Business

One Person Company: An Amalgam Structure

The Companies Act, 2013 gave origin to the concept of One Person Company (OPC). Further, the One Person Company (OPC) can be started by a single person who will act both as the owner and the director of the company. This business structure offers the full authority and control regarding the company to a single promoter and moreover, also limits his duties and liabilities towards the concerned business.

The section 2 subsection (62) of the Companies Act, 2013 defines the term “One Person Company” as a company operated and managed by a single person, who acts both as a member and the director of the company at the same time.  Further, the One Person Company has to fulfil less compliance in comparison to a Private Limited Company. Furthermore, One Person Company is a blend of a Sole Proprietorship and a Private Limited Company. Hence, the budding entrepreneurs in the initial years of their business choose to go for the One Person Company Registration instead of a Sole Proprietorship, as this business structure is a combination of both a Private Limited Company and Sole Proprietorship.

What is the Eligibility Criteria for Obtaining OPC Registration?

Following are the guidelines which are needed to fulfil before obtaining the registration of a One Person Company Registration –

  1. Only a person who is either an Indian Citizen or the Resident of India. The Resident of India means a person who has stayed in India for a period not less than one eighty two days in the preceding one year.
  2. Business Structures like the Limited Liability Partnership or a Company cannot join a One Person Company
  3. A  nominee must have been chosen by the promoter during the process of Incorporation
  4. The minimum authorized capital should be rupees one lakh
  5. A One Person Company is restrained from appointing a minor as its member
  6. If in case the One Person Company exceeds the turnover of rupees two crores or has a paid-up capital more than rupees fifty lakhs. Then the concerned One Person Company must convert itself either into a public or a private limited company within six months.
  7. At least one shareholder, Nominee and Director

What are the Privileges of choosing a One Person Company?

Following are the privileges or benefits offered on choosing the One Person Company Registration –

  1. Limited Liability – Personal property of the directors is forever safe and secure in no matter how big are the debts of the business. Further, in One Person Company, the only investment in the company is lost, and all personal assets of the directors are saved.
  2. Continuous Existence – The One Person Company enjoys the status of a separate legal identity. Hence, it would be managed by the nominee director. Thus, it has continued existence.
  3. Greater Creditability – A One Person Company requires having its books of accounts and records audited yearly. Further, it has a higher credibility between the vendors and lending institutions.
  4. Easy to sell a One Person Company – An OPC Company is simple and easy to sell due to the feature of limited documentation work.
  5. Full Authority over the Company by a Single Owner – This feature helps in the making and execution of the fast decision. Yet One Person Company can select as many as fifteen directors for the official functions, without any requirement of providing any share to them.
  6. Easy to Raise Funds and Loans – The One Person Company is one of the easiest forms of business entities to operate. Further, very few Registrar of Companies filing is to be registered with the ROC (Registrar of Companies). Furthermore, there is no need to conduct an Annual General Meeting (AGM) and other regular compliances.

What are the Exemptions granted for a One Person Company under the Companies Act, 2013?

Following are the Exemptions granted to the One Person Company under the Companies Act, 2013 –

  1. Sign on the annual returns.
  2. Hold Annual General Meetings (AGM) and Board Meetings.
  3. Sign on the Financial Statements.
  4. Option to dispense with the requirement of conducting an Annual General Meeting
  5. Power of Tribunal to call for the meetings of members.
  6. Calling for an extraordinary general meeting (EGM).
  7. Notice of meeting.
  8. Statement to be annexed with the concerned notice.
  9. The Quorum for meetings.
  10. Chairman of meetings.
  11. Proxies
  12. Restriction on the voting rights.
  13. Voting by show of hands.
  14. Voting through electronic means.
  15. Demand for poll.
  16. Postal ballot.
  17. Circulation of members’ resolution.

What are the Annual Compliances regarding the One Person Company?

  1. Minimum two Board Meetings as per the Companies Act, 2013
  2. Statutory Audit by the Practicing Chartered Accountant
  3. Appointment of an Auditor
  4. Filling of an Income Tax Return
  5. Annual Filling to the ROC (Registrar of Companies)
  6. Maintaining Minutes and the Statutory Registers
  7. Filling of Form- AOC-4 for financial statement
  8. Filling of MGT-7 for the annual return

What are the Documents Required for the Registration of a One Person Company?

