Under the One Person Company (OPC) concept, a single national person can constitute a company. Such a concept was not prevalent in India previously and was mooted in the Companies Act 2013.
The inclusion of OPC in the legal system is a step that aims to promote the corporatization of micro-enterprises and entrepreneurship with a simpler legal regime, so as not to cause a small entrepreneur to devote significant time, energy, and money towards complex legal compliances.
This article is an attempt to consolidate all important information related to compliances and registration of One Person Company in India. So, let’s deep dive into it!
What is One Person Company?
Section 2(62) of the Companies Act 2013 defines ‘One Person Company’ as a company in which there is only one member.
To be eligible to incorporate a One Person Company, the applicant (sole member of OPC) must be a natural person who is an Indian citizen and resident in India. No single person can become a member of more than an OPC at the same time.
Also, minors are not allowed to form a One Person Company. [Rule 3 of the Companies (Incorporation) Rules, 2014]
To gauge the applicant’s residency, a person who has stayed in India for not less than 182 days during the immediately preceding financial year is considered to be resident in India.
Subscribers to Memorandum and Nominee
The company is formed when such one member subscribes his name to the Memorandum of Association.
It is also stipulated that the MOA of One Person Company should indicate the name of another person who, in the event of the subscriber’s death or incapacity to contract, shall become a member of OPC. For this purpose, the written consent of such other person is to be filed with ROC in Form INC-3 at the time of registration of One Person Company in India. (Section 3)
Further, to be eligible to become a nominee for the sole member of One Person Company, the other person must also be an Indian citizen and resident in India.
It may be possible that the nominee of OPC, at his discretion, withdraw his consent. Whenever there is a withdrawal of consent by the nominee or a change in nominee by the sole member of OPC, an intimation is to be given to ROC by the filing of Form INC-4. This form is used to intimate ROC of all changes/cessation in membership of OPC.
One thing worthy of note here is that no single person can become a nominee in more than an OPC at the same time. So, if a member of one OPC happens to become a member of another OPC because of his being represented as a nominee in that other OPC, he/she has to cancel his membership in either of the OPCs within 180 days.
Some peculiar provisions concerning One Person Company are as follows:
- One Person Company is always a private company.
- The financial statements of One Person Company may not include a cash flow statement.
- The annual return of One Person Company needs to be signed by a company secretary, or where there is no company secretary, by the company’s director.
- One Person Company is exempt from holding an annual general meeting.
- One Person Company cannot be incorporated or converted into a company under Section 8.
- One Person Company cannot carry out non-banking financial/investment activities such as investment in the securities of a body corporate.
Number of directors and board meetings
Every OPC needs to have a minimum of one director. Further, it needs to hold at least one board meeting in each half of a calendar year provided that not less than 90 days should lapse between two consecutive meetings. (Section 149 and 173)
This is unlike other companies where there is a minimum requirement to hold at least 4 meetings during a single year.
The words “One Person Company” need to be mentioned in brackets below the name of such company, wherever its name is printed, affixed, or engraved whether it be outside its registered office, e-mail, and website address, business letters, notices, and the like.
For example, the name would be as under:
MITT (OPC) Private Limited
Vaibhav Hardware (OPC) Private Limited
Conversion of OPC
Unless a period of 2 years has expired from the date of its incorporation, a One Person Company is precluded from converting itself into any other form of company. However, there is one exception to this. If the paid-up share capital of OPC reaches beyond Rs. 50 lacs or its average annual turnover during the relevant financial year goes beyond Rs. 2 crores, then, in that case, it is required to be converted into either a private company or a public company. [Rule 6 of the Companies (Incorporation) Rules, 2014]
If the threshold limit is exceeded, the OPC needs to notify ROC in Form INC-5 within 60 days.
After that, Form INC-6 is filed by an OPC for its conversion to a private or public corporation. The same form is also to be filed by a private company when it seeks to convert itself into an OPC. But at the time of conversion into OPC, the paid-up share capital of a private company should not exceed Rs. 50 lacs or its average annual turnover should not be beyond Rs. 2 crores.
Time limit: Form INC-6 has to be filed with ROC within 30 days of voluntary conversion and within 6 months in case of mandatory conversion.
