OPC Registration Procedure in India [CS Hera Siddiqui]



ADVANTAGES OF OPC

Legal status 

The OPC receives a separate legal entity status from the member. The separate legal entity of the OPC gives protection to the single individual who has incorporated it. The liability of the member is limited to his/her shares, and he/she is not personally liable for the loss of the company.  Thus, the creditors can sue the OPC and not the member or director.

Easy to obtain funds 

Since OPC is a private company, it is easy to go for fundraising through venture capitals, angel investors, incubators etc. The Banks and the Financial Institutions prefer to grant loans to a company rather than a proprietorship firm. Thus, it becomes easy to obtain funds.

Less compliances 

The Companies Act, 2013 provides certain exemptions to the OPC with relation to compliances. The OPC need not prepare the cash flow statement. The company secretary need not sign the books of accounts and annual returns and be signed only by the director. 

Easy incorporation 

 It is easy to incorporate OPC as only one member and one nominee is required for its incorporation. The member can be the director also. The minimum authorised capital for incorporating OPC is Rs.1 lakh but there is no minimum paid-up capital requirement. Thus, it is easy to incorporate as compared to the other forms of company.

Easy to manage 

Since a single person can establish and run the OPC, it becomes easy to manage its affairs. It is easy to make decisions, and the decision-making process is quick. The ordinary and special resolutions can be passed by the member easily by entering them into the minute book and signed by the sole member. Thus, running and managing the company is easy as there won’t be any conflict or delay within the company.

Perpetual succession 

The OPC has the feature of perpetual succession even when there is only one member. While incorporating the OPC, the single-member needs to appoint a nominee. Upon the member’s death, the nominee will run the company in the member’s place. 

One Person Company (OPC) Registration Process

Step 1: Apply for DSC

The first step is to obtain the (DSC) of the proposed Director which required the following documents:

Address proof

Aadhar card

PAN card

Photo

Email Id

Phone number

Step 2: Apply for DIN

Once the Digital Signature Certificate (DSC) is made, the next step is to apply for the  (DIN) of the proposed Director in SPICE Form along with the name and the address proof of the director. Form DIR-3 is the option only available for existing companies. It means with effect from January 2018, the applicant need not file Form DIR-3 separately. Now DIN can be applied within the SPICE form for up to three directors.

Step 3: Name Approval Application

The next step while incorporating an OPC is to decide on the name of the Company. The name of the Company will be in the form of “ABC (OPC) Private Limited”.

The name can be approved in the Form SPICE+ 32 application. Only one preferred name along with the significance of keeping that name can be given in the Form SPICE+ 32 application. If the name gets rejected, another name can be submitted by applying another Form SPICE+ 32 application.

Once the name is approved by the MCA we move on to the next step.  

Step 4: Documents Required

We have to prepare the following documents which are required to be submitted to the ROC:

The  (MOA) which are the objects to be followed by the Company or stating the business for which the company is going to be incorporated.

The (AOA) lays down the by-laws on which the company will operate.

Since there are only 1 Director and a member, a nominee on behalf of such a person has to be appointed because in case he becomes incapacitated or dies and cannot perform his duties the nominee will perform on behalf of the director and take his place. His consent in Form INC – 3 will be taken along with his PAN card and Aadhar Card.

Proof of the Registered office of the proposed Company along with the proof of ownership and a NOC from the owner.

Declaration and Consent of the proposed Director of Form INC -9 and DIR – 2 respectively.

A declaration by the professional certifying that all compliances have been made.

Step 5: Filing of Forms with MCA

All these documents will be attached to the SPICE Form, SPICE-MOA and SPICE-AOA along with the DSC of the Director and the professional, and will be uploaded to the MCA site for approval. The Pan Number and TAN is generated automatically at the time of incorporation of the Company. There is no need to file separate applications for obtaining PAN Number and TAN.

Step 6: Issue of the Certificate of Incorporation

On verification, the Registrar of Companies (ROC) will issue a Certificate of Incorporation and we can commence our business.

Checklist for Registering OPC

Minimum and maximum of one member. 

A nominee should be appointed before incorporation.

Consent of the nominee should be obtained in Form INC-3.

The name of the OPC must be selected as per the provisions of the Companies (Incorporation Rules) 2014.

Minimum authorised capital of Rs.1 lakh.

DSC of the proposed director.

Proof of registered office of the OPC.

Timelines for OPC Registration

The DSC and DIN of the proposed directors can be obtained in 1 day. The Certificate of Incorporation of an OPC is obtained in 3-5 days. The whole incorporation process of an OPC takes approximately 10 days, subject to departmental approval and revert from the respective department.

Frequently Asked Questions

Who is eligible to act as a member of an OPC?

Only a natural person who is an Indian citizen and resident in India shall be eligible to act as a member and nominee of an OPC. For the above purpose, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one financial year.

A person can be a member of how many OPCs?

A person can be a member of only one OPC.

Is there any tax advantage on forming an OPC?

There is no specific tax advantage to an OPC over any other form. The tax rate is flat 30%, other tax provisions like MAT & Dividend Distribution Tax applies as they apply to any other form of company.

Is there any threshold limits for an OPC to mandatorily get converted into either a private or public company?

In case the paid-up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into a private or public company.

What is the mandatory compliance that an OPC needs to observe?

The basic mandatory compliance comprise:

At least one Board Meeting in each half of the calendar year and the time gap between the two Board Meetings should not be less than 90 days.

Maintenance of proper books of accounts.

Statutory audit of Financial Statements.

Filing of business income tax returns every year before 30th September.

Filing of Financial Statements in Form AOC-4 and ROC Annual Return in Form MGT 7.

Who cannot form a One Person Company?

A minor, a foreign citizen, a Non-Resident, and any person incapacitated by contract will not be eligible to become a member.

How do I convert an OPC to a Private limited company?

Mandatory conversion of One Person Company (OPC) to Private Limited Company (PLC) is required in case a One Person Company meets certain parameters such as:

The effective date of increase in the paid-up share capital of a One Person Capital is beyond 50 lakh, and

An increase of average annual turnover during the period of immediately preceding three consecutive financial years is beyond 2 crore.

In the above case, the One Person Company shall be mandatorily required to convert itself into either a private or a public company within a period of six months. In this article, we also look at the procedure for conversion of One Person Company into a private limited company or limited company.

What are the conditions for voluntary conversion of OPC to Private Limited Company?

When a One Person Company gets incorporated, it cannot convert itself to a Private or Public company before two years from the date of incorporation.

If the time period has elapsed and two years’ time period is over, a One Person Company can apply for converting itself to a Private Limited Company or a Public limited company.

The conversion process should be done as per the rules and regulations laid down by the Companies Act, 2013 under Section 18, and Rule 7(4) of the Companies (Incorporation) Rules, 2014.

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