Summary: In a One Person Company (OPC), the sole member must appoint a nominee, whose name is recorded in the Memorandum of Association. This nominee steps in as the new member in case of the original member’s death or incapacity to contract. The process of nominating a person involves obtaining their written consent in Form INC-3, and filing the nomination with the Registrar of Companies using Form Spice+ Part B. Nominees must be natural persons who are Indian citizens, whether resident in India or abroad, as per the Companies (Incorporation) Rules, 2014. A nominee can withdraw consent or be replaced by the sole member, necessitating an update with the Registrar within 30 days. If the original member passes away or becomes incapacitated, the nominee becomes the sole member and must appoint a new nominee within 15 days. The procedure for any changes involves filing Forms INC-3 and INC-4 with the required fees. The 2021 amendment now allows non-residents to incorporate an OPC in India, broadening the scope for global entrepreneurs to manage their businesses efficiently under this structure. The OPC framework offers advantages such as streamlined management and favorable banking facilities, potentially increasing registrations and foreign investment in India.
SHORT SUMMARY:
The subscriber to the memorandum of a One Person Company shall nominate a person as his nominee. The Prior written consent of nominee shall be obtained in Form INC – 3.
- Applicable Section(s)
First and second proviso to sub-section (1) of Section 3 of companies Act, 2013
- Applicable Rule(s)
Rule 4 of Companies (Incorporation) Rules, 2014
Quick Bites:
> Who can become a nominee of an OPC?
Sol: As per Rule 3(1) of the Companies (Incorporation) Rules, 2014, only a natural person who is an Indian Citizen, whether resident in India or otherwise shall be a nominee for the sole member of an OPC.
> Is there any number restriction on acting as a nominee of a person?
Sol: As per Rule 3(2) of the Companies (Incorporation) Rules, 2014, no person shall be eligible to become a nominee in more than one OPC.
> What is the concept of nominee in case of OPC?
Sol: As per the first proviso to section 3(1) of the Companies Act 2013, at the time of incorporation of OPC, the sole member of OPC is required to appoint another person as his nominee and his name shall have to be featured in the Memorandum of Association of the OPC.
The nominee so appointed shall:
a. In the event of the sole member’s death; or
b. in the event of the sole member becoming incapacitated to contract; become the member of OPC.
> Who cannot become a Member of OPC or act as a nominee in OPC
Sol:
1. Minor (as per Rule 3(4) of the Companies (Incorporation) Rules 2014). A minor cannot even hold share with beneficial interest.
2. Foreign Citizen
3. A person incapacitated to contract
4. Persons other than a Natural Person i.e. living human being
STEPS TO NOMINATE A NOMINEE
- The members of a One Person Company needs to first obtain written consent from the person they intend to nominate as a nominee. [In Form INC 3]
- The name of the individual nominated needs to be mentioned in the memorandum of the One Person Company.
- The nomination needs to be filed with the registrar in Form Spice Plus part B, along with written consent of such nominee obtained in Form INC 3 and fee as provided in the Companies (Registration offices and fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles.
| “I, (Name of the nominee) hereby give my consent to become the member of (Name of the One Person Company), in the event of death of (Name of the sole member of the One Person Company) subscriber/member of the company or his incapacity to contract.” |
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There may be certain circumstances for Change in Nominee:
1. The nominee can himself withdraw his consent.
2. Change Nominee by Member of Company.
3. Death of Incapacity of Sole Member.
A. NOMINEE CAN HIMSELF WITHDRAWN HIS CONSENT
As per rule Sub rule- 4 of the Rule- 4 of The Companies (Incorporation) Rules, 2014
A. The nominee of the One Person Company can withdraw their consent by giving a notice in writing to the member and to the One Person Company.
B. In such a circumstance, the sole member shall nominate another person as nominee within 15 days of receiving the notice of withdrawal.
C. The Sole member shall send an intimation of such nomination in writing to the One Person Company, along with the written consent of the other person so nominated in Form INC 3.
D. The One Person Company should also within 30 days of receiving the notice of withdrawal of consent file with the registrar, a copy of such notice and the intimation of the name of another person nominated by the member in Form INC 4 along with fee as provided in the Companies (Registration offices and fees) Rules, 2014 and the written consent of the new nominee to be nominated in Form INC 3.
B. CHANGE OF NOMINEE BY SOLE MEMBER
As per rule Sub rule- 5 of The Rule- 4 of The Companies (Incorporation) Rules, 2014
A. Members of a One Person Company can change the nominee at any time by informing the One Person Company in writing.
B. The Sole member will need to obtain the prior consent of the new nominee in Form INC 3.
C. The One Person Company shall on the receipt of such intimation, file with the registrar, a notice of such change within 30 days of receipt of intimation of the change in Form INC 4 along with fee as provided in the Companies (Registration offices and fees) Rules, 2014 and with the written consent of the new nominee in Form INC 3.
C. DEATH OR INCAPICITY OF SOLE MEMBER
A. In case of death or incapacity to contract of the sole member, the nominee will become the only member of the OPC.
B. The new member needs to nominate a new nominee within 15 days of becoming a member.
C. The One Person Company shall file with the registrar an intimation of such cessation and nomination in Form INC 4 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 within 30 days of the change in membership and with the prior written consent of the person so nominated in Form INC 3.
Important Amendment:
INCORPORATION OF OPC- AMENDMENT IN RULE 3:
As proposed in Budget Speech in respect of amendment in provision of One Person Company. MCA has introduced “Companies (Incorporation), Second Amendment Rules, 2021 on 1st February, 2021.
First amendment: for the words, “and resident in India” the words “whether resident in India or otherwise” shall be substituted;
Only a natural person who is an Indian citizen and “Whether resident in India or otherwise” shall be eligible to incorporate a One Person Company.
Impact: Earlier only Indian resident was allowed to incorporate OPC in India, now person other than resident in India can incorporate OPC in India.
CONSLUSION:
OPC will give greater flexibility to an individual or a professional to manage his business efficiently and at the same time enjoy the benefits of a company. Company law experts see a rise in registrations of one-person companies once the Bill is enacted into law. The concept of OPC will also help many foreign companies, which need to appoint a minimum of two nominees now when they form a wholly-owned subsidiary. OPC will open the avenues for more favorable banking facilities, particularly loans, to such proprietors. Besides, the concept will boost flow of foreign funds in India as the requirement of nominee shareholder would be done away with.
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Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).
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