One Person Company (OPC)

How many people are required to Incorporate an OPC?

To Incorporate a One Person Company, a Director and a nominee is required.

How much Capital is required to Incorporate an OPC?

An OPC can be Incorporated with any amount of Capital. However, for issuing minimum shares worth Rs. 1 lakh fees must be paid to the Government (Authorized Capital fee) during the incorporation of an OPC.

How long it will take to incorporate an OPC?

With eauditors you can incorporate an OPC easily in 7-15 days. Also, note that the time taken for Incorporation will depend on the submission of the relevant documents by the client and also approval from the Government authorities.

Is it necessary to have an office to start an OPC?

Address of the registered office of the OPC will be required as the premises will receive the communication from MCA.

What is the validity of the Incorporation?

After incorporation, the Company will be active as long as the annual Compliances are met regularly.

Who is Eligible for OPC Company?

An individual who is an Indian citizen and resident in India is eligible to act as a member and nominee of an OPC.

What are the Benefits of Incorporating an OPC?

OPCs have the following benefits

It is considered to be a separate legal entity.
The liability of the members is limited.
OPCs allow the Transferability of shares.
Tax flexibility and Savings
One single owner has control over the Company
The business gets a legal status and Recognition for the business.

OPC in India

Dr. Jamshed. J. Irani in his report on Company Law dated 31st May 2005 introduced the concept of One Person Company in India.

In the report, Dr. Irani recommended that with the ever-increasing use of Information Technology and the emergence of a strong service sector in India it was bound for the government to empower the entrepreneurs who are capable of creating innovative ideas and participating in the marketplace.

Dr. Irani suggested that innovative entrepreneurs must not be made to do through an association of persons and should be able to create a single person economic entity in the form of One Person Company.

Further, such an entity may be provided with a simple regime through exemptions so that a single entrepreneur is not compelled to dissipate his energy and resources on procedural matters.

Hence, the concept of ‘One Person Company’ was introduced in the Companies Bill 2013, with the approval from Lok sabha on 18th December 2012 and in Rajya Sabha on 8tH of August 2013.

Finally, after obtaining the assent of the President of India on 29th of August 2013, it has become the Companies Act, 2013.

Why prefer One Person Company?

Here are some major advantages of One Person Company:

For incorporating an OPC only one person is required and that is the most predominant feature of an OPC. Hence, we can say that it is a registered form of sole proprietorship. One person is responsible for decision-making, controlling, and managing the affairs.
As it is a registered form of business entity it enjoys the same privileges as a Private Limited Company. The legality of this type of business form makes it popular among banks and financial institutions
An OPC can avail various benefits enjoyed by small scale industries like loans are available at a lower interest rate.
Any remuneration made to the director will be allowed under deduction under Income Tax Law, unlike Proprietorship. Also, the benefits of Presumptive Taxation are available subject to Income Tax Law.
An entrepreneur can take more risks without stressing over the loss of assets as an OPC has limited liability. This is a sort of encouragement to new, young, and innovative business start-ups.
All Companies are required to hold annual general meetings in addition to other meetings but One Person Company is exempt from this. The Resolution signed by the Director and entered in the minutes book is sufficient, instead of the annual general meeting.
Every Company is required to prepare and file statements that include the balance sheets, Profit and loss account, cash flow statement, statement of changes in equity, and explanatory notes. In the case of an OPC, a cash flow statement is not required.

How to register a One Person Company in India?

Before understanding the Registration process for an OPC let us quickly go through the various types of companies that can be formed. A company can be established for the lawful purpose by the following number of people

One Person Company in case of an Individual
A Private Limited Company in case of two or more people
When there are seven or more people a Public Limited Company is formed

An OPC has certain restrictions when it comes to incorporation, unlike a Private Limited Company. Hence, before beginning with the OPC registrations it is essential to understand the limits to ensure the promoter is eligible as per the Companies Act to register an OPC.

Legal entities like Company or LLP cannot incorporate an OPC.
During incorporation, a nominee must be appointed by the promoter.
Business involved in financial activities cannot incorporate as an OPC
When the paid-up capital share exceeds Rs.50 lakh and the turnover crosses over Rs.2 crore an OPC must be converted into a Private Limited Company.

A person however cannot incorporate more than one OPC. Also, an OPC is prohibited for having a minor as its member.

What is the role of a Nominee in an OPC?

Nominee in an OPC is the person designated by the sole promoter of the company to be his successor. In case of death or incapacitation, the Nominee will take over. The nominee must be an Indian Citizen and a resident who is not a minor. While incorporating a One Person Company, a Nominee Consent Form must be filed with the MCA

Withdrawal of Consent: The Nominee can withdraw his/her consent, in this case, the sole member is required to nominate another member as a legal heir within 15 days of the notice of the withdrawal. The Nomination of the new personnel must be intimated to the company through a written consent in Form INC 3. In turn, the Company is required to file the notice of withdrawal of consent along with the intimation of the new nominee with the Registrar in Form INC 4.

Change in Nominee: The Sole member of the One Person Company can change the Nominee by providing notice in writing to the company. The new nominee must consent to the nomination form in INC 3. The Company must file the notice of the change and the consent of the nominee with the registrar with the applicable fee, within 30 days of receiving the intimation of change.

Nominee Appointment: In case if the nominee becomes in charge of the company due to cessation of the original member’s term owing to the death or incapacity of the latter, the new member must appoint a new nominee as a replacement

Penalty: If a One Person Company or an officer of any such company is not compliant with the mentioned regulations the entity might incur penalties as high as Rs.10,000. Further, for each day of default, the penalty will be increased by a fine of Rs,1000.