With the enactment of the Companies Act, 2013, some new ideas have been introduced into India’s Corporate Legal System which wasn’t part of the erstwhile old Companies Act, 1956, one such concept introduced by the Act is the concept of “One Person Company”, which means an individual can now constitute a company. The object behind the incorporation of this concept is to promote entrepreneurship. It will help the entrepreneurs to access certain facilities like bank loans, through access to the market as a separate entity and legal shield for their business. Let’s discuss its advantages, registration, and compliances to be followed.
According to section 2 (62) of the companies Act, 2013, ‘One Person Company (OPC)’ means a company which has only one person as a member. OPC is a type of private company. Only a natural person, who is an Indian citizen and resident in India, shall be eligible to incorporate an OPC & shall be a nominee for the sole member of an OPC. An OPC shall have a minimum of one director. Therefore, an OPC will be registered as a private company with one member and one director.
This new concept was in furtherance of the objective of creating the necessary environment for the present global corporate structure in India. The main aim behind the incorporation of such a concept is to encourage entrepreneurs who wish to set up microeconomic industry but are in search of a business structure with less effort, time and monetary resource consumption in legal conformity.
ADVANTAGES OF OPC-ONE PERSON COMPANY
Separate Legal Entity
OPC legal entity is separate than its shareholders/promoters.
Opportunities for small businessmen
OPC would provide tremendous opportunities for small businessmen and traders, including those working in areas like handloom, handicrafts, and pottery those who are also in a business or sole proprietorship can use this for commercialization.
OPC gives the individual entrepreneurs all the benefits of a company, which means they will get credit, bank loans, access to the market, limited liability, and legal protection available to companies.
The amount of compliance by an OPC is much lesser in terms of filing returns, balance sheets, audit etc.
Limited Liability of shareholder
Liability of shareholders of the OPC is limited only up to the shares subscribed by them and should not be personally liable for the debts of the company in case company are unable to pay its liabilities.
OPC existence will go forever and its existence will not be affected by the death of shareholders, directors or transfer of shares to others.
OPC, being a legal entity different from its members, can enter into contracts for the conduct of the business in its own name.
Capacity to Sue and to be Sued
OPC can take legal action against another and also another person can take legal action against company separate from directors, shareholders & promoters.
Ownership of property
OPC can sale, purchase and own the property like an individual.
DOCUMENTS REQUIRED FOR OPC REGISTRATION
PAN Card for Indian Nationals (Mandatory)
Passport for Foreign Nationals (Mandatory)
Proof of nationality for Foreign Nationals
Proof of Identity (Voter ID/Passport/Driving License) (anyone)
2 Passport size photos.
Address proof of Directors and Shareholder
Bank statement/Electricity/Telephone/Mobile bill) (not older than two months) (anyone)
Proof of Registered office
Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts (anyone)
Copy of the utility bills (Telephone/Gas/Electricity bill) (not older than two months) (anyone)
NOC from Landlord
DSC form (physically signed)
Note: All the Documents in case of Foreign Director should additionally comply as follows:
Notarized (if residing in Commonwealth countries)
Notarized & Apostiled (if residing in a country which is a signatory to Hague convention)
Notarized & Consularised (If not covered in the above categories)
PROCEDURE FOR REGISTRATION OF OPC
Name reservation: The first step in incorporation is to reserve/approve the name of the company. The proposed name selected should do not contain any word which is prohibited under Companies Act, 2013. An approved name is valid for a period of 20 days from the date of approval, for a new company. It is permitted to apply for two proposed names and one Resubmission (RSUB) while Reserving Unique Names for companies through the RUN web service. In Form SPICE (INC-32) name approval can be applied simultaneously with the application for company registration.
Digital Signature Certificate (DSC) of Director and Shareholder: The application for OPC is filed online and it is mandatorily required to be signed by the director and shareholder of the company. So DSC is required to be taken for the directors and shareholder of the company, who is required to sign the e-form for registration before filing incorporation application for the company. Photo, ID and Address proof is required to along with DSC application form for issuance of DSC.
