Introduction
The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs to start a venture on their own by allowing them to create a single person economic entity. In a One Person Company there can be only one member while a minimum of two members are required for incorporating and maintaining a Private Limited Company or Limited Liability Partnership. One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business.
Who Can Form an OPC?
Any person who is residing in India and holds Indian citizenship is eligible to form a one person company. A nominee director is also required for incorporation in an OPC.
Procedure to Register a One Person Company
1. Obtain Digital Signature & DIN for proposed director
2. Apply for Name approval by payment of fees to Ministry Of Corporate Affairs (MCA).
3. After approval of name, incorporation documents i.e. MOA and AOA etc. can be filed with MCA. Pay the RoC fees and stamp duty digitally according to the authorized capital of the company.
4. After ROC approves your application, you should receive a digitally signed certificate of incorporation in the name of your One person company. After your company is formed legally, you should carry out certain necessary procedures.
5. Apply for necessary registrations related to tax (TAN/PAN). Open a current bank account with any reputed bank.
Advantages of an OPC
• One person can start a corporate entity without having to fulfil partner requirements.
• It has a perpetual existence until it gets legally dissolved and easy ownership transferability.
• Easier to procure funds from banks and financial Institutions.
• OPC can acquire, own and enjoy property in its name.
Contract by One Person Company
Where One Person Company limited by shares or by guarantee enters into a contract with the sole member of the company who is also the director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum or are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract. This shall not apply to contracts entered into by the company in the ordinary course of its business. The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors within a period of fifteen days of the date of approval by the Board of Directors
Terms and Restrictions of OPC
1. A person shall not be eligible to incorporate more than a single One Person Company or become nominee in more than one such company.
2. Minor cannot become member or nominee of the One Person Company or hold share with beneficial interest.
3. An OPC cannot be incorporated or converted into a company under Section 8 of the Act.
4. An OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any corporate body.
5. An OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond Rs.50 Lakhs or its average annual turnover during the relevant period exceeds Rs.2 Crores i.e., if the Paid-up capital of the Company crosses Rs.50 Lakhs or the average annual turnover during the relevant period exceeds Rs.2 Crores, then the OPC has to invariably file forms with the ROC for conversion in to a Private or Public Company, with in a period of Six Months on breaching the above threshold limits.
Provisions with respect to Nominee Director
On the death of the sole member, the person nominated by such member shall be the person recognized by the company as having title to all the shares of the member. The nominee on becoming entitled to such shares in case of the member's death shall be informed of such event by the Board of the company. Such nominee shall be entitled to the same dividends and other rights and liabilities to which such sole member of the company was entitled or liable. On becoming member, such nominee shall nominate any other person with the prior written consent of such person who, shall in the event of the death of the member, become the member of the company.
Records of Company's Activities
Where the company is having only one director, all the businesses to be transacted at the meeting of the Board shall be entered into minutes book maintained. Such minutes book shall be signed and dated by the director. The resolution shall become effective from the date of signing such minutes by the director.
Closure of OPC
If an OPC is inoperative for more than one year from the date of incorporation then one may apply for closure of the company. OPC can strike off its name from the ROC Voluntary or by order of the Tribunal. Strike off the name of the company or winding up of the company is compulsorily required if the company is not in operation, to make the company free from all the legal compliances and to update MCA. The strike off application should be filed within 30 days from the date of signing the statement of Assets and Liabilities as required in filing on closure.
Other Pertinent Points of OPC
• In case the paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into private or public company.
• Every One Person Company must nominate a nominee director in the MOA and AOA of the company who will become the owner of the OPC in case the sole director is disabled.
• Filing of audited financial statements with the Ministry of Corporate Affairs at the end of each financial year: One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year.
The author can also be reached at cabhagyashreejain@gmail.com
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