What is One Person company?
One Person Company (OPC) (Section 2 (62) [7] is defined as a company which has only one member. Its more like a private company but with only one shareholder and requires a minimum of only 1 Director. Only Indian citizens can be shareholders of a one person company.
Registration of One Person Company
A new concept has been introduced in the Company’s Act 2013, about the One Person Company (OPC). In a Private Company, a minimum of 2 Directors and 2 Members are required, whereas in a Public Company, a minimum of 3 Directors and a minimum of 7 members. A single person could not incorporate a Company previously.
One Person Company (OPC) is a company incorporated by a single person. Before the enforcement of the Companies Act, 2013, a single person could not establish a company. Suppose an individual wanted to establish his business. In that case, they could opt only for a sole proprietorship as there had to be a minimum of two directors and two members to establish a company.
As per Section 2(62) of the Company’s Act 2013, a company can be formed with just 1 Director and one member. It is a form of a company where the compliance requirements are lesser than that of a private company.
The Companies Act, 2013 provides that an individual can form a company with one single member and one director. The director and member can be the same person. Thus, a one-person company means one individual who may be a resident or NRI can incorporate their business with the company's features and the benefits of a sole proprietorship.
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 authorized capital of Rs.1 lakh.
- DSC of the proposed director.
- Proof of registered office of the OPC.
One Person Company (OPC) Registration Process
The first step is to obtain the Digital Signature Certificate (DSC) of the proposed Director, which requires the following documents:
- Address proof
- Aadhaar 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 Director Identification Number (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 that 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 Company's name 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 MCA approves the name, 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 Memorandum of Association (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 Articles of the Association (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 act on behalf of the director and take his place. His consent in Form INC – 3 will be taken along with his PAN card and Aadhaar 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 have been generated automatically at the time of incorporation of the Company. There is no need to file separate applications for obtaining PAN numbers and TAN.
Step 6: Issue of the Certificate of Incorporation
On verification, the Registrar of Companies (ROC) will issue a Certificate of Incorporation to commence our business.
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.
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 authorized 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.
Disadvantages Of OPC
Suitable for only small business
OPC is suitable for small business structure. The maximum number of members the OPC can have is one at all times. More members or shareholders cannot be added to OPC to raise further capital. Thus, with the expansion and growth of the business, more members cannot be added.
Restriction of business activities
The OPC cannot carry out Non-Banking Financial Investment activities, including the investments in securities of anybody corporates. It cannot be converted to a company with charitable objects mentioned under Section 8 of the Companies Act, 2013.
Ownership and management
Since the sole member can also be the director of the company, there will not be a clear distinction between ownership and management. The sole member can take and approve all decisions. The line between ownership and control is blurred, which might result in unethical business practices.
Created & Posted by Sony Garg
Accountant at TAXAJ
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