Company means a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives of its members.
There are various types of companies Private Company, Public Company, One Person Company (OPC), Section 8 Company and many others.
Lets discuss in the details about One Person Company (OPC) –
Under Section 2(62) of the Company Act 2013, One Person Company (OPC), means a company which has only one person as a member.
Under Company Act, One Person Company (OPC) is a Company which can be formed by one member and one director. The director and member can be the same person.
Section 3(1)(c) of the Act provides that the words ‘One Person Company’ must be mentioned below the name of the company in bracket wherever it appears.
An individual forming the One Person Company (OPC) can be a resident of India or a non-resident. OPC is incorporated in a form of a company but have the benefits of a sole proprietorship. It has very less compliances, legal status, easy ways to get funds, easy incorporation, perpetual succession and many other benefits.
Explanation – “resident in India” here means a person who has stayed in India for a period of one hundred and twenty days or more during the immediately preceding one financial year.
However, like every coin as the another side, OPC also have some disadvantages too like –
|BASIS||OPC (One Person Company)||Sole proprietorship|
|Separate legal entity||Have separate legal entity.||No distinction between business and proprietor.|
|Liability||Liability of shareholder/director is limited Unlimited liability of sole proprietor||Unlimited liability of sole proprietor|
|Income tax||Income Tax rate applicable of Private Limited Company.||Slab rate wise tax applicable. Hence less tax implication|
|Audit||Compulsory statutory audit for books of account.||Audit of books of accounts depend upon amount of turnover.|
|Compliance||Mandatory compliance of provision of Company Law.||Provisions of company law do not applicable.|
The minimum and maximum number of members in an OPC can be only one. However there can be minimum 1 director to maximum 15 directors in OPC and if in case, more than 15 directors are required to pass Special Resolution for the same.
In OPC there is a need to appoint a nominee, to be appointed in case of death, incapacity, etc. who will-
(a) become a member of OPC;
(b) be entitled to all shares of the OPC, and
(c) bear all liabilities of OPC.
The person who will act as a nominee or the name of the nominee is decided at the time of incorporation only and should be mention in MOA and AOA of the company.
Nominee appointed may at any time, withdraw his consent by giving a notice in writing to the sole member and to the OPC. The sole member then is required to nominate another person as nominee within 15 days of the receipt of the notice of withdrawal.
(a) notice of such withdrawal of consent;
(b) name of the new person nominated by it (in Form No INC-4 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014), and
(c) written consent of the new person so nominated (in Form No. INC-3).
The required form should be filed within 30 days of receipt of the notice of withdrawal of consent. Also, a Nominee can be changed at any time by providing a notice to the ROC.
A person can be a member in only one OPC and if he/she becomes a member in another OPC by virtue of his being a nominee in that OPC, then he/she is required to withdraw his membership from either of the OPCs within a period of one hundred and eighty days (180 days).
All companies should hold an AGM after the end of each financial year except one person company (OPC) and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between two annual general meetings of a company.
The first annual general meeting of the Company should be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within aperiod of six months, from the date of closing of the financial year. Provided that if a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation.
Provided also that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.
But since OPC is an exception, it is not required to follow all the provisions relating to AGM under Company Act, 2013.
OPC should have at least one Board Meeting in each half of the calendar year and the time gap between the two Board Meetings should not be less than 90 days.
OPC is exempted from making Cash Flow Statement as per the Section 2(40) of the Company Act, 2013
OPC is exempted from Section 139(2) of the Company Act 2013 i.e., rotation of auditor.
OPC is exempted from holding the Annual General Meeting (AGM).
In One Person Company, Financial statement, and Board’s report can be signed only by one director.
OPC also does not require to file any Audit Report on internal financial controls with reference to financial statements and the operating effectiveness of such controls.
From 1st April, 2021, through MCA amendment, OPC now can be converted into any type of company at any time except Section 8, also the threshold limit of 2 years from the date of incorporation or threshold limits of having paid up share capital of Rs.50 Lakhs or less and average annual turnover during the relevant period Rs.2 crore or more as previously required is of no need now.
Now lets discuss in detail the procedure for incorporation of One Person Company (OPC) –
The following steps are required while incorporating an OPC –
Step 1 – Apply for Name Reservation through SPICE + (Part A), with main objects of the proposed company.
Step 2 – After the name approval, through Part B we have to incorporate a company, for which we will be needing –
After collecting all the above required documents PART B OF Spice +, along with e MOA and e AOA, AGILE PRO and INC – 9 is to be filed for approval to CRC (Central Registration Center).
Once the approval is given by CRC, COI (Certificate of Incorporation) is generated and the life of company starts from that day.