Following are the Documents required for the Registration of the One Person Company –

  1. Identity proof of the director and nominee – The Individual have to submit an identity proof of both the director and nominee. Further, the identity proof can either be their Voter ID Card, Driving License, Aadhar Card or the PAN Card, etc.
  2. MOA (Memorandum of Association) and AOA (Article of Association) – Both of these documents are very crucial and are submitted during the process of registration. It is significant to note that all the members of the company are required to highlight all the objectives and aims of the company concerned before submission.
  3. Consent of the designated Nominee – As stated earlier, one director and one nominee are needed to commence a One Person Company. Further, in case of any mishap or death, the nominee has the authority to take over the place of the director, so that the working and management of the company is not affected. Furthermore, the consent of the designated nominee is submitted by way of the form INC-3. Lastly, the Nominee too has to submit his or her PAN card details together with the Aadhar card for proceedings.
  4. Affidavit of nominee and director – The designated director and nominee have to submit their affidavit in form INC-9 and DIR-2
  5. Residential Proof of the office – Residential proof of the place used for conducting business activities is submitted at the time of registration. Further, it can be proved by using any sort of utility bill such as electricity, gas, telephone, but not older than two months. The same proof is to be attached with the proof of ownership together with a No Objection Certificate. Lastly, in the case where the company is working on a rented property, then the members of the company are required to submit the rent agreement together with all the documents.
  6. PAN card – A copy of the PAN (Permanent Account Number) card belonging to the director and nominee is required to be submitted during the registration process.
  7. Passport Size photographs – Passport size photographs of all the designated director and the nominee would be annexed together with the form.
  8. DSC and DIN – Both these documents are crucial for the purpose of registration. DSC (Digital Signature Certificate) is needed to sign the online documents while the DIN (Director Identification Number) offers a unique identification number to the concerned director.

What are the Concerns related to the One Person Company?

  1. Minimum authorized share capital required for OPC (One Person Company) registration is rupees one lakh
  2. Both the Minimum and the maximum number of members required for a One Person Company is one
  3. The subscriber to the Memorandum of Association must make the payment regarding the total amount of shares subscribed to him by the company upon incorporation
  4. The One Person Company is a separate legal entity. Still, only one person is responsible and accountable for the workings of the company. A total distinction from what a Sole Proprietorship offers
  • There can be only one member in a One Person Company at a time. However, the appointment of a nominee is a mandatory task. Further, this member and nominee cannot be of a minor age
  • The One Person Company can either be limited by guarantee or by shares or an unlimited company
  • A One Person Company limited by shares is required to comply with following listed requirements –
  • Must have a minimum paid up share capital of rupees one lakh
  • Shares will not be permitted to be transferred to anyone else
  • A One Person Company is barred from giving any invitations regarding subscription of securities of the company to the public.
  • No One Person Company can voluntarily convert into any other type of company or business structure within two years period from the date of incorporation of the concerned One Person Company, except when the limit of paid up share capital, being rupees fifty lakh, is exceeded or its average annual turnover during the said period exceeds rupees two crore.
  • A One Person Company cannot convert into a private company registered under the OPC.
  • A One Person Company is needed to give a legal identity by giving a particular name under which the activities and affairs of the company can be carried on. Further, the words ‘One Person Company’ should be mentioned at the end of the company’s name, wherever the concerned name is affixed, used or engraved.
  • A One Person Company is liable to the same taxes that of a Private Limited Company.
  • When a One Person Company is either limited by shares or by the guarantee enters into an agreement with the sole member of the company, who also acts as the company’s director, the terms of contract or the offer must be recorded either in writing or contained in the memorandum or recorded in form of the minutes of the Board meeting conducted next after entering into the agreement.
  • A One Person Company must inform the Registrar of the company about every agreement entered into by the company with the company’s sole member within fifteen days from the date of approval.

What is the Procedure for Obtaining the Registration of a One Person Company?

