One Person Company: A New Age Business Format

However, now, it is possible for any single person to form a company as per the provisions of Section 2(62) of the Companies Act, 2013. It is significant to note that as per section 2 subsection (62) of the Companies Act, 2013, One Person Company (OPC) is that company, which has only one person as to its member. Hence, obtaining OPC registration can be defined as permission given to an individual for starting a company all alone.

Further, in India, the concept of One Person Company (OPC) is an updated version of the prevailing business format Sole Proprietorship. The One Person Company (OPC) permits the individual to commence a company under the structure of Private Limited Company without the need of any co-founder on board. Hence, a One Person Company (OPC) needs to abide by all the laws as applicable to the private companies.

Furthermore, the concept of an OPC offers the owner with full-fledged authority over the company. Moreover, it enjoys the status of a separate legal entity, which is distinct from its sole owner and also limits the liability and duties of the owner to contribute towards the company. Lastly, the ultimate aim behind introducing the concept of One Person Company as one of the business formats is to encourage the single and passionate individual to be the sole owner of the company concerned.

As every coin has two sides, there are some limitations attached to the concept of One Person Company as well. Firstly, the One Person Company (OPC) cannot raise equity funding or the employee stock options offered at the initial life of the business. Moreover, if at any time in the lifetime of the business, the One Person Company (OPC) hits an average three year annual turnover of up to or more than rupees two crores or the paid-up capital of rupees fifty lakhs or more, then it will compulsorily have to convert itself into a private limited company or a public limited company within the period of six months. Lastly, every registered One Person Company (OPC) is required to add suffix “One Person Company” at the end of the company’s respective name.

What are the Features of the concept One Person Company?

Following are the features of the One Person Company –

1. The One person company (OPC) must have a minimum share capital of Rupees one lakh.
2. According to the Companies Act, 2013, the only director of the company concerned must mandatorily appoint a nominee.
3. Section 149 subsection (1) clause (a) of the Companies Act, 2013 states that every One Person Company must hold at least one board meeting in every half-year of the calendar.
4. One of the most significant features of One Person Company (OPC) is that it has only one member. Further, this only member act both as the shareholder and director of the company.
5. Further, the company is obligated to submit its annual report duly signed by the Company Secretary (CS). If in case there is no CS (Company Secretary) available at the moment, then the Director himself is responsible and accountable for signing the report.
6. Furthermore, according to section 40 of the Companies Act, 2013, the cash flow statement is not that essential for filing with the company’s financial statement.

What are the reasons as to why the Startups should choose to go with the One Person Company?

There are plethoras of reason as to why the start-ups must choose the option of the One Person Company over the Sole Proprietorship or any other business forms. Following are some of the reasons for choosing OPC –

1. Limited Liability – Limited liability means that in case of happening of any misfortune, the owner concerned would not be required to incur the loss. Furthermore, in this case, his personal assets will not be at any risk.
2. Perpetual Succession – This concept simply means that the business concerned will continue its existence regardless of whatever incidents occur.
3. Independent Existence - Even if the owner of the company dies, the company will still continue its existence and will be handled by the appointed nominee.
4. Separate Legal Entity – One Person Company enjoys the status of a separate legal entity distinct from its member.
5. No Share Transfer - As there is only one member in the company who acts both as the shareholder and director of the company. Hence, there cannot be any transfer of shares.
6. Greater Creditability – In comparison to a Sole Proprietorship firm, One Person Company has greater credibility. The reason behind is that the books of accounts and records of an OPC are audited annually because of which things are more sorted and organized. Hence, in return, this increases the credibility level of the company.
7. No Legal Disputes - Since, the One Person Company have only one member, who acts both as the shareholder and one director. Thus, the chances of any legal disputes are very rare, or we can say they do not arise. Further, there is no problem of any ego clashes between the directors, which usually happens in other business forms having more than one director.
8. Less Compliance - As compared to the registration process of other company, be it a private limited company or public limited companies, the compliances for the One Person Company are generally lesser. Besides this, minimum paperwork is required in case of the One Person Company.
9. No Minimum Capital Requirement - For the One Person Company registration, there is no prescribed minimum capital requirement. However, the paid-up capital of for the One Person Company shall not exceed the limit of rupees fifty lakhs at any point of time, or it will have to convert itself into a private limited company.

How many types of One Person Company can be Registered under the Companies Act, 2013?

1. A Company Limited by its Shares
2. A Company Limited by the Guarantee
3. An Unlimited Company

What are the Minimum Requirements to be fulfilled before the OPC Registration?