Rule 7A of the Companies (Incorporation) Rules, 2014 imposes a penalty on an OPC and its officers who are found guilty of contravening these rules applicable under the Companies Act.
In case of any default in complying with Companies (Incorporation) Rules, 2014, the OPC and its officers shall be punishable with a fine that may extend to Rs. 5,000 and a further fine that may extend to Rs. 500 for every day during which the contravention continues.
Nevertheless, Section 446B of the Companies Act 2013 gives wide leeway to One Person Companies when it comes to the imposition of a penalty for non-compliance with any other provisions of the Companies Act (other than aforesaid rules). It says that an OPC or its officers in default are liable to pay only half of the penalty that is otherwise leviable under such provisions. However, the maximum penalty can be of Rs. 2 lacs in case of an OPC and Rs. 1 lac in case of an officer who is in default.
Board’s Report of OPC
Rule 8A of the Companies (Accounts) Rules, 2014 states that the Board’s Report of a One Person Company is to be prepared in an abridged format based on stand-alone financial statements. The Board’s Report will contain the following details:
- the web address where the annual return of the company has been placed
- the number of Board meetings
- Directors’ Responsibility Statement
- the details in respect of frauds reported by auditors
- the explanations are given by Board on every qualification, reservation, or adverse remark made by the auditor
- the state of the company’s affairs and its financial highlights
- any material changes from the date of closure of the financial year
- the information about the directors who were appointed or have resigned during the year
- any important orders passed by the regulators or courts or tribunals impacting the company’s operations in the future and its going concern status
- the details of contracts with related parties
Contracts with member (Section 193)
The terms of any contract that is entered into by an OPC with its sole member who is also the director of the company, must be contained in a memorandum or recorded in the minutes of the first board meeting held next after entering into such a contract. This applies to contracts that are not entered in the ordinary course of business.
The intimation of any such contract (and its recording in minutes) is to be given to the ROC within 15 days of approval by the Board of Directors.
Procedure for Registration of One Person Company in India
Let’s find out how to register One Person Company in India.
To register a One Person Company in India, there is an integrated facility available at MCA.
Registration of One Person Company in India through SPICe
Any person, desirous of registering an OPC, shall make an application to the Registrar in SPICe+ (INC-32). It is the single application for reservation of name, incorporation of a new company, and/or application for allotment of DIN and/or application for PAN and TAN.
Step 1: Select a suitable company name, and make an application to the MCA for the availability of the name.
Apply for name approval of the proposed company through Form SPICe+ Part A (Simplified Proforma for Incorporating Company Electronically Plus: INC-32). SPICe+ Part A is a segment in which all information relating to the reservation of the name of the new company must be entered. There is no need for reserving a name separately before filing SPICe.
Step 2: Obtain a Digital Signature Certificate (DSC) for the proposed director.
Step 3: Obtain a Director Identification Number (DIN) for the proposed director. Maximum 3 directors are allowed for using this SPICe+ (INC-32) integrated form for filing ‘application of allotment of DIN’ while incorporating a company (every other individual intending to be appointed as a director shall file e-Form DIR-3 for allotment of DIN).
Step 4: Within 20 days of reserving its name or when SPICe+ Part A is approved, file all the formalities including SPICe+ Part B (INC-32) with the ROC. SPICe+ Part B is a segment in which all remaining information required for the incorporation of a company must be entered. It has to be accompanied by SPICe MOA INC-33 and SPICe AOA INC-34.
- Draft MOA & AOA
- Sign and file various documents including MOA & AOA with the Registrar of Companies electronically.
- Enter the name of the subscriber and nominee
- Attach Proof of office address
- Give personal details of the nominee (copy of proof of identity and proof of address)
- Attach Proof of identity and residential address of the nominee
- Attach Copies of utility bills that are not older than two months
- Attach Proof of identity and residential address of the subscribers and the directors
- Attach a declaration by a professional CA/CS/CWA certifying that all compliances have been made
- Attach Consent of the nominee (INC-3)
Payment of the requisite fee is to be made to the MCA and also Stamp Duty. State-wise stamp duty will be charged as per the Stamp Duty Act.
Step 5: Scrutiny of documents is done at the Registrar of Companies.
Last stage – Receipt of Certificate of Registration/Incorporation from ROC.
Hope the information provided in this article proves helpful to you!