New Concept of One Person Company for Sole-Proprietor form of business to enter into a Corporate Framework under Companies Act, 2013 By CS Yashree Dixit



Dear Professional Colleagues,

One person can carry on the business in Sole-Proprietor form of business to enter into a Corporate Framework. This will support the entrepreneur on their own and make them capable of starting a venture. A single person can start a business with new idea or own way.
 
Companies act, 2013 come up with the new concept of one person company with less compliance.
 
  1. Definition:-
As per Provision of Section 2(62) of the Companies Act, 2013 provides that “a company which has only one person as a member.”
Section 3(1)(c) of the Companies Act,2013 provides that the words ‘One Person Company’ must be mentioned below the name of the company in bracket wherever it appears. OPC can be registered as a private company means all the provision of the private company which will be applicable to the OPC. Unless otherwise expressly excluded in the Act or rules made thereunder.

  1. Member/ Director:-
The director or member only a natural person, who is an Indian citizen and resident in India, shall be eligible to incorporate a One Person Company.
Minimum and maximum number of Member can be only One & Minimum and maximum number of Directors can be one and fifteen respectively.
As per Section 152(1) of the Act, an individual being a member of OPC is deemed as First Director of the OPC until the director(s) are duly appointed by the member.

  1. Restriction:-
    An OPC cannot be incorporated or converted into a company under Section 8 of the Act.
  OPC cannot carry out non-banking financial activities, including investment in securities of any Body corporate.
A person shall not be eligible to incorporate more than a One Person Company or become the nominee in more than one such company.
 
  1. Paid- up Capital:-
In OPC there is no such restriction in minimum paid-up capital.
 
  1. Nominee:-
An OPC must mention one person as ‘Nominee’ in the event of death, incapacity, etc. (a)who will become a member of OPC (b) entitled to all shares of the OPC, and (c) bear all liabilities of OPC.
However, written consent of such Nominee to act as a nominee must be obtained and filed with the ROC at the time of incorporation along with MoA and AoA.
 Minor, Foreign citizen, any person incapacity to contract cannot become member or nominee of the One Person Company or can hold a share with beneficial interest.
A Nominee may withdraw his consent by giving a notice in writing to the sole member and to the OPC.
 
  1. Contract by One Person Company:-
 
OPC has complied with Section 193 (1) of the Companies Act, 2013 when OPC limited by shares or by guarantee enters into a contract with the sole member or director of the company, the company shall unless the contract is in writing ensure that the terms of contract or offer are in writing or contained in a memorandum or recorded in the minutes of the Board meeting held next after entering into the contact.
Intimate to the registrar about every contract entered into by the company within a period of fifteen days from the date of approval by the Board of Directors.
Contracts in the ordinary course of business not required to comply with the above.
 
  1. Board Meeting/ Annual general Meeting/ General Meeting:-
 
OPC has complied with Section 173 of the Companies Act, 2013 if at least one meeting of the Board of directors is has been conducted in each half of a calendar year and the gap between two meeting is not less than 90 days.
  • Section 173 and 174 (Quorum of Meeting of Board of directors) will not apply to an OPC in which there is only one director on its Board.

  • OPC is not required to hold an AGM.

  • Section 98,100 & 111 holding of the general meeting shall not apply.

 
  1. Financial Statement:-
 
Financial Statement of an OPC has to be approved by the Board and needs to be signed by only one director for submission to the auditor.
It is to be noted that an OPC need not prepare Cash Flow Statement as part of its financial statement. The copy of such financial statement along with other documents etc. must be filed with the ROC within 180 days from the closure of the financial year. Report of the Board to be attached to the financial statement shall mean, in case of an OPC, a report containing explanations or comments by the Board on every qualifications, reservations or adverse remarks or disclaimer made by the auditor in his report.
 
  1. Annual Return:-
 
   Annual Returns of an OPC must be signed by a company secretary and the director. In case if there is no company secretary, the signature is required only from the Director.
 
  1. Compulsory Conversion:-
 
An OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond Rs.50 Lakhs or its average annual turnover during the relevant period exceeds Rs.2 Crores i.e., if the Paid-up capital of the Company crosses Rs.50 Lakhs or the average annual turnover during the relevant period exceeds Rs.2 Crores, then the OPC has to invariably file forms with the ROC for conversion in to a Private or Public Company, with in a period of Six Months on breaching the above threshold limits.
 
  1. Tax Benefit:-
 
Tax Flexibility and Savings an OPC, Director can receive remuneration, as a lessor he can receive rent, as a creditor you can lend money to your own company and earn interest. Directors’ remuneration, rent and interest are deductible expenses which reduce the profitability of the Company and ultimately bring down the taxable income of your business.

      Incorporate One Person Company (OPC) Through SPICE Mode:-
  1. Obtain Digital Signature Certificate [DSC] for the proposed Director and witness.
  2. Application for DIN in Form DIR-3.
  3. Filed e-Form SPICe (INC-32) for reservation of name, incorporation of a new company, application for allotment of DIN and/or application for PAN and TAN.
Mandatory attachment with E-form SPICE INC-32
  •  Affidavit and declaration by the first subscriber(s) and director(s) in form INC-9.
  •  Proof of office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts)
  •  Copies of utility bills like (electronic, gas, telephone that is not older than two months.)
  •  NOC for Registered office premises From Owner.
  •  Form INC-3 with attachment self-attested copy of pan card, Residential proof(Aadhar card, passport),
  •  Proof of identity and residential address of the nominee and Member.
  •  Consent to act as Director of form DIR-2.
  •  In case of subscribers/ Director does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers.
  • -Discloser required if first director Interest in other entities.
 
  1. Sign and file e-MOA(FORM NO.INC-33) & e-AOA (FORM NO.INC-34) with the Registrar of Companies electronically. 
  2. Payment of the Requisite fee to Ministry of Corporate Affairs and also to Pay Stamp Duty and upload form 49A / form 49B.
  3. Receipt of Certificate of Registration/Incorporation from ROC.
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