Sudheer Patibandla (Accountant) (248 Points)
15 October 2014Dear Experts,
I am interested to start my new business in MSW Services.
We mainly deals in " Dry waste collection , segregation , Transportation , Selling , Recycling ".
Please let me know under which formation it would be better to start my business.
1. Sole Trader.
2. One Person Company.
I have a little knowledge about Sole Trader business & i am new to the " OPC".
Please let me know the benifits of OPC & Rules , Regulations.
Thanks,
Sudheer P.
CS Mitesh Mehta
(Company Secretary)
(17139 Points)
Replied 16 October 2014
OPC structure would be similar to that of a proprietorship concern without the ills generally faced by the proprietors. One most important feature of OPC is that the risks mitigated are limited to the extent of the value of shares held by such person in the company. This
would enable entrepreneurial minded persons to take the risks of doing business without the botheration of litigations and liabilities getting attached to the personal assets. One Person Company has a separate legal identity from its shareholders i.e., the company and the shareholders are two different entities for all purposes. On the other hand proprietorship does
not have a separate legal identity from its members. The existence of a One Person Company is not dependent upon its members and hence, it has a perpetual succession i.e., death of a member does not affect the existence of the company and the Sole proprietorship is an entity whose existence depends on the life of its members and death or any other contingency may lead to the dissolution of such an entity. In OPC the business head is the decision maker, he is not dependent on others for suggestions or implementation of suggestions etc., resulting
in quicker and easier decision making. He is the sole person who runs the business and hence, the question of consensus or majority opinion etc., does not arise.
The salient features of OPC are:
• Desire for personal freedom that allows the Professional skilled person to adopt the business of his choice.
• Personality driven passion and implementation of a business plan.
• The desire of the entrepreneurial person to take extra risk and willingness to take additional responsibility.
• Personal commitment to the business which is a sole idea of the person and close to his heart.
• It is run by individuals yet OPCs are a separate legal entity similar to that of any registered corporate.
• A One Person Company is incorporated as a private limited company.
• It must have only one member at any point of time and may have only one director.
• The member and nominee should be natural persons, Indian Citizens and resident in India. The term "resident in India" means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year.
• One person cannot incorporate more than one OPC or become nominee in more than one OPC.
• If a member of OPC becomes a member in another OPC by virtue of his being nominee in that OPC then within 180 days he shall have to meet the eligibility criteria of being Member in one OPC.
OPC to lose its status if paid up capital exceeds Rs. 50 lakhs or average annual turnover is more than 2 crores in three immediate preceding consecutive years.
• No minor shall become member or nominee of the One Person Company or hold share with beneficial interest.
• Such Company cannot be incorporated or converted into a company under section 8 of the Companies Act, 2013.
• Such Company cannot carry out Non Banking Financial Investment activities including investment in securities of any body corporate.
• No such company can convert voluntarily into any kind of company unless 2 years have expired from the date of incorporation, except in cases where capital or turnover threshold limits are reached.
• An existing private company other than a company registered under section 8 of the Act which has paid up share capital of Rs. 50 Lakhs or less or average annual turnover during the relevant period is Rs. 2 Crores or less may convert itself into one person company by passing a special resolution in the general meeting.
Some of the privileges and benefits identified with OPCs are:
• OPCs would provide the start-up entrepreneurs with new business idea.
• OPC provides an outlet for the entrepreneurial impulses among the professionals.
• The advantages of limited liability. The most significant reason for shareholders to incorporate the ‘single-person company’ is certainly the desire for the limited liability.
• OPCs are not proprietorship concerns; hence, they give a dual entity to the company as well as the individual, guarding the individual against any pitfalls of liabilities. This is the fundamental
difference between OPC and sole proprietorship.
• Unlike a private limited or public limited company (listed or unlisted), OPCs need not bother too much about compliances.
• Businesses currently run under the proprietorship model could get converted into OPCs without any difficulty.
• OPCs require minimal capital to begin with. Being a recognized corporate, could well raise capital from others like venture capitalfinancial institutions etc., thus graduating to a private limited company.
• Mandatory rotation of auditor after expiry of maximum term is not applicable.
The annual return of a One Person Company shall be signed by the company secretary, or where there is no company secretary, by the director of the company.
• The provisions of Section 98 and Sections 100 to 111 (both inclusive), relating to holding of general meetings, shall not apply to a One Person Company.
• A One Person Company needs to have minimum of one director. It can have directors up to a maximum of 15 which can also be increased by passing a special resolution as in case of any other company.
• For the purposes of holding Board Meetings, in case of a one person Company which has only one director, it shall be sufficient compliance if all resolutions required to be passed by such a
Company at a Board meeting, are entered in the minutes-book, signed and dated by the member and such date shall be deemed to be the date of the Board Meeting for all the purposes under this Act. For other One Person Companies, atleast one Board Meeting must be held in each half of the calendar year and the gap between the two meetings should not be less than 90 days.
• The financial statements of a one person company can be signed by one director alone. Cash Flow Statement is not a mandatory part of financial statements for a One Person Company. Financial statements of a one person company need to be filed with the Registrar, after they are duly adopted by the member, within 180 days of closure of financial year along with all necessary documents.
• Board’s report to be annexed to financial statements may only contain explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
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