Detailed Procedure Procedure of Incorporation of a One Person Company (OPC) Under Companies Act,2013
One Person Company is a new concept in India which has been introduced by the company’s act 2013. More than 1,400 one-person companies, a majority of them engaged in business services, have been set up in just nine months starting April 2014 when regulations allowing such entities came into force. Latest data compiled by the Corporate Affairs Ministry shows that up to December 31, 2014, a total of 1,403 OPC were registered with it and their collective authorised capital stood at Rs 31.31 crore.
Section 2(62) of the Companies Act, 2013 define “one person company” as a company which has only one person as member. OPC is a sub – domain of Private Company as per Section 2(68).
Rule 3 of the Companies (Incorporation) Rules 2014 say, only a natural person who is an Indian citizen and resident in India:-
The concept opens up spectacular possibilities for sole proprietors and entrepreneur who can take the advantages of Limited liability and corporatization but were held back in doing so because of the requirements of finding a second director or second shareholder.
Difference between Sole Proprietorship & OPC:
|Legal Entity||No Separate Legal Entity||Separate Legal Entity|
|Liability||Unlimited Liability||Limited Liability|
|Debt Responsibility||Debt is sole responsibility of the proprietor||Debt is not the sole responsibility of the one person|
|Credit Record||Finance Credit history of the owner||Finance Credit history of the Company|
|Legal Requirement||May register in Shop & Establishment Act||Follow Companies Act, 2013|
|Tax||Paid by owner||Separate Tax|
Concepts Behind One Person Company
This is the fundamental concept of a One Person Company. In fact, One Person Company is defined in the Companies Act as a Company which has only one member. A single shareholder holds 100 percent shareholding.
Only a natural person who is a resident of India and also a citizen of India can form a one person company. It means that other legal entities like companies or societies or other corporate entities cannot form a one person company.
Further it also means that Non resident Indians or Foreign citizens can not form a One person company. Further the rules also specify that a person can be a shareholder in only one one person company at any given time. It simply means an individual cannot have two different one person companies in his name.
2. One Director
The other important point is that a One Person Company may have only one director. But at the same time there is no bar on more number of directors. However, as per the Act, the total number of directors shall not be more than 15.
As per the Companies Act, if nothing is mentioned in the incorporation document, it would be assumed the sole shareholder shall also be the sole director in the one person company and which shall be practically the case in most One Person Companies incorporated.
This is a very important concept where the person forming the One Person Company has to nominate a Nominee with his written consent who, in the event of death or inability to contract of the owner of the One Person Company, shall come forward and take over the reins of the one person company.
Please note that the requirements of being a resident Indian and citizen of India also apply to the nominee. Further if the person so nominated becomes the member of such a One Person Company and is already a member of another One Person Company, at the same time, by virtue of rules has to decide within 6 months which one person company he has to continue. One more thing, the member can change the nominee at any point of time.
Since nothing has been specified as such by the finance ministry, it is assumed that the rates of taxation applicable for a private limited company shall apply to a One Person Company. Tax @30% along with other cess is to be paid.
5. Freedom from compliance
One Person Company also gets freedom from complying with many requirements as normally applicable to other private limited Companies. Certain sections like Section 96, 98 and sections 100 to 111 are not applicable for a One Person Company. Some of these are mentioned below:
No requirement to hold annual or extra ordinary general meetings. Only the resolution shall be communicated by the member of the company and entered in the minutes book and signed and dated by the member and such date shall be deemed to be the date of meeting.
For the purposes of holding board meetings, in case of a OPC which has only One director, it shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes under Companies Act, 2013.
No requirement of Cash Flow Statement in the annual financial statements
Annual returns can be signed by the Director himself instead of A Company Secretary
6. Related Party Transactions
Where One Person Company enters into a contract with the sole owner of the company who is also the director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract.
Further, the company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors under sub-section (1) within a period of fifteen days of the date of approval by the Board.
This clause shall be very much in vogue since the business of the One Person Company may use many assets of the owner and may pay compensation for that. Examples may be rent paid for using property or machinery or Furniture owned by the Owner. It may pay interest on loans taken from the owner. It may pay salaries to the Owner. All these contracts are covered under the section.
