Brief Overview of a One Person Company (OPC)

Con­tributed by: Anki­ta Ghosh (CA & CS Final Student)

Under the exist­ing Com­pa­ny Law frame­work, a pri­vate lim­it­ed com­pa­ny is required to have a min­i­mum of two share­hold­ers and two Direc­tors. But The Com­pa­nies Act, 2013 passed by the Lok Sab­ha pro­vides for the con­cept of a One Per­son Com­pa­ny (OPC) in India. This con­cept, though already preva­lent in the Europe, USA, Chi­na, Sin­ga­pore and even sev­er­al coun­tries in the Gulf region, was first rec­om­mend­ed in India by an expert com­mit­tee (Dr. J. J. Irani) in 2005 and was sub­se­quent­ly insert­ed in the Com­pa­nies Bill so as to pro­vide an option to per­sons oper­at­ing under the sole pro­pri­etor­ship mod­el to oper­ate as a company.

One Per­son Com­pa­ny (OPC) is defined in Sub- Sec­tion 62 of Sec­tion 2 of The Com­pa­nies Act, 2013, which reads as follows:

‘One Per­son Com­pa­ny means a com­pa­ny which has only one member’

The one basic pre-req­ui­site to incor­po­rate an OPC is that the only nat­ur­al-born cit­i­zens of India, includ­ing small busi­ness­men, entre­pre­neurs, arti­sans, weavers or traders among oth­ers can take advan­tage of the ‘One Per­son Com­pa­ny’ (OPC) con­cept out­lined in the new Com­pa­nies Act. Non-res­i­dent Indi­ans or indi­vid­u­als who do not reside in India for over 182 days can­not incor­po­rate a OPC, the draft rules to the Com­pa­nies Act, 2013 has clar­i­fied. Rest­ing the doubts regard­ing incor­po­ra­tion of OPC by a cor­po­rate enti­ty or non- res­i­dent Indi­ans, the draft rules said only a “nat­ur­al per­son” who is an Indi­an cit­i­zen and is res­i­dent in India shall be eli­gi­ble to incor­po­rate an OPC.

The impor­tant fea­tures of the One Per­son Com­pa­ny (OPC) –

– One Per­son Com­pa­ny has only one per­son as a member/ shareholder.

– One Per­son com­pa­ny can be reg­is­tered only as a Pri­vate Company.

– 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 INR 1 Lac

Restricts the right to trans­fer its shares

Pro­hibits any invi­ta­tions to pub­lic to sub­scribe for the secu­ri­ties of the company

– An OPC is required to give a legal iden­ti­ty by spec­i­fy­ing a name under which the activ­i­ties of the busi­ness could be car­ried on.

The words ‘One Per­son Com­pa­ny’ should be men­tioned below the name of the com­pa­ny, wher­ev­er the name is affixed, used or engraved.

– MoA (Mem­o­ran­dum and Arti­cles) to name anoth­er per­son who shall become the mem­ber in case of death or inca­pac­i­ty of the subscriber.

– The writ­ten con­sent above shall be filed with the Reg­is­trar at the time of incor­po­ra­tion of the One

Per­son Com­pa­ny along with its MoA.

– The nominee/ oth­er per­son can with­draw his con­sent at any time.

– The member/Shareholder of One Per­son Com­pa­ny may change the nominee/other per­son at any time, by giv­ing notice to the oth­er per­son and inti­mate the same to Com­pa­ny. Then the Com­pa­ny should inti­mate the same to the Registrar.

– In Case of death of Sub­scriber, the per­son so names, shall become mem­ber of OPC.

– Member/Shareholder of the One Per­son Com­pa­ny acts as first Direc­tor, until the Com­pa­ny appoints Director(s).

– One Per­son Com­pa­ny can appoint max­i­mum 15 Direc­tors, but min­i­mum should be one Director.

Board Meet­ings and Direc­tors of OPC –

Section149, 152 & 173 of the Act One Per­son Com­pa­ny needs to have one Direc­tor. It can have max­i­mum of 15 Direc­tors 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 OPC 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 a minute book – signed and dat­ed by the mem­ber and such date shall be deemed to have the date of the board meet­ing for all the pur­pos­es under com­pa­nies Act, 2013.”

