One Person Company
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The Companies Act, of 2013 completely revolutionized corporate laws in India by introducing several new concepts that did not exist previously. One person is also one of the new concepts 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. Recognition of a single person’s economic entity lightens a path for small traders and service providers to venture into business by expanding their opportunities through corporate identity.
There can be five types of OPCs that can be incorporated under the new Act:
- 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.
Features of One Person Company
Perpetual Succession: Even if there is only one member still, the OPC has a feature of perpetual succession. After the death of the only member of the Company, the nominee will run the Company.
Limited Liability and Separate Legal Entity from its Member: In the case of One Person Company, the member has limited liability. Being a company, OPC has a separate legal existence from its member. The separate legal entity gives protection to its member as the liability is limited to his shares, and he is not liable for the loss of the Company. The creditors can sue only the Company and not the Director or member for Company’s debt.
Nominee: The name of another person, i.e., the nominee, will be added to the Memorandum of Association with his prior consent. This nominee would take the place of the proprietor after the sole proprietor’s death or his incapacity to form a contract. The written consent of this nominee will also be filed with the registrar of companies during incorporation of the OPC along with the Company’s AOA and MOA.
Sole Director and shareholder: In OPC, only one member will act as director in the OPC so there is only one Director, and he is the only one to manage the Company, and there is no need for any form of independent or executive Director in this type of Company. Only one single member is needed in OPC; hence the shareholder will hold all the responsibilities.
Owner of the property: Since the OPC hold an artificial person status, it holds all the property related to business such as machinery, land, factories, residential property, building, and other assets of the Company in his name, and no person can claim over any of such property. OPC can acquire, alienate and own the property in its name.
Eligibility Criteria for Registering One Person Company
- A natural person who is a resident of India can form OPC in the preceding calendar year.
- Only one member can form an OPC.
- The name should be unique and should not be similar to any other existing company and trademark.
- An individual cannot incorporate more than 1 OPC or an individual cannot be the nominee of more than 1 OPC.
- There must be a least one director.
- In the case of OPC, the threshold limit of paid-up capital is Rs 50 lakh, and the Average Annual turnover is Rs 2 crore in the immediately preceding financial year. However, as per the latest budget now, there is no restriction on paid-up and turnover limit.
- One Person Company must include in its name (OPC) Private Limited.
- Prior condition to indicate the name of the other individual as a nominee. In the event of the death of the subscriber, a nominee becomes a member of the One Person Company.
Basic mandatory compliance for OPC
- 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
Advantages of OPC
- Limited liability for the business owner
- It is a separate legal entity
- The company registration gives more credibility to the business
- Easy to get loans or funding for the business as lenders trust the registered business
- Perpetual succession
- In case the owner becomes incapable of running the business or dies, the nominee can take over the business
- A sustainable business structure, even when you want to scale.
Disadvantages of OPC
- OPC takes more money to set up and run compared to a Sole Proprietorship
- More compliances
- Must have a nominee to incorporate an OPC
- A person cannot have more than 1 OPC at a time
Documents Required for One-Person Company Registration
- The followings are the documents required for registration of One Person Company:
- PAN card or passport
- Passport, in case of NRIs and foreign nationals
- Scanned transcript of voter’s ID and driver’s license
- Latest gas or electricity invoice/ bank account statement/ mobile phone or landline invoice
- Specimen signature
- Passport-size photographs
- The documents must be self-attested. The paper works of NRIs must be notarized or apostilled.
Other Documents required by Registered Office:
- Scanned transcript of gas or electricity invoice/ bank account statement/ mobile phone or landline invoice
- Scanned transcript of rent agreement
- Scanned transcript of No-objection Certificate (NOC) from the owner of the land, in case the member owns the property, then scanned transcript of sale deed.
Procedure for Registering One Person Company & How we can assist?
The applicant should follow the requisite steps for registration of One Person Company:
Step-1- To Get DSC: For registration, it is required for the applicant to get a Digital Signature Certificate (DSC) issued by the Certifying Authority.
- We can assist in ensuring that the OPC complies with all the legal requirements, including the filing of annual returns, maintaining statutory records, and adhering to other corporate governance norms.
Step-2- To Get DIN: Director Identification Number (DIN) is for the proposed Director. The DIN is applied in the spice+ Form along with the details of the Director.
Step-3- Approval of Name: The name of the Company will be in the form of XYZ (OPC) Private Limited.
- We can advise on the protection of the OPC’s intellectual property, including trademarks, copyrights, and patents.
RUN service will be used to check the availability of names, and one name for the OPC can be applied through spice+ (INC 32).
Step-4- Incorporation of One Person Company: Within twenty days from the date of approval of RUN, i.e., approval of name form spice+ shall be filed for incorporation of OPC. All the requisite documents shall be attached with the form spice+ and will be uploaded on the MCA portal. The PAN and TAN will automatically generate at the time of incorporation.
- We can assist in the incorporation of an OPC, which involves obtaining a Digital Signature Certificate (DSC), Director Identification Number (DIN), and filing of documents with the Registrar of Companies (ROC).
Step-5- Obtaining a Certificate of Incorporation: The Registrar of Companies will issue a COI, i.e., Certificate of Incorporation if he finds the information along with the documents appropriate.
Restrictions on One-Person Company
- No minor shall become a member or nominee of the One Person Company.
- No minor can hold a share with beneficial interest.
- OPC cannot perform voluntary conversion before the completion of 2 years from the date of incorporation of OPC.
- It cannot be incorporated or converted into a company under section 8 of the Act.
- It cannot perform Non-Banking Financial Investment activities.
We can advise on the liability of the OPC and its sole member in case of any legal dispute or liability.