The 2013 Companies Act allows the registration of a ‘ One Person Company’ in addition to founding a public or private limited corporation (OPC). A firm with only one member is referred to as an OPC. Let’s look at the relevant legal provisions under this Act.
The Companies Act, of 2013, fundamentally transformed Indian corporate law by incorporating numerous previously unknown ideas. The emergence of the one-person company idea was one such paradigm shift. This resulted in the recognition of a whole new means of creating enterprises that provided the freedom that only a company form of entity can provide, while simultaneously offering the security of limited liability that partnership and sole proprietorships could not.
At Vakilsearch we help you submit the approval application for your proprietorship. Our experts help in drafting the necessary paperwork on your behalf and also assist in the allocation of PAN and TAN for your business. The progress is strictly monitored and reported in a timely fashion. Follow Vakilsearch for more on The One Person Company Act, 2013, and how to register your business for the same.
One Person Company (OPC) under Companies Act, 2013
The concept of a One Person Company (OPC) was introduced in India under the Companies Act, 2013 to support entrepreneurs capable of starting a venture by allowing them to create a single-person economic entity. This structure combines the flexibility of a sole proprietorship with the advantages of a company, providing a perfect blend for small businesses.
The concept is intended to foster entrepreneurial and business commercialisation.m Such a firm can be restricted by share or guarantee, or it might be limitless. If shares limit the corporation, it must meet the following standards.
- A minimum paid-up capital of Rs. 100,000 is required
- The transferability of shares is restricted
- It is illegal to invite the general public to subscribe to the company’s shares.
Did You Know: Lok Sabha passed a bill for the 2013 COMPANIES ACT On December 18, 2012. On August 8, 2013, the Rajya Sabha passed a bill. The Ascension of the President was received on August 29th, 2013. The statute comprises 470 clauses and 7 schedules, compared to the previous Companies Act, 1956, which has 658 sections and 15 schedules. The act has been broken down into 29 chapters.
Key Considerations for OPC Formation in India
- Eligibility: Only a natural person who is an Indian citizen and resident in India can incorporate and be a nominee in an OPC.
- Nominee: The sole member of an OPC must nominate another person as a nominee to take over operations in case of the member’s incapacitation or death.
- Name: The name of the OPC must end with “(OPC) Private Limited”.
- Compliance: OPCs are required to maintain proper books of accounts, comply with statutory audit requirements, and submit income tax returns and annual filings with the Registrar of Companies (ROC).
- Conversion: OPCs can be converted into private or public companies after certain thresholds are met (voluntarily or mandatorily), subject to conditions prescribed under the Act.
Tax Implications of Operating as an OPC
OPCs are taxed similarly to private limited companies. The current corporate tax rate applies, and dividends distributed to the sole member are also taxed under Income Tax laws. OPCs may not enjoy the same tax benefits as a sole proprietorship or partnership, especially in terms of tax slabs and rates, which makes tax planning crucial for OPCs.
Features of One Person Company
Here are some general characteristics of a one-person business:
Private company: According to Section 3(1)(c) of the Companies Act, a single individual can establish a company for any legitimate purpose. It goes on to characterise OPCs as private corporations.
- Legal Identification: It should have a distinct name that serves as its legal identifier. Furthermore, all company activity should be conducted under that name
- Member: OPCs, unlike other private corporations, can only have one member or shareholder
- Minimum of one director: OPCs must have at least one director (the member). They can have up to 15 directors
- Restriction: The individual who establishes a one-person business is not entitled to establish several one-person firms. This implies that the individual is only legally allowed to start one OPC
- Nominee: One distinguishing feature of OPCs from other types of corporations is that the lone member of the firm must name a nominee when registering the company.
- Nominee’s Name Change: The OPC member may modify the nominee’s name at any time. He or she must provide notice to the company, and the firm must provide it to the Registrar of Companies (RoC)
- No Succession: As an OPC has only one member, his death results in the nominee selecting or declining to become its single member. This does not happen in other firms since they adhere to the principle of everlasting succession
- Memorandum: The OPC memorandum must expressly identify the name of a person (nominee) with a documented confirmation in the prescribed format who will continue as a participant in the event of the subscriber’s death or incapacity
- Extension: The word ‘one person company’ must appear just below the firm’s name in all locations where the company’s name is used
- Conversion: The owner cannot transform OPC into a corporation that focuses on the advancement of trade, art, leisure, teaching, environmental protection, public assistance, and so on. Furthermore, in some circumstances, it may be converted into a private or public business
- No minimum paid-up share capital: The Companies Act of 2013 does not specify a minimum paid-up capital for OPCs
- Special features: Under the Businesses Act, OPCs have many advantages and exemptions that other types of companies do not have. Some of them are
- OPC is not required to produce a cash flow statement
- If OPC does not have a secretary, the director may sign the annual report
- There is no legal requirement to conduct an Annual General Meeting.
