One Person Company is a company that is made up by joining one person as a member. This is known as an OPC too. It is incorporated as a private company that has only one member. Therefore, It is easy and simple to get registered even with only one shareholder or member.
Based on ownership, there can be 3 types of companies: 1. One Person Company 2. Private Company 3. Public Company. The Companies Act, of 2013, brought a number of concepts that had never been used in Indian corporatization. One major change was the emergence of the one-person company concept. However, this concept was already existing in several other nations that had previously accepted the capability of individuals to build a corporation. Singapore, the UK, China, Australia, and the USA were a few of these.
A one-person company has multiple benefits due to which a large number of people prefer to go with it. As stated in section 2(62) of the Companies Act - a one-person company has only one person as its member. Therefore, a one-person company is actually a company with a single shareholder as its member.
What is One Person Company?
One person also known as OPC, is incorporated by a single person. An OPC company does not require multiple directors or members. After the enforcement of Section 2(62) of the Company’s Act 2013, a one-person company can be formed with just 1 director and 1 member.
Features of One Person Company (OPC)
- Section 3(1)(C) states that any one person can start incorporating a one person company with a legitimate purpose & these OPCs are defined as private companies.
- One of the major features that separate OPCs from other types of companies is mentioning a nominee. Whenever a person wants to form a one person company then s/he will have to mention a nominee while registering one person company.
- Unlike other companies. One person company can have only one shareholder as its member.
- A one person company can have a minimum of a single member as a director. However, there can be 15 members as directors.
- Under section 8 of the Act, the one person company can not be converted into other types of company.
- The name of the company should be ending with the words like “one person company” where it is printed.
- There is no minimum paid-up share capital required for OPCs. Companies Act, 2013 did not define any amount as minimum paid-up share capital for one-person companies.
- There are certain exemptions and advantages of the one person company under the companies act that other companies do not possess.
Formation of a One Person Company
An OPCs can be formed by a single person by subscribing his name to the memorandum of association (MoA) and fulfilling other conditions specified by the Companies Act, 2013. The memorandum should present the information of a nominee who would become the company’s sole member on behalf of the death of the original member or any other emergency.
This nominee’s consent to his nomination must be filed to the ROC (Registrar of Companies) as well as the memorandum along with a registration application. However, it is also feasible for nominees to fetch out their names anytime by submission of relevant applications to the Registrar of the companies. His nomination can also later be withdrawn by the member of the one-person company.
Benefits of a One Person Company
- Easy Funding - Getting funds for the OPCs is convenient and easy for the owner to approach other financial institutions rather than banks as Banking and Financial Institutions keep the priority to companies other than proprietorship firms.
- Complete control - The member of the company has the authority to take all decisions about the one person company while getting the incorporation of the company.
- Perpetual succession - In case the original member of the company could not lead his duties due to any type of disability or emergence, then the nominee would be to manage all the decisions of the company.
- Easy to Manage - It is easy to manage a one person company as there is only one person who possesses the decision-making power. Running and managing a single person company is also easy and spartan because there will not be any conflict. Moreover, any resolution or decision can be passed easily by the sole member.
- Limited Liabilities - Having a one person company is appealing because the financial liability of a shareholder of any privately owned company is confined to the amount of investment made in the company.
How To Register OPC In India?
First, the applicant needs to obtain a DSC (digital signature certificate) and DIN (Director Identification Number).
Secondly, the applicant needs to file an application form to reserve the company name using the website named RUN (Reserve Unique Name). The applicant will have to pay a defined fee of Rs.1000 along with the application. name is reserved for 20 days the approval process is done successfully.
A Memorandum of Association (MoA) and an Article of Association (AoA) are two very important elements of registering a company. It contains the structure, purposes and functioning modes of the company.
Then the applicant needs to file forms like SPICe MOA and SPICe AOA with the (RoC) Registrar of Companies.
After the successful submission of the application forms and Registration fees, the Registrar of Companies would approve the application and issue a Certificate of Registration.
Required Documents For The Registration of One Person Company
- PAN card or passport.
- Passport for NRIs and foreign citizens.
