The Central Government had introduced a new concept namely the One Person company by an amendment to the Companies Act, 2013 to organize, regulate and govern the unorganized sector of proprietorship, firms and other entities.
Section 2(62) defines the 'One Person Company' as a private limited company with only one director and one shareholder. However, it may increase this number to upto a maximum of 15. This is to help small entrepreneurs operating as
proprietorships to do business with the benefits of limited liability without a second person to form a company.
The OPC provides more flexibility and control to an entrepreneur such as a sole proprietorship or a professional to control and manage the business efficiently and enjoy the benefit of limited liability.
Important requirements for the formation of One Person Company (OPC)
1. As per section 3(1)(c) of the Companies Act, 2013, an OPC may be formed by one person for any lawful purpose.
2. The Memorandum of Association of an OPC shall indicate the name of any other person as a nominee, with a prior written consent, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of the Company. This provision ensures perpetuity and continuity to the OPC.
3. Along with the Memorandum and Articles of Association, the Subscriber is also required to file the written consent of the nominee with the Registrar of Companies for the incorporation of the OPC.
4. The word ‘One person Company’ shall be a part of the name of the company as per Section 12(3) of the Act.
5. Number of directors may increase but number of shareholders cannot increase.
6. One person can incorporate a maximum of 5 OPCs [Rule 2.1(2)].
7. Recently amendments were made in Rule 3, 6 & 7 of the Companies (Incorporation) Rules, 2014 that effective from 1st April, 2021, to boost the economy.
Five major changes are made as under:
(a) Resident individuals as well as NRIs are also permitted to form an OPC in India
(b) Residence status for formation of OPC was also relaxed to allow a person to qualify as Indian resident if he resides in India for 120 days or more in preceding FY, instead of 182 days.
(c) The conversion of OPC in Private Limited or Public Limited Company is also made easier.
(d) Requirement relaxed so that now OPC can be converted anytime into any other type of company under the Act.
(e) The conversion norms are now relaxed so that OPC can convert itself into any kind of Company at any time under the Act.
Exemptions provided to OPC
OPCs have been provided with several exemptions and therefore have lesser compliance burden than Limited companies or Limited Liability Partnerships.
(a) The OPC is not required to prepare Cash flow statement as a part of financial statement [Section 2(40)]
(b) In case an OPC does not have a Company Secretary, the annual return can be signed by the director of the company [Proviso to section 92(1)]
(c) An OPC is not required to hold an annual general meeting [Section 96(1)]
The advantages of an OPC are as follows:
1. Limited liability Under the Companies Act, the liability of the single shareholder in an OPC is limited to the unpaid subscription money subscribed by the promoter. Thus the personal property of the promoter is safe from creditors of the business.
2. Succession
The Companies Act also provides for a person, nominated by the promoter of the OPC, to take over the reins of the company in the event of the death or inability of the promoter to continue the business. This allows the OPC to have a perpetual succession to run the company.
3. Market Value An OPC is registered under the Companies Act and enjoys the same privileges available to a private limited company.
4. Easy Credit Facilities The OPC finds it easier to obtain funds from banks and financial institutions than sole proprietorships or partnerships.
5. Tax Rate Since the OPC is a company, the same tax slabs will be applicable and an OPC would have to pay 30% tax on its profits with an additional surcharge of 5% if the income exceeds 10 million with an addition to 3% of education cess. There are no exemptions.
The OPC is required to file its income tax return in Form ITR 6 for the financial year on or before 30th September of the following financial year with the Income tax department.
Restrictions on OPCs A promoter can register only one OPC.
Documents Required For OPC Registration
1. Passport size photograph of the Owner. 2. Copy of PAN Card of owner. 3. Copy of Aadhaar Card/ Voter identity card. 4. Copy of Property documents like Sale deed or Gift deed or Leave & License agreement plus Landlord NOC in case of rented premises. 5. Electricity/ Water bill as proof of address.
Registration process for OPC
1. A one person company has only one shareholder, who may also be the director. There can be a maximum of 15 directors like any company.
2. The subscriber has to file application for Digital Signature (DSC).
3. The Director must apply for the “Director Identification Number’ (DIN) in
4. The name of the OPC must be selected as per the provisions of the Companies (Incorporation Rules) 2014. The form is SPICe+32.
5. Minimum authorised capital of Rs.1 lakh
6. The director must file SPICe-MOA and SPICe-AOA of the OPC.
7. The written consent of the Nominee in Form INC-3 also to be filed along with the PAN card and Aadhar Card. The Owner may change the Nominee at any time. The Nominee may also resign at any time. The Owner is required file a fresh nomination and inform the Registrar of the change.
8. The name will carry a suffix, ‘OPC’, similar to the manner in which a private company uses the suffix ‘pvt ltd’.
9.Declaration and Consent of the proposed Director in Form INC -9 and DIR – 2 respectively to be filed
10. A declaration by the professional certifying that all compliances have been made.
11. The Registrar will issue the Certificate of Incorporation within seven days of receiving the documents, after which the OPC can start the business.
Every OPC is required to have minimum of two Board meetings every year if there is more than one Director. Resolutions passed by the sole member must be entered in the minutes book of the OPC. The OPC is required to have its Passport audited and file its financial statements with the ROC.
Filing of Returns
Every OPC is required to get its accounts audited as per the provisions of the Companies Act, 2013. It is also required file its audited Financial Statements like Balance Sheet, Profit and Loss Account and Income & Expenditure in Form No. AOC-4 The annual returns in Form MGT-7A also has to be filed end November as per the Companies (Management and Administration) Amendment Rules, 2021 with effect from 5th March, 2021. The same can be filed with the signature of the single director without the need for a Company Secretary’s signature.
The Writer is a Practicing Company Secretary with more than 30 years in project consultancy. He can be contacted for queries or assistance at the following address:
CS Joseph Sequeira B.Com, LL.B, FCS, MICA Practicing Company Secretary Delfina Apts, Opp. Rosary Church, Caranzalem, Panaji, Goa - 403004 Email : josephcf@yahoo.com Phone: +91 8380087153. Website: www.csjoseph.in
Disclaimer: The information given in this document has been made on the basis of the provisions stated in the Companies Act, 2013 & :rules. It is based on the analysis and interpretation of applicable laws as on date. The information in this document is for general informational purposes only and is not a legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this document. Under no circumstances whatsoever, we are not responsible for any loss, claim, liability, damage(s) resulting from the use, omission or inability to use the information provided in the document.
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