Documents Required for OPC Registration
The following list of documents is essential for OPC company incorporation
- PAN card of the owner and the nominee
- Aadhar card of the owner and the nominee
- Passport size photo (one) each of the owner and the nominee
- Email Id
- Contact number
- Bank statement/ telephone bill/electricity bill (last two months)
- Notarised rent agreement
- No Objection certificate from the property owner
- In the case of owned property, a sales deed
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Benefits of One Person Company
The benefits of the OPC include
- Limited liability protection for directors and shareholders
- Complete control of the solitary proprietor of the firm
- Tax savings and flexibility
- Less formal legalities
- Credit from banks and other organisations is easily accessible.
Learn more about the advantages of the OPC company at the official website of Vakilsearch.
Checklist for Registering a One Person Company
- Digital Signature Certificate (DSC): Obtain a DSC for the sole member, which is needed for all electronic document filings.
- Director Identification Number (DIN): The sole member will need a DIN, which is a unique identification number for the director of a company.
- Name Approval: Reserve your company name through the RUN (Reserve Unique Name) form on the MCA portal.
- Incorporation Documents: Prepare the Memorandum of Association (MoA) and Articles of Association (AoA), along with consent forms of the nominee and other necessary declarations.
- Incorporation Application: File the incorporation application through the SPICe+ form on the MCA portal, attaching all required documents.
- PAN and TAN: Apply for the company’s PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) during the incorporation process.
- Opening of Bank Account: Once the company is incorporated, open a bank account in the name of the OPC.
Registering an OPC involves legal and procedural steps that need careful consideration to ensure compliance with the Companies Act, 2013. It’s advisable to consult with our Vakilsearch legal or financial expert to navigate the incorporation process smoothly.
Conclusion
The most prevalent kind of legal entity for micro-businesses or startups in the early stages is the OPC. Its inception, management, and operation are all in the hands of a single person.
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FAQs on One Person Company
What is the maximum turnover for OPC?
The maximum turnover for an OPC is not explicitly mentioned in the Companies Act, 2013. However, an OPC needs to mandatorily convert into a private or public limited company if its paid-up share capital exceeds ₹50 lakhs or its average annual turnover during the relevant period exceeds ₹2 crores.
What are the rules for OPC?
Key rules for OPCs under the Companies Act, 2013 include:
- Nominee: Each OPC must have a nominee who will become the member in case of the original member's death or incapacity.
- Director: OPCs must have at least one director but can have up to 15 directors without passing a special resolution.
- Conversion: Mandatory conversion to a private or public limited company if certain thresholds are met (paid-up capital over ₹50 lakhs or annual turnover over ₹2 crores).
- Annual Compliance: OPCs must adhere to annual compliance requirements, including annual returns and financial statements.
What is the concept of OPC?
The concept of OPC allows a single individual to form a company, blending the advantages of a sole proprietorship and a company structure. It provides a legal identity to the business, limited liability protection, and easier access to funding while maintaining control with the single owner.
What is closure of OPC under Companies Act, 2013?
Closure of an OPC can occur voluntarily or by order of the Tribunal. Voluntary closure involves applying to the Registrar of Companies with a declaration that the OPC has no debts or liabilities, along with the necessary resolutions and affidavits. The ROC will then strike off the OPC's name from the register of companies.
What are the limits of OPC company?
Limits include:
What are the limitations of OPC?
Limitations include:
Can I convert OPC to private limited?
Yes, an OPC can be converted into a private limited company voluntarily after two years of incorporation or mandatorily if it exceeds the prescribed thresholds. The process involves passing a special resolution, obtaining No Objection in writing from creditors and members, and filing the necessary forms with the Registrar of Companies.
What is OPC and its benefits?
OPC stands for One Person Company, offering benefits like limited liability protection, separate legal entity status, perpetual succession, and ease of setting up and managing with single ownership while maintaining the business's credibility.
What is the minimum capital of OPC?
The minimum authorized capital for an OPC in India is Rs. 1 lakh. However, there is no minimum paid-up capital requirement. This means you don't need to invest any specific amount of money upfront to register your OPC..