Terms and Restrictions of OPC
Brief of procedure / steps to company incorporation:
|1||Obtain Digital Signature Certificate (DSC)||Obtain a Digital Signature Certificate from authorized DSC issuing authority.|
|2||Obtain Director Identification No. (DIN) [S.153]||Make Application in Form DIR-3 [Rule 9 of Chapter XI Rules]|
|3||Register DSC in the name of Director on MCA portal|
|4||Apply for Reservation of Name [S.4(4)]||Application in Form No. INC.1 [Rule 9]. The same shall be reserved for a period of 60 days|
|5||Getting consent of a person to become its Nominee in Form INC-3|
|6||Drafting and Printing of Memorandum and Articles of Association|
|7||Filing of INC -2, DIR 12 (except when promoter is the sole director of the OPC.) & INC 22||Discussed Later|
|8||Commencement of business [S.11]||Mandatory to file Declaration with ROC in Form No. INC.21 [Rule 24]|
|9||Registered Office [S.12]||A company shall have a registered office within 15 days of Incorporation and it shall file Form No.INC.22 [Rule 25] within 30 days to verify the same|
Step 1: Acquire DSC
The basic step to company incorporation is to get DSC made of all directors.
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance programme are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.
Names of Certification Agency (CA) from where DSC can be acquired are MTNL CA, TCS, IDBRT, SAFESCRYPT (SATYAM), nCODE Solutions, NIC, Central Excise & Customs (Does not issue DSCs to person other than those from the Department), e-Mudhra (3i Infotech Consumer Services Limited).
Step 2: Acquire Director Identification Number
The concept of a Director Identification Number (DIN) has been introduced for the first time with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. As such, all the existing and intending Directors have to obtain DIN within the prescribed time-frame as notified.
INCOME TAX PAN IS MANDATORY, so before applying of DIN a person must have his PAN number. Details on PAN and DIN must be same.
Step by step Process
Step by step process to be followed by the applicant is as under:
As per the revised procedure for DIN Allotment, any person intending to apply for DIN shall have to make an application in eForm DIR 3 and should follow the following procedure:
eForm DIR -3 has to follow the offline eFiling process i.e. the form can be downloaded from MCA 21 portal and thereafter be filled up without internet connection. The connection is required only for validating the form.
Attach the photograph and scanned copy of supporting documents i.e. proof of identity, and proof of residence as per the guidelines. Physical documents are not required to submit at DIN cell.
Passport, Election (voter identity) card, and Ration card, driving license, electricity bill, telephone bill or aadhaar
All Documents should be verified by CA/CS/CMA.
Name of person proposed to be the directors, address of directors and other details should be correctly filed.
These documents should not be more than 2 months old. In bank statement, passbook print of transactions in last two months is to be attached.
The eForm shall have to be digitally signed and shall be uploaded on MCA21 portal.
Upon upload, Pay the fees for DIR 3 eForm. Only electronic payment of the fees shall be allowed (i.e. Netbanking / Credit Card). No challan payment will be accepted under revised procedure of DIN allotment.
The applicant is required to get himself/herself registered on the MCA21 Portal to obtain login id, which is necessary for payment of the fees. After obtaining the login-id, Login to the MCA21 portal and click on ‘eForm upload’ link available under the ‘eForms’ tab for uploading the eForm DIR 3. eForm DIR -3 will be processed only after the DIN application fee is paid.
Upon upload and successful payment,
Processing of e Form DIR 3
In case, DIR-3 gets certified by the professional ( i.e. CA/ CS/ CWA in whole time practice), the DIN will be approved by the system immediately online(in case it is not potential duplicate). In case of signing by any other signatory (i.e. director/ Managing Director/ secretary of the company with which applicant is to be associated), the MCA DIN cell will examine the e Form DIR-3 and same shall be disposed of within one or two days.
After the DIN getting approved, Approval Letter must be downloaded from MCA21.
It may be a person has already DIN number, but it mismatches with the Income Tax PAN. If PAN detail is wrong, correct the details by applying to Income Tax Authorities or if details of DIN is wrong, file DIR -6
Director is required to download and fill up eForm DIR-6 for such changes and follow the same process for uploading the same as mentioned for eForm DIR-3. The requested change is taken into the system on verification of the proof enclosed with the application for change request. In the case of change in applicant’s name, gazette notification is must with form DIR-6. Married women, who are having Id proof with their maiden name, can submit marriage certificate along with application. Verification as per Form DIR-7 of Companies Act 2013 also needs to be attached to Form DIR-6 as it is a mandatory attachment now. All documents are to be verified by the professional.
There is no fees charged for DIR 6. Form is accepted by STP mode if name, father’s name or date of birth is changed, for other cases, potential duplicacy arises and the form is processed by MCA officials.
But, to file DIN -6 for change in DIN particulars, DIFFERENT ADDRESS PROOF IS REQUIRED unlike DIR 3 for application of DIN number.
Step 3: Register DSC
Third step is to register DSC of the person authorized to sign E-forms on MCA21 or click on the link http://www.mca.gov.in/DCAPortalWeb/dca/MyMCALogin.do?method=setDefaultProperty&mode=36
Step 4: Apply for Reservation of Name [S.4(4)]
As per section 4(4) of Companies Act, 2013 read with rule 9 of Companies Incorporation Rules, 2014, application is to be made to registrar for reservation of name. 6 names can be proposed after checking its availability at MCA21 and as per guidelines given in the said rules.
