By : Jayesh Ahuja

Introduction

Genesis and Global Development

Definition of one person company

Special Features of OPC

Privileges to OPC

Incorporation of OPC

Conversion of OPC to Pvt./Public and vice-versa

Few Compliance required to be followed by OPC

Benefits & Limitation

Conclusion

The introduction of OPC in the legal system is amove that would encourage corporatization ofmicro businesses and entrepreneurship with asimpler legal regime so that the smallentrepreneur is not compelled to devoteconsiderable time, energy and resources oncomplex legal compliances.

With the implementation of the CompaniesAct, 2013, a single national person canconstitute a Company, under the One PersonCompany (OPC) concept.

One person companies are in existence in certaincountries. In India this concept has been mootedby the Ministry of Corporate Affairs by allowingOne Person Companies in India in line with UK,China, USA, Australia, Singapore, Qatar, Pakistanand several other countries.

It is a right thinking in right direction by theMinistry of Corporate Affairs. One PersonCompanies have been in existence in UK forseveral years now. China allowed formation ofOPCs as recent as in 2005. A few other countrieshave also given the legal status for OPCs.

Clause 2(62) defines a OPC as “a companywhich has only one person as a member”.

OPC Sole Proprietorship

Separate Legal Entity Owner & Entity are same

personality

Limited Liability Unlimited Liability

Perpetual Succession No Perpetual Succession

Loan not the sole

responsibility of the owner

Loan- sole responsibility of the

owner

Registration Required Registration not required.

Separate legal entity.

Incorporated as a private limited company.

Must have only one member/shareholder.

Should indicate nominee member in the MOA,

who shall become member in the event of death/

incapacity of sole member.

The member and nominee should be natural

persons, Indian Citizens and resident in India.

One person cannot incorporate more than one

OPC

No minor shall become member or nominee.

OPC cannot be incorporated/converted u/s. 8(i.e. Formation of companies with charitable objects)

OPC cannot carry out Non Banking FinancialInvestment activities.

OPC Lose its status if paid up capital exceeds Rs. 50lakhs or average annual turnover is more than 2crores in 3 immediate preceding consecutive years.

OPC is required to specifically mention the word “oneperson company” below the name wherever it is used.(e.g. : Vijay Corporate Solutions OPC Private Limited)

Limited Liability.

Easy Incorporation & conversion procedure.

Mandatory rotation of auditors not applicable.

The annual return of a OPC signed by the companysecretary (C.S.), or where there is no (C.S.) , by thedirector of the company.

The provisions of Section 98 and Sections 100 to111 (both inclusive), relating to holding of generalmeetings, shall not apply to a OPC.

Must have at least one director and conduct boardmeeting once within each half of the calendar year.

No Annual General meeting is required, it shall besufficient if the resolution is communicated by themember to the company and entered in theminutes-book, which will be signed and dated bythe member. {Sec. 96(1) & 122(3)}

No Board meeting is required, when there is onedirector, if the resolution by such director isentered in the minutes-book and signed anddated by such director.

Financial statements can be signed by one directoralone.

Cash Flow statement is not mandatory.{Sec. 2(40)}

Obtain Digital Signature Certificate [DSC] for the proposed Director(s)

Obtain Director Identification Number [DIN] for the proposed director(s)

Select suitable Company Name, and make an application Form INC -1 to the Ministry of Corporate Affairs for availability of name

Draft Memorandum of Association and Articles of Association [MOA & AOA]

Sign and file various documents including MOA & AOA with the Registrar of Companies electronically

Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp Duty

Scrutiny of documents at Registrar of Companies [ROC]

Receipt of Certificate of Registration/Incorporation from ROC

If, any

Conditions

fulfilled.

Average Annual

Turnover* Rs. 2

cr. Or less.

Paid up Capital

Rs. 50 lakhs or less.

Obtain ‘No Objection’ in writing from Members & Creditors Pass a special resolution in the general meeting. File copy of the special resolution with the R.O.C. in Form No.

M.G.T. 14 within 30 days from the date of passing suchresolution.

File an application in Form No.INC.6 for its conversion intoOne Person Company along required documents.

On being satisfied the ROC shall issue the certificate.

Average Annual

Turnover* >

Rs. 2 cr.

Paid up

Capital > Rs.

50 lakhs

If, any

Conditions

fulfilled.

OPC convert itself, within 6 months from fulfillment of any ofthe above conditions, into either a Private or Public companyin accordance with the provisions of section 18 of the Act.

1) Alter its memorandum and articles by passing a resolutionin accordance with sub-section (3) of section 122 of the Act .

2) File form No. INC – 5 to ROC, within 60 days from the dateof exceeding the above limit.

Directors {Sec. 152(1), 149(1)a & (1)b}

Annual Return (sec. 92)

Financial statement, Board’s report, etc.(Sec. 134)

Copy of Financial statement to be filled with Registrars.

Meetings of Board (Sec. 173)

Appointment of directors (Sec. 152)

Contract by one person company (Sec. 193)

Limited Liability Protection to Directors andShareholder.

Legal Status & Social Recognition

Complete Control Of The Company With TheSingle Owner

Helps for Testing of business model and enablesFunding.

Easy to Get Loan from Banks.

Easy To Manage and Freedom Compliances.

Minimum authorized share capital of Rs. 1 lakh isrequired.

Incorporation cost is high, requires morepaperwork and time consuming.

Tax rate: 30 %, and also applicability ofMinimum alternate tax and DividendDistribution tax.

Professional like CA or CS’s help is required.

Company Audit and Annual compliance to ROC.

1) Who is eligible to act as an member of OPC?

A. Only a natural person who is an Indian citizen andresident in India shall be eligible to act as a memberand nominee of an OPC. The term "resident inIndia" means a person who has stayed in India for aperiod of not less than 182 days during theimmediately preceding one financial year.

2) A person can be a member in how many OPCs?

A. A person can be member in only one OPC.

3) What if a member of an OPC becomes a member inanother OPC by virtue of being a nominee in thatother OPC?

A. Where a natural person, being member in OnePerson Company becomes a member in another OPCby virtue of his being a nominee in that OPC, thensuch person shall meet the eligibility criteria of beinga member in only one OPC within a period of onehundred and eighty days, i.e., he/she shall withdrawhis membership from either of the OPCs within onehundred and eighty days.

4) How to Inform ROC about the change inmembership of OPC?

A. The company shall file form INC-4 in case ofcessation of member of OPC on account of death,incapacity to contract or change in ownership. Inthe same form, user needs to provide details of thenew member of the OPC.

5) Which Form is to be filed in case of withdrawal ofconsent by the nominee of an OPC or in case ofintimation of change in nominee by the member?

A. Form INC-4 shall be filed in case of withdrawal ofconsent by the nominee or in case of intimation ofchange in nominee by the member.

The concept of OPC is still in its nascent stages inIndia and would require some more time tomature and to be fully accepted by the businessworld. With passage of time, the OPC mode ofbusiness organization is all set to become themost preferred form of business organizationspecially for small entrepreneurs.

The One Person Company concept holds a brightfuture for small traders, entrepreneurs with lowrisk taking capacity, artisans and other serviceproviders.

An OPC as a business structure doesn’t seemefficient from tax perspective as an OPC would betreated as a company and be subject to a higherrate of tax compared to a Sole Proprietorship.Since an OPC is a company, there would be anincidence of tax (dividend distribution tax) whiledistribution of dividend.

It would be premature to comment on the successor failure of this new business model just yet, as itis yet to be put to test. It remains to be seen if OPCwould become popular business model forentrepreneurs wanting to go it alone.