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We all are aware of the basic concept that incorporation of any private company needs minimum of 2 directors and 2 members. Whereas, incorporation of any public company needs minimum of 3 directors and 7 members. The said minimum required was a major hurdle for any person who individually wants to incorporate a company.

Introduction of the Companies Act, 2013 came up with the solution for the same. The said solution was in the form of the new concept of ‘One Person Company’.

‘One Person Company’ is a type of company that is incorporated and managed by one person. Accordingly, the founder of the company is both the director as well as the shareholder of the company.

In the present article let us understand the concept of a ‘One Person Company’ along with relevant Frequently Asked Questions.

‘One Person Company’, its eligibility criteria under Companies Act, 2013 and other provisions

Section 2(62) of the Companies Act, 2013 defines a ‘One Person Company’ as a company which has only one person as a member. Simplifying thereof, a ‘One Person Company’ can be formed by only one member and one director. Importantly, the member and director can be the same person.

Provisions of section 3 of the Companies Act, 2013 state that One Person Company is also a private limited company. Meaning thereby that all the characteristics of the private limited company will apply to One Person Company.

As per rule 3 of the Companies (Incorporation) Rules, 2014, the following are the basic eligibility criteria –

1. ‘One Person Company’ shall be incorporated by only a natural person who is an Indian citizen and resident in India;

2. The nominee for the sole member of the ‘One Person Company’ should also be a natural person who is an Indian citizen and resident in India.

Notably, ‘resident in India’ (above) means a person who has stayed in India for a period of not less than 120 days during the immediately preceding Financial Year.

Further, a natural person –

  • Shall not be a member of more than one ‘One Person Company’ at any point of time; and
  • Shall not be a nominee of more than one ‘One Person Company’.

Other important points –

  • The words ‘One Person Company’ needs to be mentioned in brackets below the name of the company, wherever, the name of the company is printed/ affixed/ engraved.
  • Minor cannot become a member or the nominee of a ‘One Person Company’.
  • Minor also cannot hold share with beneficial interest.
  • ‘One Person Company’ cannot be incorporated/ converted into a company under section 8 (i.e. Formation of Companies with Charitable Objects, etc.) of the Companies Act, 2013.
  • ‘One Person Company’ cannot carry out non-banking financial investment activity (including investment in securities of any body corporates).

One Person Company

Nominee under ‘One Person Company’

As per proviso to section 3(1) of the Companies Act, 2013, it is mandatory that the memorandum of ‘One Person Company’ should indicate the name of the other person (i.e. nominee) with his prior consent.

The nominee comes into action on account of –

1. The subscriber’s death; or

2. Incapacity of the subscriber to contract.

On triggering any of the above situations, the nominee will become a member of the company. Once, the nominee becomes a member of the company, then, such a new member is required to nominate a new nominee within a period of 15 days.

Nominee vis-à-vis filing with the Registrar –

  • Consent of the nominee in Form INC-3;
  • Nomination is to be mentioned in Form INC-32;
  • Memorandum of ‘One Person Company’ should mention the name of the nominee;
  • Appropriate fees as per Companies (Registration Offices and fees) Rules, 2014 to be paid.

Compliance exemption available to ‘One Person Company’

Following are some of the important compliance exemption benefit available to ‘One Person Company –

1. It is not mandatory to include a ‘cash flow statement’ in the financial statement of ‘One Person Company’ [Section 2(40) of the Companies Act, 2013];

2. The annual return of ‘One Person Company’ can be signed by the company secretary or director of the same [proviso to section 92(1) of the Companies Act, 2013];

3. ‘One Person Company’ is exempt from holding an annual general meeting [section 96(1) of the Companies Act, 2013];

4. ‘One Person Company’ is also exempt from following all the below provisions –

a. Power of Tribunal to call meetings of members, etc. (Section 98);

b. Calling of extraordinary general meeting (Section 100);

c. Notice of meeting (Section 101);

d. Statement to be annexed to notice (Section 102);

e. Quorum for the meeting (Section 103);

f. Chairman of meeting (Section 104);

g. Proxies (Section 105);

h. Restrictions on voting rights (Section 106);

i. Voting by show of hands (Section 107);

j. Voting through electronic means (Section 108);

k. Demand for the poll (Section 109);

l. Postal ballot (Section 110);

m. Circulation of members’ resolution (Section 111).

Pre-requisite for ‘One Person Company’ registration

Following are the minimum pre-requisite which need to be satisfied for ‘One Person Company’ registration –

1. Minimum 1 director who must be an Indian resident;

2. Minimum 1 shareholder;

Please, note director and shareholder can be the same person.

3. Minimum 1 nominee;

4. Minimum authorized share capital of INR 1 Lakhs.

Steps for registering ‘One Person Company’ 

Following are the simple steps for registering a ‘One Person Company’ –

STEP 1 – Apply for and obtain Digital Signature Certificate (DSC);

STEP 2 – Apply for and obtain Director Identification Number (DIN);

STEP 3 – Apply for approval of the name. Notably, the RUN service is to be used to check the availability of the name. Name of the ‘One Person Company’ can be applied through SPICe (INC-32).

STEP 4 – Apply for incorporation of ‘One Person Company’ –

  • Fill the Form No. INC-32 (SPICe+) for incorporation of ‘One Person Company’. Such application should be filed within 20 days from the date of approval of name (RUN);
  • SPICe-MOA and SPICe-AOA should be attached to the SPICe form.

STEP 5 – Post verification of all the forms and documents, the Registrar of Companies may issue a registration certificate.

FAQs on One Person Company (OPC) provisions under Companies Act, 2013

Important Frequently Asked Questions with regard to ‘One Person Company’ are highlighted hereunder –

1. What is one person company?

In simple terms, One Person Company is a company which has only one person as a member. A natural person, being an Indian Citizen, is eligible to incorporate One Person Company.

2. Is it mandatory for a member of OPC to appoint a nominee?

The member of the One Person Company must mandatorily appoint a nominee.

3. Which is better OPC or Pvt Ltd?

One Person Company (OPC) can be said to be better as various exemptions are available to OPC as compared to Pvt. Ltd. Compliance requirements of OPC is also much less than that in Pvt. Ltd.

4. Is OPC a private company?

One Person Company is incorporated as a Private Limited company where there is only one member and there is a prohibition with regard to an invitation to the public for the subscription of the securities of the company.

5. What is disadvantage of OPC?

Suitable only for small businesses; lack of perpetual succession; NRI restricted from incorporating OPC; etc. are some of the disadvantages of OPC.

6. Is Amazon a one person company?

Amazon began being a one person company.

7. Can OPC issue shares?

One Person Company is prohibited from issuing/ allotting shares to anyone other than its sole member.

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One Comment

  1. Rajani says:

    Thank you for giving such insight. I operate OPC in kerala. i have few doubts if you can clear, i would be gratefull.
    1) opc companies are not given loans as easily as others
    2) Despite good features why still people are not opting it.
    3) when cash flow from owner is also stated in record does owner needs to file seperate ITR for this.
    4) if nominee and the owner both happens to die and no one is no one is nominated. who will gets this companies share

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April 2024