The Companies Act, 2013 completely revolutionized corporate laws in India by introducing several new concepts that did not exist previously. One person is also one of new concept introduced.
One person company (OPC) means a company formed with only one (single) person as a member, unlike the traditional manner of having at least two members. It is recognition of single person economic entity lightens a path for small traders, service providers to venture into business by expanding their opportunities through corporate identity.
As per provision of section 2(62) of the Companies Act, 2013 defined “one person company” means a company which has only one person as member.
Any natural person (should not be minor) who is an Indian citizen whether a resident in India or not i.e. NRI shall be eligible to incorporate a One Person Company and appoint nominee of an OPC,Timeline for Non-resident individuals has been reduced to 120 days.
Benefits of One Person Company
One person company is corporatization of sole proprietorship, so it has all benefits will a corporate enjoys aside to this it has some relaxations in provision of company law. Following are some of benefits of One Person Company.
- It has separate legal entity.
- The liability of shareholder/ director is limited
- The organized version of OPC will open the avenues for more favorable banking facilities
- Legal status and social recognition for your business. It gives suppliers and customers a sense of confidence in business.
- The director and shareholder can be same person
- On the death/disability company can be succeed by nominee.
- Exemption available from various provisions under Company law.
Difference between OPC and Sole proprietorship
||Have separate legal entity
||No distinction between business and proprietor
||Liability of shareholder/director is limited
||Unlimited liability of sole proprietor
||Income Tax rate applicable of Private Limited Company
||Slab rate wise tax applicable. Hence less tax implication
||Compulsory statutory audit for books of account.
||Audit of books of accounts depend upon amount of turnover.
||Mandatory compliance of provision of Company Law.
||Provisions of company law do not applicable.
Basic mandatory compliance for OPC
The basic mandatory compliance comprises:
- 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.
- Maintenance of proper books of accounts.
- Statutory audit of Financial Statements.
- Filing of business income tax returns every year before 30th September.
- Filing of Financial Statements in Form AOC-4 and Annual Return in proposed Form MGT 7-A
Detail provision applicable on OPC
Naming the OPC
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.
Members and Directors in an OPC
- The minimum and maximum number of members in an OPC can be only one. As per Section 152(1) of the Act, an individual being member of OPC is deemed as First Director of the OPC until the director(s) are duly appointed by the member.
- A person can be member in only one OPC.
- The minimum and maximum number of directors in an OPC can be one (1) and fifteen (15) respectively.
- In order to increase the number of directors beyond 15 directors, a special resolution must be passed by the OPC to that effect
Nominee in an OPC
- An OPC must mention one person as ‘Nominee’ in the event 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.
However, written consent of such Nominee to act as nominee must be obtained and filed with the RoC at the time of incorporation along with MoA and AoA.
- A Nominee may, withdraw his consent by giving a notice in writing to the sole member and to the OPC. The sole member then nominates another person as nominee within 15 days of the receipt of the notice of withdrawal.
The OPC is required to file with RoC:
(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 above filing requirement has to be fulfilled within 30 days of receipt of the notice of withdrawal of consent from the earlier nominee. Also, a Nominee can be changed at any time by providing a notice to the RoC.
- Where a natural person, being member in One Person Company becomes a member in another OPC by virtue of his being a nominee in that OPC, then such person shall meet the eligibility criteria of being a member in only one OPC within a period of one hundred and eighty days, i.e., he/she shall withdraw his membership from either of the OPCs within one hundred and eighty days.
Board Meetings and AGM
- OPC is deemed to have complied with Sec. 173, if at least one meeting of the BoD is has been conducted in each half of a calendar year and the gap between two meetings is not less than 90 days. Section 173 and 174 (Quorum of Meeting of BoD) will not apply to an OPC in which there is only one director on its Board.
- An OPC is not required to hold an AGM.
Financial Statements of an OPC
- Financial Statement of an OPC has to be approved by the Board and needs to be signed by only one director for submission to the auditor.
- OPC need not prepare Cash Flow Statement as part of its financial statement.
- The copy of such financial statement along with other documents etc. must be filed with the RoC within 180 days from the closure of the financial year. Report of the Board to be attached to the financial statement shall mean, in case of an OPC, a report containing explanations or comments by the Board on every qualifications, reservations or adverse remarks or disclaimer made by the auditor in his report.
Annual Returns & Auditor’s Report of an OPC
- Annual Returns of an OPC must be signed by a company secretary and the director. In case there is no company secretary, the signature is required only from the Director.
- Mandatory rotation of auditor after expiry of maximum term is not applicable to an OPC.