- Copy of driving license or voter ID
- Redrafted gas/electricity invoice/bank account statement
- Specimen signature or impression
- Passport size photo.
Note: in case of company director, opc company director must self-attest the initial three documents. The complete paperwork for an NRI should be notarised (if they are currently residing in India or a non-commonwealth country) or apostilled (if living in a commonwealth country at present).
Eligibility For One Person Company
There are certain conditions prescribed in the companies act to be eligible for owning a one person company. We expressed below a major of the eligibility conditions that an individual must follow-
Being An Indian Citizen -
The member/shareholder or nominee must be an Indian citizen for owning a one person company. Any other person such as a foreigner or non-resident of India can not start an OPC.
Having Unique Company Name -
The purposed company name should not be a copy of the existing company name, it must be unique.
Least Paid up capital required -
Getting an OPC registration does not require too much paid-up capital. There are no predefined maximum paid-up capital needs for the incorporation of one person company.
Declaring A Nominee -
The member of the one person company should also appoint a nominee in for the future emergence of the original member.
Conversion A OPC Into a Private Limited Company
You can convert your one person company into a Pvt Ltd company. But there are certain conditions that need to be fulfilled before converting it into a Pvt ltd company. Major of them is that your company at least must have a paid-up capital of Rs.50 lac or more or the average turnover of the company should be Rs.2 crores or more than this for over 3 years from the date of incorporation.
After the conversion of one person company into a private limited company, you need to follow all the prescribed provisions for a private limited company.
However, there is also a possibility to convert your private limited company into a one person company. Regarding this, your private limited company must have a paid-up capital of not more than Rs. 50 lakhs or an average annual turnover for the past 3 years from the date of incorporation, less than Rs. 2 crores, can be converted into a one Person Company.
Basic Things For OPC Company To Execute
- OPC members need to conduct at least one Board Meeting in half of the calendar year and the time between the two Board Meetings should not be lesser than 90 days.
- Maintenance of proper books of accounts.
- Statutory audit of Financial Statements.
- Filing of business income tax returns before 30th September every year.
- Filing of Financial Statements in Form AOC-4 and Annual Return in the prescribed Form MGT 7-A.
Penalties For Breaching The Provisions of One Person Company
If a one person company or any member of such company violates the provisions of Companies Incorporation Rules, 2014, then the breaching party will be punished with a penalty which may expand to Rs. 10,000 and with an additional fine which may grow to Rs. 1000 every day after the first contravention continues.
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Frequently Asked Questions-
What are the OPCs that can be incorporated under act?
There are 5 types of one person companies that can be incorporated under the new act- which are as follows-
- OPC limited by guarantee with the share capital
- OPC with the limited shares
- OPC limited by guarantee without share capital
- Unlimited OPC with share capital
- Unlimited OPC without share capital
Who can be a member of a one person company?
A person should be a citizen and resident of India to be eligible for being a member or nominee of OPC company. Here, the resident stands for the period of living in India for at least one hundred years and eight two days.
Can one person be in more than one OPC company?
No. A person can not be in more than one person company. He/she can only be a member of only one OPC.
Who can form an OPC company in India?
A one-person company can be formed in India by one member and one director under the companies act of 2013.
How much amount of money should I have to start an OPC company?
There is no specific amount of money to be invested in an OPC. But to start any business or OPC, one should have at least 1 lakh authorized amount of money.
What are the certain benefits of OPC?
There are many benefits of an (OPC) one-person company. Major of them are less compliance, limited liability, and have no form of disputes.
Is a one person company permitted to secure Foreign Direct Investment?
No. The Indian government did not bring any kind of regulations related to direct foreign investment in OPC.
What would happen to the death of an OPC member?
On the account of the death of an OPC member, It should be informed to the register of companies as soon as possible. This process is done with the form INC-4 to change the membership status of the one-person company.
Can we take a loan in OPC?
Yes. Along with many benefits, You can also take a loan from an OPC easily.
Can OPC have 2 Directors?
Yes. There should be 2 directors in a one-person company as per the companies act 2013.
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