited.
Incorporation
Within 60 days of name approval, form INC-2 should be filled for the incorporation of OPC. If the promoter is not the sole director of the OPC form DIR-12 has to be filled along with this.
If the company address is not specified in INC-2, within next 30 days, INC-22 has to be filled.
Incorporation of OPC with single integrated incorporation form INC-29 is allowed for this INC-1 is not a pre-requisite.
Mandatory attachments to e-form INC-2
Memorandum of association
Articles of Association
Along with this the residential proof, identity proof, PAN, consent and signature of the member and nomine. Utility bills (electricity, telephone, gas etc)
Memorandum of Association (MOA)
MOA contains the fundamental provision of the company and their objectives.
Articles of Association (AOA)
AOA contains rules and regulations of the internal management of the company. It is a contract defining the relationship between company and it members, along with rights and duties.
After name approval by ROC, MOA and AOA have to be drafted. The subscriber has to fill all the details regarding the name, address and occupation in their own handwriting and sign the subscription pages of AOA and MOA.
Payment of fees and stamp duty
After all the documents, the register has to make ROC fee payment and stamp duty electronically based on the authorized capital of the company.
Verification
After the submission of all the forms and payment of fees, ROC will verify and scrutinize the documents and will suggest changes in case of any discrepancy or errors.
Certificate:
After all the forms are duly approved by the ROC the digitally signed “certificate of incorporation” is issued in electronic form with the digital signature of ROC registrar. The company can begin operation post receiving the certificate.
Formalities after incorporation
According to the companies act 2013 following provision have to be followed post the incorporation:
To apply for shop act license, PAN TAN
Open current bank account
Pay subscription money with current bank account
Issue share certificate to subscriber by company.
File e-form INC-21 for the certificate of commencement of business with registrar of companies within 180 days from the date of incorporation.
Membership change
In case of death or incapacity of the member of OPC form INC- 4 should be filled for the change of ownership. The detail of the new owner has to be filled in this form.
OPC into private company
If after the completion of 2 years the OPC organization willing to convert into private company has to fill form INC-6.
Private company into OPC
A private company willing to convert itself into OPC also has to fill form INC-6. However the company should not have share capital of more than INR 50 lakh and annual turnover more than INR 2 crore at the time of conversion.
Advantages of One Person Company:
Separate legal entity
Registering as a company will give legal advantages, incur debts and can own properties. The members (share holder or director) of the company have no liability to the creditors of a company for debts.
Uninterrupted existence
A company can continue its existence until it legally decides to dissolve. This means it remains unaffected by the death of any member and continues to operate with new membership.
Borrowing capacity
A company has lot of channels for borrowing funds. It can accept deposits from public issue debenture, secured and unsecured). Even banks favor giving a large amount of financial assistance to the company rather than partnership firms or proprietary entities.
Transferability
Shares of a company are transferable to any other person. This can be done easily with signing the share certificates.
Property
A company being a legal entity can acquire and sell properties and no shareholder can gain claim rights over the property.
Limited liability
The members of the company in respect to the company’s debt are limited.
With the lengthy process involved in the registration of the company it is flexible to avail the services of various consulting firms who complete all the legal norms involved in the process.
Author Bio
Anand Rajendran, CEO of Uptra.in, a leading provider of legal services, including company registration. He is the Head of Communications at Uptra Consultancy Services, India’s largest online legal services facilitator.
Is there any turnover limitations?