Explore the benefits, legal status, and exemptions of One Person Company (OPC) under the Companies Act 2013. Understand the simplified formation process, reduced compliances, and limited liability protection for members. Follow the annual compliance checklist for seamless operations.
The Companies Act 2013 introduced the concept of a One Person Company (OPC), allowing the formation of a company with only one person as a member and director, as per Section 2(62) of the Act. This article highlights the benefits of OPC, including reduced compliances, ease of formation, lower costs, ease of management, and access to funding. It also discusses the legal status of OPC, its separate legal entity, and limited liability protection for the member. Furthermore, exemptions provided to OPCs are outlined, along with the requirements for registration and the process of incorporation. The article concludes by mentioning the annual compliance checklist for OPCs.
According to Section 2(62) of the Companies Act 2013, a “One Person Company” refers to a company that has a single individual as its sole member.
As per above, it is clearly stated that after addition of this section, company can be formed with One person and one Director. Before applicable of this section, for company incorporation, min 2 directors and 2 Members are required.
Benefits of OPC:
1. Less Compliances: In One Person Company, Compliance Checklist is very short.
2. Easy Formation: Formation of One Person Company is very easy to incorporate, less documentation and less risk of certification.
3. Less costing: Costing of Incorporation of One Person Company is very less. In point of view of compliances, less burden of compliances on OPC during the year.
It is not required to conduct Annual General Meeting or Board Meeting by One Person Company.
4. Easy to Manage: Due to less burden of compliances and costing of One Person Company, it is easy to manage One Person company by single hand.
5. Easy to get fund: Due to less burden of compliances, chances of non-compliances in OPC are very low and it is attracted investors for funding. Complexity of non- compliances in One Person Company is very less.
6. Perpetual Succession: One notable feature of an OPC is its ability to have perpetual succession, even with just one member. During the incorporation process, the single member appoints a nominee. In the event of the member’s demise, the nominee assumes responsibility for running the company.
7. Legal Status of One Person Company: An OPC is granted a distinct legal entity status separate from its member. This legal entity status offers protection to the individual who incorporated the OPC. The member’s liability is limited to their shares, safeguarding them from personal liability for the company’s losses. Consequently, creditors have the right to take legal action against the OPC itself, rather than the member or director.
Exemptions provided to OPC
There are some exemptions provided in the Company to promote OPC culture in India.
Few of these exemptions are below:
- OPC is not required to prepare cash flow statement as a part of financial statement. [Section 2(40)]
- In case an OPC does not have a company secretary, the annual return can be signed by the director of the company.
- An OPC is not required to hold an annual general meeting. [Section 96(1)]
Requirement for registration of OPC
- Minimum and Maximum of one member.
- A nominee should be appointed before incorporation.
- Consent of the nominee should be obtained in Form INC-3.
- The name of the OPC must be selected as per the provisions of the Companies (Incorporation Rules) 2014.
- Minimum authorised capital of Rs.1 lakh.
- DSC of the proposed director.
- Proof of registered office of the OPC.
Process to incorporation of One Person Company:
1. Apply for DSC and DIN
2. Submit Name approval application to ROC
3. After approval of name application then submit further below documents for incorporation:
(i) MOA
(ii) AOA
(iii) KYC documents of Director.
(iv) Address proof of registered office of the Company along with NOC of owner of premises.
(v) Other required documents as mentioned in the form, if any.
After approval of Company incorporation documents, Obtain Certificate of Incorporation and run the company without any hassle.
Annual Compliance Checklist for OPC:
- At least one Board Meeting in each half of the calendar year and the time gap between the two Board Meetings should not be less than 90 days.
- Maintenance of proper books of accounts.
- Statutory audit of Financial Statements.
- Filing of business income tax returns every year before 30th September.
- Filing of Financial Statements in Form AOC-4 and ROC Annual Return in Form MGT 7.
Conclusion: The introduction of the One Person Company (OPC) under the Companies Act 2013 has provided individuals with the opportunity to establish a company with minimal requirements and enjoy several benefits. OPCs have reduced compliances, simplified formation procedures, and lower costs compared to traditional companies. The separate legal entity status of OPCs ensures limited liability protection for the member. Additionally, exemptions from certain requirements further facilitate the growth and promotion of OPCs in India. By adhering to the annual compliance checklist, OPCs can maintain regulatory compliance and operate smoothly. Overall, OPCs offer a viable option for individuals seeking to establish and manage a company with ease and convenience.
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