All about OPC - Meaning, Membership, compliance and Formation
What is the One Person Company?
According to Section 2 (62) of the Companies Act, 2013, a OPC is defined as “a company which has only one person as a member.” Therefore, as per the definition, as defined by the Companies Act, 2013 means that a company that has only one shareholder as a member of the company is a One Person Company. Generally speaking, a OPC is founded by only one founder or promoter.
Membership in One Person Companies
Only natural persons who are Indian citizens and residents are eligible to form a one-person company in India. The same condition applies to nominees of OPC. Further, such a natural person cannot be a member or nominee of more than one OPC at any point in time.
It is important to note that only natural persons can become members of OPC. This does not happen in the case of companies wherein companies themselves can own shares and be members. Further, the law prohibits minors from being members or nominees of OPC.
Conversion of OPC into other Companies
Rules regulating the formation of one-person companies expressly restrict the conversion of OPCs into Section 8 companies, i.e. companies that have charitable objectives. OPCs also cannot voluntarily convert into other kinds of companies until the expiry of two years from the date of their incorporation.
What effects did the concept of One-Person-Company make on the Indian entrepreneurs
The model of OPC is still in its embryonic stages in India and would require some more time to mature and to be fully accepted by the business world. With the passage of time, the OPC model of business organization is believed to become the most preferred form of business organization, especially for small entrepreneurs.
Therefore, the benefits emanating from this concept are a lot, but to name a few are as follows;
- Minimal paperwork and compliance.
- The ability to form a separate legal entity with just one member.
- The provision for conversion to other types of legal entities by induction of more members and amendment in the Memorandum of Association.
The OPC concept holds a bright future for small traders, entrepreneurs with low risk-taking capacity, artisans and other service providers. The OPC would act as a launchpad for such entrepreneurs to showcase their capabilities in the global market.
How to form a One Person Company (OPC)?
According to Ministry of Corporate Affairs, one person company registration process can be detailed as:
Application for Digital Signature Certificate (DSC): To obtain a DSC, the proposed director will require documents regarding; address proof, Aadhar card, PAN card, photograph, email-id and phone number. DSC is important as all the company registration process are done digitally.
Application for Director Identification Number (DIN): The proposed director will have to fill the SPICe Form to avail DIN. The details of name and address proof of the Director has to be submitted here. In case the company already exists, Form DIR 3 has to be filled.
Name Approval Application: The name for company registration can be approved either by making an application in Form SPICe 32 or by using RUN web service of Ministry of Corporate Affairs. One preferred name along with the signature has to be given. The ministry will decide to permit two proposed names along with one re-submission. The name of the company once approved shall affix private limited at the end, for instance, ABC (OPC) Private Limited. You can conduct your company name search here.
Filing forms with MCA: In order to complete the OPC Registration, all the mentioned documents will have to be attached to SPICe Form, SPICe-MoA, and SPICe-AoA along with the DSC of the director and the professional. The same would be uploaded by the MCA on the website for the purpose of approval. Further, PAN and TAN are generated for the OPC which will be uploaded to MCA after affixing the DSC of the proposed Director.
Note: In January 2020 The Ministry of Corporate Affairs (MCA), notified to issue new form SPICe Plus as a part of India’s Ease of Doing Business initiatives.
The issue of Incorporation Certificate: After verification, RoC will issue a Certificate of Incorporation. Thereby, the business shall commence.
Documents required for submission to the Registrar of Companies (RoC):
The Memorandum of Association (MoA) stating the business for which an OPC will be incorporated.
- The Articles of Association (AoA) stating the bye-laws for the operation of a business.
- A nominee has to be appointed. The nominee will take charge in case the director dies, or become incapacitated or is unable to perform his duties.
- A proof of company's registered office: proof of ownership and a NOC of the owner.
- Affidavit and consent of the proposed director.
- A professional declaration certifying that all compliances have been made.
Post OPC registration, it is the duty of every OPC to follow basic mandatory compliance:
- At least one board meetings have to be held in 6 months. The time gap between the board meetings should not be less than 90 days.
- Proper book of accounts has to be maintained.
- Statutory audit of financial statements has to be followed.
- Business income tax returns have to file every 30th September.
- Financial statements in Form AoC-4 and RoC annual return in Form MGT 7 have to be filed.
- Thus, One Person Company is a new form of business that allows an entrepreneur to operate a corporate entity single-handedly. The average time taken to complete the registration process may be around 10 to 15 days. Changes in the same are subject to changes in government processing time.
Some relaxations to One Person Company (OPC)
- One person Company must have minimum one director and a maximum of 15 directors.
- Provisions of Annual General Meeting (AGM) and Extra-Ordinary General Meetings do not apply to an OPC.
- There is no separate provision for appointment of first director, an individual being member shall be deemed to be first director.
- In case the Board consists of only one director, then the OPC is exempted from the requirement of conducting a Board Meeting as well.
- In case of more than one director, it shall conduct at least one board meeting in each half year and time gap between two meetings should be minimum 90 days.
- Financial Statements needs to be signed by the director and Annual returns by the Company Secretary, else by the director.
- One person Company have been relaxed from preparing Cash Flow Statements.
- One Person Company are required to file Financial Statements and Annual Returns to ROC within 180 days from closure of financial year.
For more information visit Taxaj
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