Contract between OPC and Member
- Where an OPC enters into a contract with its sole member (who is also the director), unless the contract is in writing, the OPC should shall ensure that the terms of the contract/ offer are incorporated in the memorandum of the OPC or recorded in the first meeting of the Board held next after entering into such contract.
- The above provision is, however, not applicable if the contracts are entered into by the company in the ordinary course of business.
- The other requirement is that the OPC must intimate the RoC about every such contract recorded in the minute book of its Board under section 193(1) within 15 days of the date of approval by the Board.
Penalty of non-compliance with the provision of the Act
If an OPC or any officer of such company contravenes the provisions of Companies Incorporation Rules, 2014, such contravening party will be punishable with fine which may extend to Rs. 10,000/- and with a further fine which may extend to Rs. 1000 for every day after the first during which such contravention continues.
List of Exemptions Available to OPCs under the Act
Following sections are not applicable to OPCs-
- 98(Power of Tribunal to call meetings of members, etc.)
- 100(Calling of EGM)
- 101 &102 (Notice of Meeting & Statements to be annexed to Notice)
- 103 (Quorum of Meetings)
- 104(Chairman of Meetings)
- 106(Restriction on Voting Rights)
- 107 & 108(Voting by show of Hands & by Electronic Mode)
- 109&110 (Demand for Poll & Postal Ballot)
- 111(Circulation of Member’s Resolutions)
Incorporation of OPC
Types of OPCs can be incorporated under the Act.
There can be five types of OPCs that can be incorporated under the new Act, viz.
- OPC Limited by Shares;
- OPC Limited by Guarantee with Share Capital;
- OPC Limited by Guarantee without Share Capital;
- Unlimited OPC with Share Capital, and
- Unlimited OPC with Share Capital.
Steps for Incorporation of OPC
Incorporation through SPICe (Without filling RUN)
Stakeholders can avail of 5 different services (Name Reservation, Allotment of Director Identification number (DIN), Incorporation of New Company, Allotment of PAN and Allotment of TAN) in one form by applying for Incorporation of a new company through SPICe form (INC-32) with eMoA, , eAOA.
Incorporation through SPICe (With RUN)
Name reservation: RUN service shall be used for name availability.
Incorporate OPC: After name approval, form SPICe shall be filed for incorporation of the OPC within 20 days from the data of approval of RUN. The company shall file form INC-22 within 30 days once form SPICe is registered in case the address of correspondence and registered office address are not same.
Certificate of Incorporation
When the eForm is processed and DIN is generated, an acknowledgement email of Certificate of Incorporation (CoI) is sent on email.
Further, on approval of SPICe+ forms, the Certificate of Incorporation (CoI) is issued with PAN and TAN as allotted by the Income Tax Department. An electronic mail with Certificate of Incorporation (CoI) as an attachment along with PAN and TAN is also sent to the user.
Conversion of OPC into a Public Company or a Private Company
- The One Person Company shall alter its memorandum and articles by passing a resolution in accordance with sub-section (3) of section 122 of the Act to give effect to the conversion and to make necessary changes incidental thereto.
- A One Person company may be converted into a Private or Public Company, other than a company registered under section 8 of the Act, after increasing the minimum number of members and directors to two or seven members and two or three directors, as the case may be, and maintaining the minimum paid-up capital as per the requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion.
- The company shall file an application in e-Form No.INC-6 for its conversion into Private or Public Company, other than under section 8 of the Act, along with fees as provided in the Companies (Registration offices and fees) Rules, 2014 by attaching documents, namely:- (a) Altered MOA and AOA; (b) copy of resolution; (c) the list of proposed members and its directors along with consent; (d) list of creditors; and (e) the latest audited balance sheet and profit and loss account.
- On being satisfied that the requirements stated herein have been complied with, the Registrar shall approve the form and issue the Certificate.
In nut shell, conversion of One Person Company into a Public company or a Private company shall be permitted anytime other than a company registered under section 8 of the Act, after increasing the minimum number of members and directors to two or minimum of seven members and three directors as the case may be.
Conversion of Private Limited Company to OPC
A private company other than a company registered under section 8 of the Act may convert itself into One Person Company by passing a special resolution in the general meeting.
The company shall file an application in Form No.INC.6 for its conversion into One Person Company along with fees as provided in in the Companies (Registration offices and fees) Rules, 2014, by attaching the following documents, namely:-
- The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion,
- the list of members and list of creditors;
- the latest Audited Balance Sheet and the Profit and Loss Account; and
- the copy of No Objection letter of secured creditors
E –Forms of OPC
|One Person Company- Nominee consent form
|One Person Company- Change in Member/Nominee
|One Person Company –Application for conversion