While applying for a name in the Form INC -1, using Digital Signature Certificate (DSC), the applicant shall be required to verify that:
Following documents have to be attached to INC – 1:
Validity of Name approved by ROC: As per section 4(5), maximum time for which name will be available has been prescribed in the law itself under section 4(5). The name will be valid for a period of 60 Days from the date on which the application for Reservation was made.
Where after reservation of name, it is found that name was applied by furnishing wrong or incorrect information, then, –
1. if the company has not been incorporated, the reserved name shal be canceled and the person making application shall be liable to a penalty which may extend to one lakh rupees;
2. if the company has been incorporated, the Registrar may, after giving the company an opportunity of being heard –
Step 5: Getting consent of a person as Nominee
The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
The name of the person nominated shall be mentioned in the memorandum of One Person Company.
The nominee so appointed shall become the member in the following situation:
Form No. INC-3
One Person Company- Nominee consent form
This form is required to be filed pursuant o section 3(1) of the Companies Act, 2013 and rule 4(2), (3), (4), (5) & (6) of Companies (Incorporation) Rules, 2014
One Person Company is required to indicate the name of the other person as nomine in its memorandum with his prior written consent, who shall become the member of the company in case of subscriber’s/member’s death or incapacity to contract and such consent of the nomine shall be submitted to Registrar in this eForm INC-3.
Step 6: Drafting and Printing of Memorandum and Articles of Association
After ascertaining name availability from the Registrar of Companies steps should be taken to get the memorandum and articles of association for the proposed company drafted and printed.
In subscriber’s page:
Name, Fathers name, Address, Designation and Occupation along with number of Equity shares proposed to be subscribed is to be given.
In Witness Column:
“I witness to subscribers who have subscribed and signed in my presence. Further I have verified their Identity Details for their identification and satisfied myself of their identification particulars as filled in”
Membership No. ………
Occupation: Chartered Accountant
Step 7: Filing of Company Incorporation form – eform INC 2, DIR 12 (except when promoter is the sole director of the OPC.) & INC 22
As per section 3(1) and 7(1) of the Companies Act, 2013 and Rule 4, 10, 12 and 15 of the Companies (Incorporation) Rules, 2014, application for incorporation of a one person company, with the Registrar, within whose jurisdiction the registered office of the company is proposed to be situated, shall be filed in Form no. INC 2 along with Form no. INC.22 for situation of registered office of the Company, (as the case selected in form no. INC 2) and DIR -12.
Form INC – 2 is to be filed along with consent of nomine 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 company along with its memorandum and articles.
Form INC – 2 is form for incorporation of one person company. The form is similar to Form INC – 7 except his form contain Nomination details and particulars of nomine.
Form No. INC-2
One Person Company- Application for Incorporation
eForm INC-2 is required to be filed pursuant o section 3(1) and 7(1) of the Companies Act, 2013 and Rule 4, 10, 12 and 15 of the Companies (Incorporation) Rules, 2014. eForm INC-2 deals with incorporating One Person Company.
This eForm is accompanied by supporting documents such as annexure containing details of directors/subscribers, the Memorandum of Association and Articles of Association and evidence of payment of stamp duty. Once the eForm is processed and found complete, a company is registered and CIN is allocated.
It is suggested that eForm DIR-12 should be filed together at the time of fling of eForm INC-2 if the member is not he sole director of the company.
In case the address for correspondence is not he address of the registered office of the Company, user is required to file INC-2 within 30 days of its incorporation. – Stamp duty on eForm INC-2, Memorandum of Association (MoA) and Articles of Association (AoA) can be paid electronically through the MCA portal. Payment of stamp duty electronically is mandatory for certain States.
User is required to scan the photograph of every subscriber with MOA and AOA.
MOA Registration Fes
|Nominal Share capital||OPCs|
|Fixed||For every 10, 00 or part thereof|
|Up to 1,00,000||2,000||N/A|
|More than 1,00,000 up to 5,00,000||2,000||N/A|
|More than 5,00,000 up to 10,00,000||2,000||N/A|
|More than 10,00,000 up to 50,00,000||2,00 0+||200|
|More than 50,00,000 up to 1,00,00,000||N/A||N/A|
|More than 1,00,00,000||N/A||N/A|
DIR 12 for giving details of Directors 12 (except when promoter is the sole director of the OPC.):
As per Rule-17 of Companies (Incorporation) Rules, 2014, the particulars of each person mentioned in the articles as first director of the company and his interest in other firms or bodies corporate along with his consent to act as director of the company shall be filed in Form No.DIR-12 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014. Along with the above details in the Form no.INC.2, Form no.DIR 12 to be filed IN CASE THE PROMOTER IS NOT THE SOLE DIRECTOR OF THE OPC along with the following attachments:
INC 22 for giving details of Registered Office:
As per Rule 25 of Companies (Incorporation) Rules, 2014, verification of registered office shall be filed in Form No.INC.22 along with the fee.
