OPC Formation Procedure in India

Last Updated at: October 22, 2019
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opc registration

If you are planning to start a business as a single entrepreneur, you may want to know whether to start it as a proprietorship or one person company. Both structures have their advantages, but most entrepreneurs looking to build a large business would benefit from the OPC structure.

What is an OPC?

According to section 2(62) of companies act 2013, OPC gives a single promoter full control over the company while limiting his/her liability to contributions to the business. This person will be the only director and shareholder (there is a nominee director, but with no power until the original director is incapable of entering into contract). So there’s no chance of raising equity funding or offering employee stock options.

What the eligibility criteria for an OPC?

1. The person must be an Indian citizen and resident of India. 2. The entity must have a nominee. 3. There can only be one shareholder and director. 4. The entity must have an average turnover of no more than Rs. 2 crore for the preceding three years. 5. The authorised capital cannot exceed Rs. 50 lakh.

What are the benefits of an OPC?

An OPC is a legal entity separate from its member. This means that the liability of the member is limited to his/her contribution to the business. This is unlike any other structure in India because all other limited liability businesses need more than one member. In the OPC structure, a single member may take all the decisions.

Restrictions on OPC

The director may only run one OPC. If a person is already a member of an OPC, he can not incorporate another. An OPC can also not be converted into a company under section 8.

Procedure For One Person Company

Obtaining Digital Signature Certificate (DSC)

Time to Complete: 3 to 5 days
Cost: Rs1,500 per director
As incorporation is now done online, the director’s signature is needed on electronic documents. To make this possible, the director in the OPC needs a Class-II Digital Signature Certificate (DSC). This is available from a vendor of any one of the six Certifying Authorities appointed by the MCA, including Tata Consultancy Services, nCode and e-Mudhra. The rates of their vendors could differ vastly. Charges would include the cost of the physical USB token and the certificate itself. The entire process would take three days, largely because hard copies of the form and documents need to be couriered to the vendor (online legal services companies, including VakilSearch, would, however, need only self-attested soft copies to begin the process).

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What you need to submit:
1. Hard copy of completed Class-II form
2. Identity Proof: Self-attested copy of PAN card or, in case of foreign national, copy of Passport
3. Address Proof: Self-attested copy of (any one) Passport/Election/Voter ID/Ration Card/Driver’s License/Utilities Bill/AADHAR Card

If the Utilities Bill (Electricity/Telephone) is submitted, it should be in the name of the Applicant and no older than two months from the filing of the form (12 months, in case of foreign national).

Obtaining Director Information Number (DIN)

Time to Complete: 1 day
Cost: Rs500 per director plus CA/CS fees
The Director Information Number (DIN) is how the MCA identifies directors of the company. Anyone over the age of 18 can apply. Citizenship doesn’t matter. This can be done online on payment of Rs500.

Here is the process:
1. Download Form DIR-3 from the MCA website.
2. Indian and foreign nationals can apply, but there is one difference between the details required: the former would need to provide PAN, while the latter need to provide Passport number. A soft copy of a Passport-sized photograph is also required. Ensure you don’t make common errors while filling this form.
3. Identity proof: A soft (scanned) copy of the PAN card or, in case of foreign national, passport is required. 4. Residence proof: A soft (scanned) copy of (any one) Driver’s License/Passport/Voter Card/Ration Card/Utilities Bill/Bank Statement. The last two of these should be no more than two months old. In case of a foreign national, it should be no older than 12 months.

3. Search for Company Name Availability

Time to complete: 1 to 3 days
Cost: Free
You don’t need to wait for the DIN to begin this process. In fact, given how tricky it can be, it’s best that you start it as soon as you apply for DSC. The reasons are that the name you’ve hoped to get for your company may violate the rules set by the MCA, may have been taken by another company and may conflict with any pre-existing trademarks.

3. Obtaining Name Approval

Time to complete: 2 to 7 days
Cost: Rs1000 per two requests
The RoC requires you to submit form names in Form INC-1. Each time you submit this form, you pay Rs1,000. If the names you’ve suggested are rejected the first time, you may resubmit once (within 15 days) at no cost. However, if they’re rejected once more, you would need to pay again.
Here’s what you need to submit:
1. Download the INC-1 form.
2. The form allows a minimum of one name and a maximum of six. The best practice is to submit the maximum number, in order of importance.
3. You also need to submit the Main Objects of your business and the Significance of each proposed name. Your application should have one line on each.
4. Approval can take 2 days at the earliest, but it is more likely to take 5 to 7 working days.
5. Once approved, the name will be reserved for 60 days. Therefore, the application for incorporation must be approved before its expiry.

5. Drafting of MoA and AoA

Time: 2 days
Cost of completion: Rs2,000 to Rs5,000 per document
Once the name is approved, the MCA requires further definition of the proposed company. These will be provided through the Memorandum of Association (MoA) and Articles of Association (AoA), which can be drafted by a CS or lawyer. In the MoA, remember to paste the exact Main Objects approved in INC-1. If even a word is changed, the RoC has the power to reject your application.

MoA: The MoA is the constitution of the company, defining and governing its activities, its relationship with shareholders and the amount of authorised share capital. This legal document is accessible to the public. It will also contain the name of the company, its physical address and the names of shareholders and distribution of shares.
AoA: The AoA contains the internal byelaws of the company, listing its rules and regulations and defining the relationship between the company and its members and the members themselves. The AoA has the function of bringing clarity to how the MoA will be carried out.

Filing of e-Forms

Time to complete: 2 days
Cost: Charges of CS (usually Rs2,000 per document)
Once the MoA and AoA are drafted, the Final Filing process can begin. This involves the submission of the following documents:
INC-7, which is the main application for incorporation.
The following documents need to be attested by a full-time CS:
Memorandum of Association
Articles of Association
Declaration of Profession in INC-8
Copy of utility bill no older than two months
Copy of PAN card/Passport
Affidavit from the subscriber to the Memorandum in Form INC-9
Verification of signature of subscribers (Form INC-10, in case company has no share capital)
INC-22, which states the location of the registered office
Proof of registered office address (Conveyance or sale deed, in case property is owned, or rent receipt) Residential or commercial real estate, so long as it is in India No-objection Certificate from owner of the property
DIR-12, which contains information regarding the appointment of the directors and key personnel of the company
Letters of appointment of Directors, CEO, Managers
Declaration by first director in INC-9
Declaration by appointee director and managing director in Form DIR-2

7. Payment of RoC fees

Time to complete: 1 day
Cost: Varies according to authorised capital fee and location of company
RoC fees and stamp duty need to be paid at this stage electronically. RoC fees change according to authorised capital fee and stamp duty varies by location. In certain states, such as Punjab and Kerala, it is costlier than in others. You can calculate the fees to be paid on the MCA website.

Verification by RoC & Issue of Certificate of Incorporation

Time to complete: 7 to 8 working days
Cost: n/a
The RoC will verify the documents. If any changes are needed, you will be notified of the required changes. If it’s all clear, you shall receive the certificate of incorporation within 7 to 8 days. On final approval, the Certificate of Incorporation is e-mailed to the directors. The MCA now only issues digital certificates. You can print out the incorporation certificate if you wish.

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