One person company and its advantages

One Person Company (OPC)

• Section 2(62) - One Person Company means a company which has only one member.

• One Person Company may be either a Company limited by share or a Company limited by guarantee or an unlimited Company.

• An OPC limited by shares shall comply with following requirements:

• Shall have minimum paid up capital of Rs.1,00,000/-.
• Restricts the right to transfer its shares.
• Prohibits any invitations to public to subscribe for the securities of the company.

OPC 

Section 3(1)(c) – A company may be formed by one person by subscribing his/her name to a memorandum.

Only a natural person who is an Indian citizen and resident in India-

• shall be eligible to incorporate a One Person Company;
• shall be a nominee for the sole member of a One Person Company

OPC

Explanation-

For the purposes of this rule, the term "resident in India" means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.

OPC

1. The memorandum shall indicate the name of the other person, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company. A written consent from such nominated person shall be filed with registrar at the time of registration of OPC.

2. That such nominated person may withdraw his consent at a future date. Even the member has the right to change such nominated person.

3. In case a nominated person withdraws, the member shall within 15 days of such withdrawal, nominate a new person and send an intimation to the company OPC.

4. The company shall within thirty days of receipt of the notice of withdrawal of consent under sub-rule (3) file with the Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No INC.4 and the written consent of such another person so nominated in Form No.INC.3.

5. Member - Dies or is incapacitated to contract – nominee becomes member – he has to appoint a nominee within 15 days of becoming a member – within 30 days file an intimation with Registrar.

OPC

1. Wherever the name of the company shall be mentioned, it should be noted that the word “One Person Company” must be written in the “()” below the name of the Company.

2. No person shall be eligible to incorporate more than one OPC or become nominee in more than one such company.

3. In a scenario where a member of a OPC, who is also a nominee in another OPC, becomes member of this other OPC, he has time of 180 days to restore the status of being member of only one OPC.

Advantages of OPC

1. Cash Flow statement is not mandatory for One Person Company. (Section 2 (40))

2. Annual Return shall be signed by the Company Secretary or where there is no Company Secretary, by the Directors of the Company. (Section 92)

3. It is not compulsory to call Annual General Meeting. (Section 96)

4. The provisions of Section 174 (Quorum for meetings of Board) will not apply to One Person Company in which there is only one director on its Board of Directors.

More on OPC

5. An individual who is member shall be deemed as first director until the director or directors are duly appointed by the members according to the Provisions of the Act. (Section 152)

6. One Person Company may conducted Board Meeting, and one meeting may be held in each half of a calendar year and gap between two meetings should not be less than 90 days

7. One Person Company shall file its Financial Statement along with necessary documents which is duly adopted by the Member within 180 days from the date of ending of financial year/ closure of financial year By: CA Rajesh Saluja More on OPC.

8. 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 under section 118

9. Minutes book shall be signed and dated by the director and the resolution shall become effective from the date of signing such minutes by the director.

10.Procedure mentioned in Pt. no 8 and 9 will also be applicable to Resolutions passed in general meetings.

11.Such Company cannot be incorporated or converted into a company under section 8 of the Act (Charitable Objects).

Conversion of OPC into a Pub. or Pvt. Ltd. Co.

1. Voluntarily - By increasing no. of members to 2 & 2 Directors or 7 Members & 3 Directors as the case may be. But not before 2 years of incorporation.

2. Upon any of the following conditions:

• Paid up Share Capital > 50 Lakhs
• Average Annual T/o of preceding three years > 2Cr

Should covert within 6 months of:

•  the day Paid up Share Capital crosses 50 Lakhs
•  he last day of the third year. Alter its memorandum by passing a resolution U/s 122(3)

Conversion of OPC into a Pub. or Pvt. Ltd. Co.

Give notice to registrar in Form INC 5, within 60 days from activation of either of two conditions, informing that it has ceased to be a OPC. In case of default, a fine which may extend to Rs.10000/-, and a fine of Rs. 1000/- per day till such default continues.

 A Private Co. having:

• Paid up Share Capital < 50 Lakhs

• Average Annual T/o of preceding three years < 2Cr, may convert itself into an OPC Shall obtain a NOC in writing from members and creditors .Thereafter pass a special resolution in general meeting File the resolution within 30 days of passing in MGT.14

Concluding Comments

 • One Person Company is a useful option for Small entrepreneurs who wants to give their business a distinct identity with lesser legal compliance and benefits in comparison to Private Companies while at the same time limiting the liabilities to the extent of Capital Contribution.