You can be your own boss by establishing a One Person Company (OPC). But is it possible that you hold multiple OPC ownerships? Find the answer to this question in this brief article on One Person Companies.
The Concept of the One Person Company
Holding a company is different from owning a sole proprietorship. Usually, companies are robust in nature. A person cannot flexibly manage a company as he would be able to in the case of a sole proprietorship. This is because a company has shareholders and directors who make the decisions. Therefore to bring together certain benefits of companies, and sole-proprietorship firms, the concept of One Person Company(OPC) was introduced by the Companies Act, 2013.
The Definition of One Person Company
As per the Companies Act of 2013, an OPC is an entity that can have only one person as its member. The members of a company are recognised as the shareholders of the company or subscribers to its Memorandum of Association (MoA). Therefore an OPC is a company with only one shareholder as its member. People form an OPC usually when a business has just one founder or promoter.
Can a Person Hold Multiple OPC Ownership?
As per the rules of the Companies Act, 2013, an individual can only be an owner of an OPC at a time. In other words, you cannot hold multiple OPC ownership. If in case an OPC owner becomes a member of another One Person Company by virtue of becoming a nominee in that OPC, he or she will have within one hundred and Eighty days to withdraw their ownership from either of the OPCs.
How Is an OPC Better than a Sole Proprietorship?
People who want to be their own boss can even opt for a sole proprietorship. Though both entities have only one person as a member, there are some differences between them both.
OPC has the status of a separate legal entity which is not the case with sole proprietorship in which the owner can be personally held liable to pay off the debts of the firm. OPCs provide for limited liability as well. An OPC can gain increased credibility and make a superior market standing when compared to a sole proprietorship.
Who Can Register One Person Company in India?
- Only citizens and residents of India are eligible to create an OPC
- The applicant should be a natural person
- The applicant must not be a minor
It is to note that in the case of other structures of companies, a company or corporation can become a member, or hold shares of another organisation. But in the case of an OPC, the member has to be a true person.
What Are the Privileges of One Person Companies?
There are some privileges and exemptions that can be enjoyed by One Person Companies”: In One Person Companies
- There is no need to conduct annual general meetings.
- There is no requirement to include cash flow statements in their financial statements
- A company secretary is not mandatorily required, and a director too can sign the annual returns
- Provisions concerning independent directors do not apply
- More remuneration can be taken home by the directors, as compared to other companies.
How Many Directors Can an OPC Have?
One Person Companies must have a minimum of one person as its director at all times. The company can appoint a maximum of 15 directors. To increase the number of directors, the OPC can pass a resolution.
How to Create a One Person Company
As we already know, OPC can be formed by a single individual. He can do so by subscribing his name to the Memorandum of Association and satisfying other prerequisites prescribed by the Companies Act, 2013. It is to be noted that a declaration of all the details of a nominee who would become the sole member of the company, in case of death of the original member must also find clear mention in the MoA.
A person has to file an application to the Registrar of Companies (RoC) to create a One Person Company. The Memorandum of Association, along with the nominee’s consent to his nomination must accompany the application form. The nominee is allowed to withdraw his name from the nomination at any point in time. For this, he can submit the required application to the Registrar. The nominee can also cancel his nomination later.
As already mentioned, an OPC can have more than one director but cannot have more than one shareholder. OPCs allow you to own a company all by yourself, as a shareholder, member, and owner. It provides you the flexibility of running the company by being its only owner.
To establish an OPC you will require class 2 Digital Signature Certificates (DSC), and an application properly filled up with all the information. You should seek the services of Vakilsearch to help you throughout the process, from applying for name approval, drafting MoA, drafting AoA, filing the application for you, and updating you with the status of registration.