The Companies Act, 2013 completely revolutionized corporate laws in India by introducing several new concepts that did not exist previously. One such game-changer was the introduction of the One Person Company concept. This led to the recognition of a completely new way of starting businesses that accorded flexibility which a company form of entity can offer, while also providing the protection of limited liability that sole proprietorship or partnerships lacked.
1. Definition of One Person Company?
Section 2(62) of the Companies Act defines a one-person company as a company that has only one person as to its member. Furthermore, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its member.
Such companies are generally created when there is only one founder/promoter for the business. Entrepreneurs whose businesses lie in the early stages prefer to create OPCs instead of sole proprietorship businesses because of the several advantages that OPCs offer.
2. Privileges of One Person Companies
A. OPC enjoys the following privileges and exemptions under the Companies Act:
B. They do not have to hold annual general meetings.
C. Their financial statements need not include cash flow statements.
D. Company secretary not required to sign annual returns, directors can also do so.
E. Provisions relating to independent directors do not apply to them.
F. Their articles can provide additional grounds for the vacation of a director’s office.
G. Several provisions relating to meetings and quorum do not apply to them.
H. They can pay more remuneration to directors than compared to other companies.
3. One Person Company (OPC) Compliance under the Companies Act, 2013
|S.No.||Title||Section & Rules||Forms Description||Particulars of Compliances|
|1.||Disclosures by a Director of his Interest||Section 184(1) & Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014||Form MBP-1||Every director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting in every financial year or whenever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in other entities which shall include the shareholding.|
|2.||Disqualification of Directors||Section 164(2) & 143(3)(g) & Rule 14(1) of Companies (Appointment of Directors) Rules, 2014||Form DIR-8||Every director shall inform the company concerned about his disqualification under sub-section (2) of section 164, if any, before he is appointed or reappointed.|
|3.||Annual Return||Section 92(4) & (1) & Rule 11(1) of Companies (Management and Administration) Rules, 2014||E-form MGT-7A||OPC shall file its Annual Return within 60 days of entry of ordinary resolution in Minute Book.
By the amendment in the Companies (Management and Administration) Rules, 2014, sub-rule (1) of Rule 11 has been substituted for –
Every company shall file its annual return in Form No. MGT-7 except One Person Company (OPC) and Small Company. One Person Company and Small Company shall file annual return from the financial year 2020-2021 onwards in Form No. MGT-7A.
|4.||Financial Statement||Section 137 & proviso 3 to Rule 12(1) of Companies (Accounts) Rules, 2014||E-form AOC-4||One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within 180 days from the closure of the financial year.|
|5.||Directors’ Report||Section 134(4)||N.A.||Directors’ Report shall be signed by only one director, for submission to the auditor for his report thereon. In case of OPC, the report of the Board of Directors to be attached to the financial statement under section 134 means a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.|
|6.||Board Meetings||Section 173 (5) & SS-1||N.A.||Every One Person Company shall hold at least one (1) meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings shall not be less than 90 days. However, provisions of section 173 (5) and section 174 relating to quorum shall not apply to One Person Company in which there is only one (1) director on its Board of Directors.|
|7.||Notice of Board Meeting||Section 173 (3) & SS-1||N.A.||A meeting of the Board shall be called by giving not less than 7 days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means. However, meeting of the Board may be called at shorter notice to transact urgent business|
|8.||Appointment of Auditor||Section 139(1) & Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014||E-form ADT-1||Auditor shall be appointed for 5 years. The company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen (15) days of the meeting in which the auditor is appointed in e-Form ADT-1.|
|Meaning of AGM for the OPC means “Resolution passed for the Ordinary Business entered into the Minute Book. In case of OPC, there is no need to hold AGM because there is only one Member.|
1. An OPC in which there is only one Director, Secretarial Standard- 1 will not apply.
2. OPC is not required to hold AGM so Secretarial Standard- 2 is not applicable to OPC.
3. Section 98 and Section 100 to Section 111 are not applicable on One Person Company.
4. No need of preparation of Cash Flow Statement, in case of OPC.