Section 12(2) of the Companies Act, 2013 states that the Company shall furnish to the Registrar verification of its registered office within a period of thirty days of its incorporation in such manner as may be prescribed.
Section 12(4) of the Companies Act, 2013 states that Notice of every change of the situation of the registered office, verified in the manner prescribed, after the date of incorporation of the company, shall be given to the Registrar within fifteen days of the change, who shall record the same.
1. Proof of Registered Office address (Conveyance/Lease deed/Rent Agreement along with the rent receipts) etc.; or
(the notarized copy of lease / rent agreement in the name of the company along with a copy of rent paid receipt not older than one month; or the authorization from the owner or authorized occupant of the premises along with proof of ownership or occupancy authorization, to use the premises by the company as its registered office); and
2. Copies of the utility bills as mentioned above (not older than two months) (the proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, as the case may be, which is not older than two months)
3. List of all the companies (specifying their CIN) having the same registered office address, if any;
4. Optional attachment, if any
On receipt of the aforementioned documents, the office of the Registrar of Companies will scrutinize them and if they are found complete in al respects, the Registrar will register the company and generate a CIN. If the Registrar finds any defect or deficiency in any of the documents or forms, the Registrar will send an electronic communication pointing out he defects and after the deficiencies are removed, the Registrar will register the company.
After the registration of the company, the Registrar will issue under his hand and seal of his office, the Certificate of Incorporation in the name of the company and send it electronically. One may also take printout of the Certificate of Incorporation generated online. The date mentioned by the Registrar in the Certificate of Incorporation shall be the date of incorporation of the company, on which date the company will be considered to have come into existence as a legal entity separate from its subscribers.
The Certificate of Incorporation shall be in From INC – 11 of the Companies (Incorporation) Rules, 2014.
Now comes the last step.
Step 7: Filing of Commencement of Business – eform INC 21
On registration, a company cannot commence business or exercise any borrowing powers until it files a declaration by directors in Form INC – 21 to the effect hat every subscriber to the memorandum has paid the value of the shares agreed to be taken by them as specified in section 1(1)(a).
E-form INC.21 is required to be filed with concerned Registrar of Companies for obtaining approval for commencement of Business and exercise of borrowing powers. This E-form is required to be filed by all companies incorporated under Companies Act 2013.
Procedure for commencement of Business under Companies Act, 2013
A promoter must pay its subscription money in cash or through bank account for the number of shares as mentioned in eform INC 2 / MOA after which this form will be filed.
Following documents required to be filed as an attachment of form INC.21:
1. E-form INC.10 of Specimen Signature, which you would have attached with Form INC 1 at the time of incorporation.
2. A declaration on stamp paper of Rs. 20/- signed by the directors. This stamp paper should be in the name of the Company and you may write the following statement on this stamp paper for stamp duty payment related compliance:
“This E- Stamp paper is for E-Form INC.21 (Declaration prior to the commencement of business or exercising borrowing powers) of __________ Private Limited.”
Note: Rs. 20 as stamp duty or as the case may be can be paid online or offline as payment of stamp duty of above Rs. 100 is mandated for taking online route. Name of vendor, serial number of stamp paper and registration number of vendor is mandatory to enter if the amount of stamp duty is more than or equal to Rs 50/-
3. Board Resolution stating that Company has received the subscription money in full, which will be deposited into company bank account.
4. In case the affairs of the Company is regulated by any sectoral regulator (like RBI in case of NBFI activities), Certificate of Registration issued by the RBI (Only in case of Non-Banking Financial Companies)/ from other regulators must be attached.
5. You may also attach Bank Account statement as an optional attachment.
6. You may also attach duly certified signed minutes of First Board Meeting of the Company as an optional attachment.
ROC processes the e-form INC.21 filed by the Company if it finds all the necessary attachments and related compliance proper.
Status of the form can be checked at MCA.
After this approval, THE COMPANY IS READY TO RUN & PROSPER.
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Disclaimer: This write up is intended to initiate academic debate on a pertinent question. It is not intended to be a professional advice and should not be relied upon for real life facts.
(Author ‘Sagar Gupta’ is an innovative leader in delivering corporate advisory & solutions and can be reached at firstname.lastname@example.org. On Request Author may provide all or any draft related to above.)
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