One Person Company (OPC), a new concept which is popular now, introduced by the Companies Act, 2013. Before the enforcement of the Companies Act, 2013, a single person could not establish a Company, if an individual want to establish any business, he/she could only opt for Sole Proprietorship as at that time there had to be minimum of 2 Directors and 2 members for establishment of Company. But now One Person Company is a concept where a single person can incorporate a Company.
As per Section 2(62) of the Companies Act, 2013, a Company can be formed with 1 Director and 1 Member.
And the Director as well as Member can be the same person. Here Compliance requirements are lesser than that of a Private Company, having the features of Company and benefits of a Sole Proprietorship.
Earlier only a Natural person who is an Indian Citizen and resident in India was allowed to incorporate OPC but with the recent Amendment in Companies (Incorporation) Second Amendment Rules, 2021, which is effective from 1st Day of April, 2021, now even Non-Resident Indians (NRI) is allowed to incorporate OPCs in India. By making the amendment in sub-rule (1) of Rule 3 for words, “and resident in India”, following words substituted “whether resident in India or otherwise”. Further, for this rule, the period of resident in India has been reduced from 182 days to 120 days.
Advantages of forming OPC
- Easy Incorporation– It is easy to incorporate OPC as only one Director, one Member and one Nominee is required for its Incorporation. Even Member and Director can be a same person.
The Minimum Authorised Capital is Rs. 1 Lakh but there is no minimum Paid-up Capital requirement for incorporating any OPC.
- Minimum Compliance– Less compliances are required to comply in case of OPC such as no requirement to hold Annual General Meeting as OPC is exempted to hold Annual General meeting and Extra-Ordinary General Meeting, no requirement to prepare Cash Flow Statement, minimum of two Board Meetings are requiring to conduct.
- Perpetual Succession– OPC is perpetual in nature. At the time of incorporating the OPC, Nominee is required to be appointed by member. So, if in case member die, the Nominee will run the Company in place of member.
- Easy Management– It is easy to control and manage OPC as single person is running the company, no others approval is required for any decision making and implementation, so decision making and execution is also quick without any conflict and delay.
Disadvantages of OPC
- Suitable for small businesses- In case of OPC, maximum number of members can be one all the time, more number of members cannot be added in OPC to raise further capital.
- Certain Restriction of business- OPC cannot carry out Non-Banking Financial Investment activities, including the investments in securities of any corporates. OPC is also not permitted to convert itself into Section 8 Company.
Mandatory Compliances of OPC
- Maintaining Minutes of Board Meeting
- Maintaining Statutory Registers
- Minimum 2 Board Meeting as per Companies Act
- Appointment of Auditor
- Statutory Audit by Chartered Accountant
- Filing of ITR
- Filing of AOC-4
- Filing of MGT-7
Steps to Incorporate OPC
- Digital Signature Certificate (DSC) Application– The Proposed Director must have DSC, so DSC application for Director is first step for incorporating any OPC.
- Director Identification Number (DIN) Application– Once the DSC is made, the next step is to apply for DIN of Director. Filing of Form DIR-3 is an option available for existing Companies, the applicant is not required to file DIR-3 in case of new company, now DIN can be applied through SPICE+ form for up to three Directors.
- Name Application– The Name Application can be done through SPICE+ Form. After the approval of name, we can move to next step.
- Preparation of documents– Various documents are required to prepare for submission to ROC:
> Memorandum of Association
> Article of Association
> Consent of Nominee in Form INC-3
> Proof of Registered office
> Consent of Director in Form DIR-2
> Declaration of Director in Form INC-9
Filing of forms– Next Step is to file SPICE+ along with related documents and forms.
Issue of the Certificate of Incorporation– After verification of various required documents, the ROC will issue a Certificate of Incorporation along with the PAN & TAN, there is no need to file separate application for obtaining PAN and TAN and thereafter, Applicant can commence the business.
Even in case of OPC, the restriction of two years to convert the OPC into any kind of Company has been removed. Now, OPC can be converted into any kind of Company any time and without any limit of paid up capital and turnover.
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Disclaimer: The information given in this document has been made on the basis of the provisions stated in the Companies Act, 2013. It is based on the analysis and interpretation of applicable laws as on date. The information in this document is for general informational purposes only and is not a legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this document. Under no circumstances whatsoever, we are not responsible for any loss, claim, liability, damage(s) resulting from the use, omission or inability to use the information provided in the document.
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