– One Per­son Com­pa­ny need not to hold any AGM (Annu­al Gen­er­al Meet­ing) in each year.

Hold­ing Annu­al Gen­er­al Meet­ings of OPC-

Sec­tion 122 of the Com­pa­nies Act, 2013: Sec­tion 122(1) of The Com­pa­nies Act, 2013, pro­vides that the pro­vi­sions of Sec­tion 98, Sec­tion 100 to Section111 (both inclu­sive) are not applic­a­ble to One Per­son Com­pa­ny. There­fore, pro­vi­sions relat­ing to Gen­er­al Meet­ings, Extra Ordi­nary Gen­er­al Meet­ing and Notice Con­ven­ing to Gen­er­al Meet­ing are not applic­a­ble to One Per­son Com­pa­ny. How­ev­er, for ful­fill­ing the pur­pos­es of Sec­tion 114 of the Com­pa­nies Act, 2013, where any busi­ness is required to be trans­act­ed at an Annu­al Gen­er­al Meet­ing, or oth­er Gen­er­al Meet­ing of the com­pa­ny by means of an ordi­nary or spe­cial res­o­lu­tion, it shall be suf­fi­cient if the res­o­lu­tion is com­mu­ni­cat­ed by the mem­ber of the com­pa­ny and entered in the min­utes book which is required to be main­tained U/s 118 and signed and dat­ed by the mem­ber and such date shall be deemed to be the date of meet­ing under the pur­pos­es of Com­pa­nies Act, 2013.”

– Cash Flow State­ment may not include in the finan­cial state­ments of One Per­son Company.

– With­in 180 days from the clo­sure of the Finan­cial Year, One Per­son Com­pa­ny should file the copy of the Finan­cial State­ments with Registrar.

Sig­na­tures on Finan­cial Statements

Sec­tion 134 and 137 of the Act: The OPC shall file with the ROC a copy of finan­cial state­ments duly adopt­ed by its mem­bers along with all the doc­u­ments which are required to be attached to such finan­cial state­ment, with­in 180 days from the clo­sure of the finan­cial year along with cash flow state­ments. The finan­cial state­ment shall be signed by only one Direc­tor and the annu­al return shall be signed by the com­pa­ny sec­re­tary and the Direc­tor, and in case if there is no com­pa­ny sec­re­tary then only by the Director.”

One Per­son Com­pa­ny should inform to the Reg­is­trar about every con­tract entered and also should record in the min­utes of the meet­ing with­in 15 days from the date of approval by the Board of Directors.

Con­tracts by One Per­son Company

Sec­tion 193 of the Act: The new Com­pa­nies Act, 2013 gives spe­cial atten­tion to the con­tracts which will be entered by One Per­son Company.

Sig­na­tures on Annu­al Returns

Sec­tion 92 of the Com­pa­nies Act, 2013:

“It is pro­vid­ed in Sec­tion 92 of The Com­pa­nies Act, 2013, that the annu­al returns in the case of One Per­son Com­pa­ny shall be signed by the com­pa­ny sec­re­tary or where there is no com­pa­ny sec­re­tary, then by the Direc­tor of the company.”

– OPC – manda­to­ry con­ver­sion to Pri­vate or Pub­lic if paid up cap­i­tal exceeds 50 lakh or Aver­age turnover in 3 pre­ced­ing years exceeds 2 Crore –To con­vert with­in 6 months.

Notes:

It is note­wor­thy that it is manda­to­ry for an OPC to clear­ly spec­i­fy that it is a one per­son com­pa­ny for all pur­pos­es. Such a step will ensure that all per­sons deal­ing with the OPC are aware of its cor­po­rate sta­tus and in turn fos­ter bet­ter trans­paren­cy. How­ev­er, one must note that the tax impli­ca­tions of OPC are much high­er than of sole proprietorship.

The OPC is charged at a base tax rate of 30% along with oth­er applic­a­ble tax­es like min­i­mum alter­na­tive tax (base tax rate 18.5%), div­i­dend dis­tri­b­u­tion tax (base tax rate 15%) and oth­ers. The con­cept of OPC indeed looks promis­ing look­ing to the fea­tures but the suc­cess would be cor­rect­ly judged only after its implementation.