Company IncorporationOPC

OPC Formation Procedure In India

If you are planning to start a business as a single entrepreneur, and want to know more about the incorporation procedure for a one-person company. This article is a good place to start.

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A One Person Company (OPC) is a company incorporated by a single person. As per Section 2(62) of the Company’s Act of 2013, such a company can be formed with just 1 director and 1 member.

According to Section 2(62), and OPC gives a single promoter full control over the company while limiting his/her liability to their capital contributions to the business. This individual must be the only shareholder of the company and can also be the director of the company. There is also a provision for a nominee director, but he/she has no power until the original director is incapable of entering into a contract.

The OPC  structure was introduced to allow a sole entrepreneur to start and manage a legal entity with limited liability. It was brought into existence mainly to help all those sole member enterprises. 

The Eligibility Criteria for Forming an OPC

According to Rule 3 of the Companies (Incorporation) Rules, 2014, 

  • Only a natural person who is an Indian citizen and whether resident in India or otherwise-

– Shall be eligible to incorporate a one person company;

–  Shall be a nominee for the sole member of a one person company.

The term ‘resident in India’ means a person who has stayed in India for a period of not less than 120 days immediately preceding one calendar year.

  •  A natural person shall not be a member of more than a one person company at any point in time and the said person shall not be a nominee of more than a one person company
  • No minor shall become a member or nominee of the OPC nor hold shares with beneficial interest.

Additionally, such a company cannot carry out non-banking financial investment activities including investment in securities of any other corporations.

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What Are the Benefits of an OPC?

An OPC is a separate legal entity, distinct from its sole member. This means that the sole member’s liability is limited to his or her contribution to the business. This structure is unique in India because all other limited liability companies require more than one member. A single member of the OPC structure may make all decisions quickly without any unnecessary delay due to group deliberation.

 The OPC model gives rise to various benefits such as – 

  • Autonomy in existence and management 
  • Corporate tax flexibility and exemptions 
  • Separate legal existence 
  • Limited liability 
  • Credibility and status recognition for a business
  • Easy funding 

Restrictions on Incorporating an OPC

A director of an OPC may only run one OPC. Similarly, if a person is already a member of an OPC, they can not incorporate another. Additionally, an OPC can not be converted into a company under Section 8.

To allow such companies to flourish, Finance Minister Nirmala Sitharaman while delivering the Union Budget 2021-22 announced that there will be no restrictions on the paid-up capital and the average annual turnover of one-person companies.

Documents Required for OPC Registration

  • PAN Card of owner
  • Passport size photograph of the owner
  • Copy of Aadhaar card/voter identity card
  • Copy of property papers (if owned)
  • NOC from the landlord 
  • Copy of rent agreement and NOC from the landlord (if rented)
  • The Memorandum of Association (MoA)
  • The Articles of the Association (AoA) 
  • Nominee’s consent in Form INC-3 along with their PAN card and Aadhaar card
  • Electricity/ water bill 

Procedure for Forming a One Person Company

Obtaining a  Digital Signature Certificate (DSC)

As incorporation is now done online, obtaining a DSC is compulsory. Further, to make this possible, the director in the OPC needs a Class-II Digital Signature Certificate (DSC). The entire process can take 3-5  days.

Apply for DIN

Once the Digital Signature Certificate (DSC) is created, the next step is to apply for the proposed Director Identification Number (DIN) in the SPICe+ form, along with the director’s name and address proof.

Applicants will no longer need to file Form DIR-3 separately. DIN can now be obtained in the SPICe + form itself.

Filling of Forms via SPICe+

The form has two parts, namely 

  • Part A – Name approval
  • Part B –  Incorporation of company

Stakeholders can avail of 5 different services in one form by applying for Incorporation of a new company through the SPICe+ form (INC-32).

  • Name reservation
  • Allotment of director identification number (DIN)
  • Incorporation of a new company
  • Allotment of PAN
  • Allotment of TAN

After the eForm is processed, the certificate of incorporation (CoI) is sent by email. For more details on the procedure involved in filling the SPICe+ form (INC-32), get in touch with our team of experts right away!

The Takeaway

Check out Vakilsearch’s OPC incorporation service if you need assistance or if you just want it to be handled quickly. Further, our experts will handle and oversee the entire procedure for you, from filling out paperwork to post compliance formalities.

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