One Person Company (OPC) Registration
The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own can start a venture by allowing them to create a single person economic entity. One of the biggest advantages of a One Person Company (OPC) is that there can be only one member in an OPC, while a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership (LLP). Like a Private Limited Company, a One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.
Though a One Person Company allows a lone Entrepreneur to operate a corporate entity with limited liability protection, an OPC does have a few limitations. For instance, every One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the Company, who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of Companies. Therefore, it is essential for the Entrepreneur to carefully consider the features of a One Person Company before incorporation.
OPC in India
The concept of One Person Company in India was introduced by Dr. Jamshed J. Irani in his Report on Company Law dated 31st May, 2005. As per the report, Dr. Irani recommended that with the increasing use of information technology and emergence of a strong service sector in India, it was time for the Government to empower entrepreneurs who on their own are capable of developing ideas and participating in the marketplace. He suggested that entrepreneurs who on their own are capable of starting a venture should not be made to do it through an association of persons, and should be able to create a single person economic entity in the form of ‘One Person Company’. Further, it was also suggested that such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters.
This led to the introduction of “One Person Company” in the Companies Bill 2013, which got its assent in the Lok Sabha on 18 December 2012 and in the Rajya Sabha on 08 August 2013. After obtaining the assent of the President of India on 29 August 2013, it has become the Companies Act, 2013.
Benefits of One Person Company
Till the introduction of One Person Company in India, the Limited Liability and Continuous Existence feature was only available to an association of persons such as a Private Limited Company or Limited Liability Partnership or a Limited Company. With the introduction of One Person Company, the limited liability and continuous existence feature is now available for One Person Company also, which is an entity with just one member. As One Person Company has just one member, it is necessitated by the law for the single member of the Company to designate another person (as his/her nominee to continue the business activities of the OPC) in the Memorandum of Association, who on the event of subscriber’s death or incapacity shall become the person to contract. This mechanism provides an adequate safeguard to ensure continuous existence of the entity even in case of incapacitation of the single member.
All companies in India are required to hold an annual general meeting each year, in addition to holding any other meetings and not more than fifteen months should elapse between the dates of subsequent annual general meetings. One Person Company is exempt from holding an annual general meeting or extraordinary general meetings. The resolution signed by the single Director and entered into the minutes book is sufficient, in lieu of a General / Extraordinary General Meeting. Every company in India is required to prepare and file financial statements that includes balance sheet, profit and loss account, cash flow statement, statement of changes in equity and explanatory notes. In case of One Person Company, cash flow statement is not required.
OPC Registration Process
Before exploring the concept of a one person company, let us have a brief understanding of the various types of companies that can be formed.
A company can be established for a lawful purpose by the following number of persons:
- Seven or more persons, in case of a public limited company.
- Two or more persons, in case of a private limited company.
- One person, in case of a one-person company.
OPC Requirements
Unlike a private limited company, a one person company has certain restrictions associated with its incorporation. Hence, before starting an OPC registration, its essential to understand the constraints and ensure the promoter is eligible as per the Companies Act to register an OPC.
- Only a natural person who is an Indian Citizen and resident in India can incorporate OPC.
- It means Legal entities like Company or LLP cannot incorporate a OPC.
- Resident in India means a person who had resided in India for a period not lesser than 182 days in the prior calendar year.
- The minimum authorised capital is Rs 1,00,000/-.
- A nominee must be appointed by the promoter during incorporation.
- A person can incorporate not more than one OPC.
- Businesses involved in financial activities cannot be incorporated as a OPC.
- OPC must be converted in to a private limited company when paid-up share capital exceeds Rs.50 lakhs or turnover crosses Rs.2 crores.
Thus, a one-person company can be formed by an Indian citizen who has his/her presence in India for at least 182 days during the immediately preceding calendar year. Finally, an OPC is prohibited from having a minor as its member.
Nominee in One Person Company
The rules for incorporation of one person company requires that the sole member of a One Person Company should include the name of a nominee in the Company's MOA, who will undertake the entity after the expiry or incapacity of the promoter. Moreover, the document must contain the written consent of the nominee, which must also be filed with the Registrar during incorporation along with the MOA and AOA.
Withdrawal of Consent
The nominee is entitled to withdraw his/her consent, in which case the sole member is required to nominate another member as a legal heir within 15 days of the notice of withdrawal. The nomination of new person must be intimated to the Company through a written consent in Form INC-3. The Company, in turn, is required to file the notice of withdrawal of consent along with the intimation of the new nominee with the Registrar of Companies in Form INC-4.
Change of Nominee
The sole member of a 'One Person Company' is empowered to change the nominee of the Company for any reason whatsoever, by providing notice in writing to the Company. Again, the new nominee must consent to the nomination in Form INC-3, and the Company must file the notice of change and consent of the nominee with the Registrar along with the applicable fee, within 30 days of receiving the intimation of change.
New Nominee Appointment
If a nominee becomes in-charge of the one person company due to the cessation of the original member's term owing to the death or incapacity of the latter, the new member must appoint a nominee as a replacement.
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