WHAT IS ONE PERSON COMPANY (OPC)?
The concept of One Person Company [OPC] is a new vehicle/form of business, introduced by The Companies Act, 2013 [No.18 of 2013], thereby enabling Entrepreneur(s) carrying on the business in the Sole-Proprietor form of business to enter into a Corporate Framework.
One Person Company is a hybrid of Sole-Proprietor and Company form of business, and has been provided with concessional/relaxed requirements under the Act.
FEATURES OF ONE PERSON COMPANY (OPC)
Only a natural person, who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company. A single shareholder holds 100 percent shareholding. Further the rules also specify that a person can be a shareholder in only one one person company at any given time. It simply means an individual cannot have two different one person companies in his name.
The Shareholder shall nominate another person who shall become the shareholders in case of death/incapacity of the original shareholder. Such nominee shall give his/her consent and such consent for being appointed as the Nominee for the sole Shareholder. Only a natural person, who is an Indian citizen and resident in India shall be a nominee for the sole member of a One Person Company. Please note that the requirements of being a resident Indian and citizen of India also apply to the nominee. Further if the person so nominated becomes the member of such a One Person Company and is already a member of another One Person Company, at the same time, by virtue of rules has to decide within 6 months which one person company he has to continue. One more thing, the member can change the nominee at any point of time.
Must have a minimum of One Director, the Sole Shareholder can himself be the Sole Director. The Company may have a maximum number of 15 directors.
Since nothing has been specified as such by the finance ministry, it is assumed that the rates of taxation applicable for a private limited company shall apply to a One Person Company. Net profits, which are calculated by deducting all allowable expenses from the turnover of sales, shall be taxable at the rate of 30 percentage + education cess.
One Person Company also gets freedom from complying with many requirements as normally applicable to other private limited Companies. Certain sections like Section 96, 98 and sections 100 to 111 are not applicable for a One Person Company. Some of these are mentioned below:
– No requirement to hold annual or extra ordinary general meetings. Only the resolution shall be communicated by the member of the company and entered in the minutes book and signed and dated by the member and such date shall be deemed to be the date of meeting.
– For the purposes of holding board meetings, in case of a OPC which has only One director, it shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes under Companies Act, 2013.
– No requirement of preparing cash Flow in the annual financial statements
– Annual returns can be signed by the Director himself instead of A Company Secretary
Where One Person Company enters into a contract with the sole owner of the company who is also the director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract.
Further, the company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors under sub-section (1) within a period of fifteen days of the date of approval by the Board.
TERMS AND RESTRICTIONS OF OPC:
PROCESS OF INCORPORATION:
The process of incorporation of a one person company is a very simple one.
First the sole shareholder shall get a Director Identification Number (DIN) as well as a digital signature certificate.
Then he should apply for the name of the company
After that he should get the consent of the nominee in the prescribed forms.
Then he shall file the consent along with the final incorporation forms with the Memorandum and Articles and other required documents
After that he shall receive the final incorporation certificate from the register of companies. Now he can commence business under the name.
Please note that that the words ‘‘One Person Company’’ shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.
(Author Ankita Chopra is Partner at Whitte Collar Legal LLP and can be contacted at email@example.com)