In the Company Act of 2013, a new concept known as the One Person Company was established (OPC). A minimum of two directors and two members are necessary for a private company, whereas a minimum of three directors and seven members are required for a public company. Previously, a single individual could not form a company.
A One Person Company (OPC) is a business formed by a single person. Prior to the implementation of the Companies Act of 2013, a single individual could not form a business. If a person wished to start a business, he or she could only do it as a single proprietorship because a company required a minimum of two directors and two members to be formed.
A company can be created with just one director and one member, according to Section 2(62) of the Company Act 2013. It is a type of company with less compliance obligations than a private corporation. According to the Companies Act of 2013, a person can create a business with one member and one director. Both the director and the member might be the same individual. Thus, a one-person company means that one person, who may be a resident or an NRI, may incorporate his or her firm, which has the characteristics of a corporation and the advantages of a sole proprietorship.
Advantages of OPC
Legal status
The OPC is treated as a separate legal entity from the member. The OPC’s independent legal entity protects the sole individual who has formed it. The member’s responsibility is limited to his/her shares, and he/she is not personally accountable for the company’s loss. As a result, creditors can sue the OPC rather than the member or director.
Easy to obtain funds
Because OPC is a private business, it is simple to raise funds from venture capitalists, angel investors, incubators, and other sources. Banks and financial institutions prefer to lend to corporations rather than sole proprietorships. As a result, obtaining cash becomes simple.
Less compliance
The Companies Act of 2013 exempts the OPC from some compliance requirements. The OPC is not required to prepare the cash flow statement. The company secretary is not required to sign the books of accounts or annual returns, which must only be signed by the director.
Easy incorporation
It is simple to incorporate OPC because just one member and one nominee are necessary. The member might also be the director. The minimum authorised capital for incorporating OPC is Rs.1 lakh, however no minimum paid-up capital is required. As a result, it is simpler to incorporate than other types of companies.
Easy to manage
Because the OPC may be established and operated by a single person, it is simple to manage its affairs. Decisions are simple to make, and the decision-making process is rapid. Ordinary and special resolutions can be readily passed by the member by writing them into the minute book and signing them. As a result, operating and managing the firm is simple because there will be no disagreement or delays.
Perpetual succession
Even if there is just one member, the OPC has the property of perpetual succession. The single-member must appoint a nominee while integrating the OPC. When a member dies, the nominee takes over the business.
Disadvantages of OPC
Only suitable for small businesses
OPC is appropriate for small business structures. At any given moment, the OPC can have no more than one member. More members or shareholders cannot be joined to OPC in order to raise additional capital. As a result, new members cannot be joined as the company expands and grows.
Restriction of commercial activity
The OPC is not permitted to engage in Non-Banking Financial Investment operations, including investments in corporate securities. It cannot be transformed into a company with philanthropic purposes as defined in Section 8 of the Companies Act of 2013.
Ownership and management
Because the only member can also be the company’s director, there will be no obvious separation between ownership and management. All decisions must be made and approved by the sole member. The distinction between ownership and control is blurred, perhaps leading to unethical corporate activities.
Registration Process
Step 1: Apply for DSC
The first step is to get the proposed Director’s Digital Signature Certificate (DSC), which requires the following documents:
- Address proof
- Aadhaar card
- PAN card
- Photo
- Email Id
Step 2: Apply for DIN
Once the Digital Signature Certificate (DSC) is created, the next step is to apply for the proposed Director Identification Number (DIN) in SPICe Form, along with the director’s name and address evidence. Form DIR-3 is only available to established businesses. It implies that effective from January 2018, the applicant will no longer need to complete Form DIR-3 individually. DIN can now be used in the SPICe form for up to three directors.
Step 3: Name Approval Application
The next stage in forming an OPC is to choose a name for the company.
Only one preferred name, as well as the significance of maintaining that name, can be specified in the Form SPICe+ 32 application. If the name is denied, another name can be provided by submitting a new Form SPICe+ 32 application. Once the MCA authorises the name, the next step can proceed.
Step 4: Documents Required
The following documents must be submitted to the ROC:
- The Memorandum of Association (MoA) states the company’s objectives or the business for which it will be established.
- The Articles of Association (AoA) establishes the ground rules for the company’s operations.
- Since there is only one Director and one member, a nominee on behalf of such a person must be appointed because if he becomes disabled or dies and is unable to execute his responsibilities, the nominee will perform on behalf of the director and take his place. His consent in Form INC – 3 will be taken, along with his PAN card and Aadhar card.Since there is only one Director and one member, a nominee on behalf of such a person must be appointed because if he becomes disabled or dies and is unable to execute his responsibilities, the nominee will perform on behalf of the director and take his place. His consent in Form INC – 3 will be taken, along with his PAN card and Aadhar card.
- Proof of the prospective company’s registered office, as well as proof of ownership and an NOC from the owner is to be submitted.
- Consent and Declaration of the proposed Director of Form DIR -2 and INC-9 respectively.
- A declaration made by a professional stating that all compliances have been met.
Step 5: Filing of Forms with MCA
All of these documents, together with the DSC of the Director and the professional, will be added to the SPICe Form, SPICe-MOA, and SPICe-AOA and submitted to the MCA portal for approval. The Pan Number and TAN are created automatically when the company is formed. There is no need to submit separate applications for the PAN Number and the TAN.
Step 6: Issue of the Certificate of Incorporation
The Registrar of Companies (ROC) will issue a Certificate of Incorporation after verification, after which the company is set to carry on business.
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