Introduction
Introduced in companies’ act 2013 [No.18 of 2013], One Person Company [OPC] is a new concept in India.Earlier in Companies act 1956 at least two directors and shareholders were required to form a company.
In OPC only one person is needed to form a company. The one person can act as a shareholder and a director. Thus we call it One Person Company. The One Person Company can be understood as a hybrid of Sole-Proprietor and Company. The OPC has minimum and /relaxed requirements under the Act.
How to Incorporate OPC
1. The first step is to get the Digital Signature Certificate [DSC] of the Director(s).
2. The next step is to get the Director Identification Number [DIN] of the proposed director(s).
3. After selection of suitable company name an application is made to the Ministry of Corporate Office to
check for availability of name.
4. A Draft Memorandum of Association and Articles of Association [MOA & AOA] is prepared in relation to
OPC
5. The director of the OPC must sign and file documents like MOA & AOA with the Registrar of Companies electronically.
6. After submission the director of OPC must pay the Requisite fee to Ministry of Corporate Affairs and Stamp Duty.
7. The Registrar of Companies will scrutinize the documents and check for validity.
8. After proper scrutiny the ROC will send a receipt of Certificate of Registration/ Incorporation to the directors of OPC.
Benefits of OPC& Rules of OPC
The introduction of OPC concept is beneficial for many sole proprietors and entrepreneurs in India. They can easily form the companies without a second person and enter into corporate framework.
OPC should not be confused with sole proprietorship. In OPC the liability is limited to the assets of the business. In single proprietorship the business and the owner are single entity and creditors can acquire personal assets of the owner in case of default.
Rules of OPC
1. One Shareholder/Director:In One Person Company the single owner owns 100% of the company.
The Company incorporation rules state that only an Indian citizen who is also a resident of India is eligible to form a one person company.
Other societies or company or corporate entities cannot form a one person company.Non Resident Indian’s and Foreigners are not eligible to form a company. The rules also clarify that a person cannot be a shareholder in more than one OPC at one time.
OPC can have more then one director. But the number of directors cannot exceed 15.
2. Nominee:The director of an OPC need to nominate a nominee. The nominee cannot be a minor.
In case of death of the owner the nominee will take over the company as the owner. It must also be understood that the nominee should also be a citizen of India residing in India.
In case the nominee is already a director of OPC, the nominee has to decide within six months about the OPC he want to continue with.
On becoming the director of the OPC the nominee has to nominate another person who would take the ownership in case of death of the nominee. The OPC cannot be converted into Not for Profit under Section 8 of the Act.
3. Tax Rates : The tax rates will be similar to private limited company. Since no clarification has been provided by the companies act.
The net profits shall be calculated after all allowable expenses are deducted from the turnover. The net profits shall be taxed at 30% + Education cess.
4. Compliance Freedom : There are other freedoms OPC can enjoy over private limited companies. Section 96, 98,100,111 of companies act are not application to OPC.
OPC are under no obligation to have annual general meetings. Resolutions can be communicated by member of the OPC. Resolution can be entered in minutes book.
5. Other Party Transactions : The OPC must inform the registrar of the company about the contracts the OPC has entered into. All the contracts and offers need to be recorded in the minutes of Board of Directors meetings under sub-section (1).
The OPC cannot be converted into any type of company before two year since the date of Incorporation.
Except when the threshold limit of paid up share capital has increased over Rs. 50 Lakhs or the average turnover has crossed Rs. 2 Crores.
In case an OPC does increase the paid up share capital threshold limit and increases the turnover to Rs. 2 Crores. The director of the OPC has to file form with the Registrar of the Company.
The ROC will then convert the company into Private Limited or Public Company in a period of Six Month from the filing.
Conclusion:
The concept of One Person Company is new to India. Many people wanting to start a business are unaware of the concept. However OPC will give great boost to the ecosystem as individual can now form companies without the need of a partner. However it is advised that the individual looking to form an OPC should take care of all the regulatory paperwork before forming a company. The OPC has many benefits over sole proprietorship and treat the owner and company as separate legal entity.
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