Director Identification Number (DIN): It is a unique identification number to the director issued by Registrar of the companies (ROC) for becoming a director in India. If proposed directors already have approved DIN then that will be used and if proposed directors do not have approved DIN then DIN will be approved simultaneously with Registration of company.
Approval of other authorities: The Registrar of Companies may require the applicant to furnish the approval or concurrence of any department, regulatory body, appropriate authority, or Ministry of the Central or State Government(s) in relation to the work to be done.
Document submission: Application for registration/incorporation of OPC is made to Registrar of Companies (ROC) along Memorandum and Article of Associations, declaration, affidavits etc.
Certificate of Incorporation: ROC then scrutinizes the incorporation form and documents, if ROC finds the documents are in order, issues Certificate of Incorporation which is the Registration certificate of OPC. After receiving the certificate of Incorporation the OPC is set to roll out its function.
PAN& TAN of the company: PAN and TAN are simultaneously applied along with company registration forms and are mentioned in Certificate of Incorporation.
The opening of Bank Account: On submission of Certificate of Incorporation & other essential documents, a bank opens a current account in name of a company, required for smooth running of the company.
The provision of the holding of the Annual General Meeting is not applicable to OPC.
The OPC is required to hold minimum two Board meeting during a calendar year and one meeting in each half of the calendar year and gap between two meetings is not more than 90 days *
* Provided that nothing contained in this sub-section and in section 174 (Quorum for meetings of Board) shall apply to One Person Company in which there is only one director on its Board of Directors. (If OPC has only one director then OPC need not hold Board Meeting (BM)
FINANCIAL STATEMENT OF OPC
The Financial statement of OPC includes the balance sheet, profit and loss account and statement of changes in equity.
Financial statement may not include the cash flow statement.
The OPC is required to file the copy of the financial statement within 180 days from the closure of the financial year [Section 137(1)].
SECTIONS OF COMPANIES ACT, 2013 WHICH NOT APPLIES TO A OPC
Section 98: Power of Tribunal to call meetings of members, etc.
Section 100 : Calling of extraordinary general meeting
Section 101 : Notice of meeting
Section 102 : Statement to be annexed to notice
Section 103 : Quorum for meetings
Section 104 : Chairman of meetings
Section 105 : Proxies
Section 106 : Restriction on voting rights
Section 107 : Voting by show of hands
Section 108 : Voting through electronic means
Section 109 : Demand for poll
Section 110 : Postal ballot
Section 111 : Circulation of members’ resolution.
WHO TAKES OVER WHEN THE PROMOTER OF ONE PERSON COMPANY DIES?
The promoter while forming the Company has to mention one person as his nominee during the incorporation of the Company. The nominee, in event of the death of the promoter or due to his incapacity to contract for any other reason, will:
become a member of OPC;
be entitled to all shares, same dividends and other rights of the OPC; and
Bear all liabilities of the OPC.
On becoming the member, the nominee has to appoint another person as his nominee who will take over the Company in event of his death or due to his incapacity to contract. The nominee has to be appointed within 15 days of becoming a member of the Company with the prior written consent of the person in Form INC-3.
NOMINEE FOR OPC
The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining the prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
The name of the person nominated as mentioned above shall be mentioned in the memorandum of One Person Company and [such nomination in Form No.lNC-32 (SPICe) along with consent of such nominee obtained in Form No. lNC-3] and fee as provided in the Companies (Registration offices and fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the company along with its memorandum and articles.
AT THE END:
The concept of One Person Company is not only helping in corporatization but also pave way for various small-scale traders and mid-level entrepreneurs to start their own Company without unnecessary hassles of various lengthy and unwanted compliances. This will also help in providing legal protection to unorganized Indian businesses.
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