Following are the steps involved in the process of obtaining OPC Registration –

  1. Apply for the Digital Signature Certificate – The first and foremost step is to acquire the digital signature certificate for at least one director. Following are the documents required for obtaining the Digital Signature Certificate (DSC) –
  2. Address Proof
  3. PAN Card
  4. Aadhar Card
  5. Photograph
  6. Email ID
  7. Phone Number
  8. Apply for the Directors Identification Number – Once the DSC (Digital Signature Certificate) is obtained, the next step is to apply for obtaining the Director Identification Number (DIN) of all the proposed Director.  The request for obtaining DIN is to be made in the SPICe Form together with the name and the address proof of the concerned director. Further, the Form DIR-3 is the choice only available for the existing companies. This means that with effect from the January 2018, the concerned applicant is not required to file Form DIR-3 separately, and now the DIN can be applied easily within SPICe form for up to three directors.
  9. Name Approval Application – The next step required while is to decide on the company’s name. The proposed name of the Company will be in the format of “ABC (OPC) Private Limited”.

Further, there are two choices available for getting the name approved, either by making an application in the Form SPICe 32 or by using RUN (Reserve Unique Name) Web service of Ministry of Corporate Affairs by giving only one preferred name together with the importance of keeping that name. Thus, with effect from the March 23, 2018, Ministry of Corporate Affairs (MCA) has decided to allow two proposed Names and one re-submission (RSUB) while reserving the Unique Names (RUN Service) for the Companies.

  • Recheck all the Documents – It is quite obvious that no one wants to resubmit their documents, so it is better and advisable to recheck them and make sure that all the documents are true and in the prescribed format. Further, check whether the details of the PAN card matches with the details and particulars submitted with other proof such as the address proof. Lastly, In case of some spelling mistakes, it is always advisable to correct it before the submission.
  • Submission of Forms – After uploading all the required documents, a Form 49A and Form 49B would be generated for the concerned company’s PAN and TAN. Further, one can make use of them while filing the PAN and TAN of the company concerned. The Filling will further help in opening a bank account for the concerned company.
  • Issuance of the Certificate of Incorporation – All the documents, records and forms required are to be verified by the concerned authorities. Once the verification is complete, the Registrar of Companies (ROC) would issue a certificate of Incorporation that will also include the CIN number.

How a One Person Company is Different from a Public Limited Company?

Particulars One Person Company (OPC) Public Limited Company
Governing Body OPC (One Person Company) is governed and administered by the Companies Act, 2013. Public limited companies are also governed and administered by the Companies Act, 2013.
Name of the entity A One Person Company (OPC) must have the word ‘OPC’ in brackets as suffix at the end of the name of the company. In a public limited company the word ‘limited’ should be used as a suffix with the name of the company.
IPO One Person Company restricts the issuance of shares publicly. A public limited company allows the issuance of share to the general public by way of an IPO (Initial Public Offer).
Number of members A One Person Company can be incorporated only with one person and also restricts to have more than one shareholder or member. Minimum- 7 members Maximum- unlimited as not limit is prescribed
Number of directors Minimum one director must be appointed at the time of incorporation. Minimum- 3 directors Maximum- 15 directors Further, the Number of directors can be increased by just passing the special resolution.
Transferable shares Shares can be transferred only due to the alteration in company’s MOA (Memorandum of Association). Shares can be freely and easily transferable which means that shares are bought and sold in the recognized stock exchange market.
Concept of nominee It is compulsory and mandatory to appoint a nominee. Further, the name of the nominee must be mentioned in company’s MOA. No such concept of nominee exist in the regulations of a public company.
Auditor The provision of mandatory and compulsory rotation of auditor after the expiry of term does not prevail in the concept of an One Person Company. In a public limited company the provision of mandatory and compulsory rotation of auditor after the expiry of prescribed maximum term is applicable.
Control and management The sole owner of the company has the complete authority and control over the company. But in case of a public limited company the directors do not have a complete ownership of the concerned company.
Foreign ownership In One Person Company every owner or director or nominee must be a resident of India. Further, no NRI or foreigner is permitted to invest in OPC. In case of a public limited company, the concept of FDI (Foreign Direct Investment) is allowed.

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