Explore the concept and benefits of One Person Company (OPC) in India. Learn about incorporation, benefits, points to consider, and legal compliances. Discover why OPCs are a convenient option for small businesses.
Before the enforcement of the Companies Act 2013 a single person could not establish a company. But the Companies Act 2013, introduced a new concept i.e. – One Person Company (OPC), which can be incorporated by a single natural person.
According to Section 2 (62) of the Companies Act 2013, a company can be formed with just 1 director and 1 member. The Director and the member can also be the same person. Like a private limited company name in India must end with the words “private limited”, similarly a one Person Company name must end with the words “(OPC) private limited”.
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Benefits of an OPC
An OPC or a One person company is a hybrid of the benefits of a Company and the benefits of a sole proprietorship. Following are some of benefits of an OPC: –
- Like a Private/ Public limited company, it has separate legal entity.
- The liability of shareholder / director is limited.
- The director and shareholder can be same person.
- In case of death of the shareholder, company can be succeeded by his/her nominee.
- Less compliances as compared to Private/ Public limited companies under Company law.
Points to keep in mind while incorporation of an OPC
- The Memorandum of OPC shall indicate the name of the nominee, who shall become the member in case of death or disability of the subscriber.
- Prior written consent in the prescribed form must be obtained from the nominee, which shall be filed with the ROC at the time of incorporation along with the Memorandum of Association and Articles of Association.
- Such Nominee has the right to withdraw his consent to be the nominee of the OPC.
- The member of OPC may at any time change the nominee by giving notice to the company along with the consent of new nominee, which shall be filed in the prescribed form with the ROC.
- Such change shall not be deemed to be a change in the Memorandum of Association.
- Only a natural person who is an Indian citizen whether resident in India or otherwise: –
- Shall be eligible to incorporate OPC
- Shall be a nominee for the sole member of OPC
- A natural person shall not be a member of more than 1 OPC at any point of time and the said person shall not be a nominee of more than 1 OPC.
- No minor shall become member or nominee of the OPC.
- An OPC cannot carry out NBFC activities.
- An OPC can be converted into a private or a public company, however it cannot be converted into section 8 company of the Companies Act, 2013.
Compliances for OPC under Company Law
- At least 1 Board Meeting in each half of the calendar year with time gap of at least 90 days between the two such Board Meetings. However, an OPC is not required to hold an AGM.
- Statutory audit of Financial Statements and maintenance of proper books of accounts and filing of ITR are also required to be complied. However, preparation of Cash flow statement is not mandatory for an OPC.
- Submission of Forms AOC-4 and MGT 7-A annually to the ROC.
OPCs are easy to set up and manage, require minimal maintenance, and can offer better operational control. With the ease of registration and low cost of operation, OPCs are the ideal way for small businesses to get started which also gives them a corporate look.
Hope the above insight on One Person Company (OPC) was useful.
Disclaimer: The article is for educational purposes only.
Author Bio
Beautifully explained and quire useful article.
Good luck.
Kesari G Sharma, Auditor