1. The concept of an entity called a One Person Company (OPC) has been introduced by the Companies Act, 2013. Earlier, a company involved at least 2 persons to begin with.
2. In such a company, a single person is the sole shareholder of the company who may as well be the Sole Director.
3. The purpose is to enable small businessmen to function with a corporate identity, a separate legal entity having limited liability and Perpetual Existence, while remaining independent.
4. Also, Compliances in case of an OPC are a lot less as compared to those in case of a Private Limited Company, in effect reducing costs.
5. The member must appoint a nominee, and take prior written consent from him, who shall become a member of the company in case of death/ inability to contract of the owner.
6. When an OPC’s paid up Capital exceeds 50 lakh rupees or if the average annual turnover of the company in the last 3 FYs exceeds Rs. 2 Crores, then the company must be converted into a private limited/ public company.
- Small businessmen get corporate status while remaining independent.
- Freedom from many compliances, the time and cost involved as compared to pvt ltd company.
- Separate legal entity, social status, limited liability and perpetual succession.
- No Minimum paid-up capital required.(In all type of companies)
- Cost of Incorporation is same as a pvt ltd company, though future compliance cost may be lesser.
- Cannot convert to Pvt/ Public company before 2 years from incorporation (unless cross the limits)
- Turnover limit of Rs.2 Crore may be too small for certain businesses.
- Such company cannot invest in another body corporate.
- Income tax – Base rate = 30%, If Proprietor – gets slab rate.
Only a Natural Person, who is a resident and citizen of India can –
- Form an OPC
- Be a nominee in an OPC
A person cannot incorporate or become a nominee in more than 1 OPC at a time.
[Rule 3 of Companies (Incorporation) Rules, 2014]
- Memorandum and Articles– Format prescribed in the act (Schedule I, Table A & Table F)
- The Procedure for Incorporation is as under –
- Name reservation: Form INC-1 needs to be filed for name availability.
- Incorporation: After name is approved, form INC-2 will be filed for incorporation of the OPC within 60 days of filing form INC-1.
Form DIR-12 must be filed linked with form INC-2 if promoter is not the sole director of the OPC.
Form INC-22 must be filed within 30 days once form INC-2 is registered in case the address of correspondence and registered office address are not same.
1. The member of an OPC must appoint a ‘NOMINEE’, after obtaining prior written consent from him.
2. On death of member, such nominee becomes the member of the OPC and is entitled to the same dividends, rights and liabilities as the deceased member.
3. Such person shall then appoint a new nominee within 15 days.
1. The Member shall be deemed to be the director until other directors duly appointed.
2. A person must apply for and get a DIN (Director Identification Number), before he can become a director in any sort of company.
3. Director must be appointed at general meeting.
BOARD MEETINGS AND RESOLUTIONS
If OPC has only 1 Director –
1. For passing any Board Resolution, it shall be sufficient if –
- The resolution is entered in the minutes-book required to be maintained under section 118.
- It is signed and dated by the director. (such date shall be deemed to be the date of the meeting of the Board of Directors for all the purposes under this Act)
2. Minimum no. of board meetings to be compulsorily held in a year = 0
If OPC has more than 1 Director –
- It has to hold board meetings and pass resolutions as required.
- Minimum no. of board meetings to be compulsorily held in a year = 2
(1 in each half of calendar year with at least 90 days gap between the 2 meetings in the year)
GENERAL MEETINGS AND RESOLUTIONS
1. Holding of AGM is not mandatory for OPC. [Section 96(1)]
2. Section 98 and section 100 to 111 do not apply to OPC. [Section 122(1)]
3. For passing any shareholder’s resolution (whether ordinary or special), it shall be sufficient if – [Section 122(3)]
- The resolution is communicated by the member to the company
- It is entered in the minutes book required to be maintained under section 118
- It is signed and dated by the member (such date shall be deemed to be the date of the meeting for all the purposes under the Act)
ANNUAL FINANCIAL STATEMENTS, ANNUAL FILING AND AUDIT
1. Cash Flow Statement is not mandatory. [Section 2(40)]
2. The financial statements can be signed by only one director before submission to auditor. [Section 134(1)]
3. Board Report to be annexed to financial statements need to contain only 1 thing –
“Explanations or comments by the board on every qualification, reservation or adverse remark or disclaimer by the auditor” [Section 134(4)]
- A copy of the financial statements duly adopted by its member (along with Notes, Board Report, and Auditor’s Report) must be filed within 180 days from the closure of the financial year. [3rd Proviso to Section 137(1)]
- In Annual Return, signature of a Company Secretary is not mandatory. [Proviso to Sec. 92(1)]
- Rotation of auditor not applicable. [Section 139]
[Companies (Incorporation) Rules, 2014]
1. Cannot be converted into a Section-8 company.
2. Cannot convert VOLUNTARILY into a pvt/ public company unless 2 years has expired since date of incorporation.
3. Must be converted into a pvt/ public company if –
- Paid-up capital of the company exceeds Rs.50 lacs, or
- The average annual turnover of past 3 FYs exceeds Rs.2 Crores
a. If OPC enters into contract with its member who is also the director (other than in the ordinary course of business), the procedure prescribed in Section 193 must be complied with.
b. If a person becomes a member in an OPC due to the death/ inability to contract of its member, and he is also already a member in another OPC, then he must leave membership of one of them within 180 days.
I am sure the above would prove useful.
Tags Corporate Law