1. There should only be one member in total
2. There should only be one director (member acts as the director)
3. There should only be one shareholder (member acts as the shareholder)
4. There should only be one nominee appointed

What are the Eligibility Criteria for the OPC Registration?

Following are the conditions which are to be satisfied before going for OPC Registration –

1. The applicant should be an Indian Citizen
2. The sole owner of the One Person Company must appoint a nominee
3. The member of the One Person Company must be an Indian Resident, who has stayed in India for at least 132 days in the preceding year.
4. The paid-up capital of the One Person Company must not exceed the limit of rupees fifty lakhs. Further, the annual turnover of the One Person Company must not exceed the limit of rupees two crores.

What are all Exemptions are granted for the One Person Company under the Companies Act, 2013?

1. The One Person Company is not compulsorily needed to file the Annual Returns.
2. The One Person Company is exempted from holding both the Annual General Meetings and Board Meetings.
3. Signing on the Financial Statements is not obligatory.
4. Tribunal has the power to call meetings of members.
5. Providing Notice of the concerned meeting is not mandatory.
6. The statement to be attached to notice is not prescribed by law.
7. The quorum required for meetings is relaxed.
8. Restriction on voting rights is not imposed, unlike in other forms of the business.
9. Need to abide by the rules and regulations pertaining to the Companies Act, 2013 concerning voting through electronic means, voting by show of hands, Postal ballot, Demand for the poll, Circulation of member’s resolution is exempted.

What are the Documents Required for obtaining the OPC Registration?

1. Documents Required from the Director

• A scanned copy of the PAN Card

• A copy of the Passport or Voter ID or Driving License
• Latest Bank Statement or the telephone Bill
• Passport-sized photograph
• A copy of the MOA (Memorandum of Association) and AOA (Article of Association)

2. Documents required for the Registered Office

• Notarized copy of the Rent Agreement
• No-Objection Certificate obtained from the landlord of the property where applicable
• Copy of the sale deed or the copy of the property deed (in case of the owned property)
• Other documents as required

What is the Procedure for obtaining One Person Company Registration?

Following are the steps required in the procedure for One Person Company Formation –

1. Obtain Digital Signature Certificate (DSC) - Like in every type of company registration, for One Person Company registration also, the applicant is firstly required to obtain Digital Signature Certificate. The applicant can use this DSC (Digital Signature Certificate) later for other purposes also, like for filing returns with Registrar of Companies, with compliances, etc.
2. Obtain Director Identification Number (DIN) - The next essential step after obtaining the Digital Signature Certificate is to acquire the Director Identification Number (DIN) of the proposed Director. Further, one can apply for the Director Identification Number (DIN) in SPICe form together with his or her Know Your Customers (KYC) such as the name and address proof.
3. File an Application for the Name Approval - Selecting a name for the concerned company plays one of the most significant roles in the company’s process for incorporation. Hence, the applicant needs to make sure that the proposed name is unique, new and does not hurt the sentiments of any religion, community, or anybody concerned. Further, the applicant can suggest a maximum of two names in the SPICe Form-32 or by using RUN service on the portal of the Ministry of Corporate Affairs.
4. Prepare Memorandum of Association (MOA) and Article of Association (AOA) – In the next step, the applicant is required to prepare and draft the company’s Memorandum of Association (MOA) and Articles of Association (AOA) for the One Person Company registration. Further, MOA describes the objective of the company while on the other hand, AOA explains the rights and duties together with the rules and regulations of the company.
5. Filling SPICe Form with the Ministry of Corporate Affairs – Now, attach all the documents including the Memorandum of Association and Article of Association of the company together with the SPICe form and also upload it to the portal of the Ministry of Corporate Affairs for approval. Once, the applicant has uploaded, the website will generate the Form 49A and 49B for the PAN and TAN generation of the concerned Company. The applicant would be required to upload these forms to the Ministry of Corporate Affairs after annexing the Digital Signature Certificate of the Director.
6. The Certificate of Incorporation - Firstly, the Registrar of Companies (ROC) will verify and check the submitted documents. If it finds everything is valid and satisfying, it will issue the applicant his Certificate of Incorporation.

What is the Penalty prescribed for the Non-Compliance of the OPC in India?

If One Person Company (OPC) or its director does not follow the compliances prescribed or contravenes any of the provisions of the Company Incorporation Rules, 2014, then the defaulter business will be punishable with a fine up to rupees ten thousand. Further, if the contravention continues, then the fine may extend up to rupees one thousand every day.