1.One Person Company

8/11/2019 1.One Person Company

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CONCEPT *

Was first recommended by Dr. JJ IraniCommittee in the year 2005

Introduced in Company Bill 2012

Provisions relating to OPC first timeformulated in Companies Act, 2013

New in India but is successful form of business

in other parts of the world like the US, China,Singapore and several European countries since

a very long time


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CONCEPT (Contd..)

Section 2(62) of Companies Act, 2013 definesOPC as 'One Person Company means a company

which has only one member

Effective from 1st

April 2014 ( vide MCAnotification dated 26thMarch 2014)


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MAJOR CONTRADICTION IN CONCEPT

Company by definition or in logical sensedenotes coming together of more than one person

OPC by its nature is contradictory to the above

It is one person who himself is the director, andsole promoter and sole member.

In a sense it is a process of incorporating oneself.


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FORMATION OF OPC

The incorporation process for OPC is similar toprocess for registering any other company.**

OPC needs to be registered as Pvt Ltd Co., only

with following variations :- One promoter and one member

- Appointment of Nominee

OPC can be formed as a company Limited byshares or Limited by Guarantee or Unlimited

Company.


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FORMATION OF OPC (Contd..)

Process starts with providing followinginformation:

- Legal Identity by giving Name to the OPC

under which the business activities will becarried on

-Nature of the activities of OPC

- Nominee Details


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FORMATION OF OPC (Contd..)

The words One Person Company should be included

in & mentioned below the name of the company,wherever the name is affixed, used or engraved. (Sec

12(3))

OPC can not be incorporated or converted into a

company under section 8 (Not for Profit of the Act.

Similarly a company under section 8 (Not for Profit

Companies) of the Act cannot be converted into OPC.

OPC can not carry out Non-Banking FinancialInvestment activities including investment in securities

of a body corporate.


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FEATURES OF OPC

Section 3 classifies OPC as private limitedcompany for all legal purposes

Provisions related to pvt ltd co are applicable to

an OPC, unless otherwise expressly excluded Has Perpetual Existence, unless dissolved.

Business of the OPC will not come to an end on

the death or incapacity of the Member of OPC In such event the membership as well as all

liabilities of OPC vests in Nominee


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MEMBER AND NOMINEE

Only Natural Person being Indian National andresident in India can form OPC*

One person can form only one OPC (Initial

suggestion was five) The member of OPC has to nominate a Nominee

withNomineeswritten consent

The Nominee details need to be filed with RoC Nominee must be Natural person being Indian

National and resident in India*


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MEMBER AND NOMINEE (Contd..)

Nominee becomes the member of the OPC in

case of death or any other incapacity of Memberto contract.

Member can change the Nominee at any time,

by giving notice to RoC in prescribed manner

Similarly, Nominee can withdraw his consent to

be Nominee of OPC at any time

Any such changes in Nominee needs to be notedin the minutes of OPC and to be informed to

RoC in prescribed manner


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MEMBER AND NOMINEE (Contd..)

But such change is notdeemed to be an alteration

to the Memorandum.

Nominee becomes member of the OPC in case of

death of member and he is already member of

other OPC*

No person shall be eligible to incorporate more

than one OPC or become nominee in more than

one such company. No minor can become member or nominee of

OPC or can hold share with beneficial interest.


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RATIONALE FOR CREATION OF OPC

To create an organizational model for anindividual for starting a business venture.

To provide young entrepreneurs and

professionals benefits of the pvt ltd company To overcome the hurdle of needing second

person to form company (member) or manage it

(director) which at times dilutes the control andfocus.


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RATIONALE FOR .(Contd..)

To opt for corporate structure without loosingany control or freedom

To mitigate potential risk attached to any

business venture To reduce the exposure of his personal assets to

any un-favourable business conditions.

To pursue ones entrepreneurial ambitions


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SHARE CAPITAL

Minimum Paid Up Capital of Rs. 1,00,000

Restriction on right to Transfer the shares

Cannot invite public to subscribe for thesubscription.

Maximum paid up capital can be Rs. 50 Lacs


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OPC Vs. SOLE PROPRIETORSHIP

Entity

- OPC Separate Legal Entity from its Member

- Sole Proprietorship does not have legal statusseparate from its owner

Limited Liability

- Limited to the unpaid subscription money.- Unlimited liability


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OPC Vs. PROPRIETORSHIP(Contd)

Succession- To the Nominee designated by the Member

- By Will or Inheritance

Compliances

- All normal compliances under Company Law

- No specific governing body

Tax Brackets

- As per provisions applicable to Pvt Ltd Co.

- As applicable to Individual.


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BENEFITS

Brings flexibility to individuals especially toprofessionals in managing business more

effectively

Allows them to enjoy the benefits of theorganization form Company

Ease in availing finance

Legal protection being entity separate from themember as an individual


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BENEFITS (Contd..)

The concept of Limited Liability gives protection

to the sole shareholder from losses/liabilities of

the Company being separate legal entity.

Easy Access to market as it gets recognition as

Company


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EXEMPTIONS / RELAXATIONS

ll the provisions related to private ltd companiesapply to OPC, with few variations

Minimum No of Directors 1 and Maximum 15

No need to appoint first Directors as solemember is deemed to be first director

If only 1 director-No need to conduct meeting

More than one Director - Minimum number ofmeetings to be held and Interval between two

meetingsSec 173


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EXEMPTIONS/RELAXATIONS(Contd..)

Provisions relating to conduct shareholders meetings(AGM/EGM), issuance of notices for holding such

meetings, etc.Not Applicable.

Signing of Financial Statements

Financial statements of OPC may not include Cash

Flow Statement

Filing a copy of Financial Statements with ROC

Signing of Annual ReturnSec 92 Failure -compliance of provisions related to AR


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CONVERSION OF OPC INTO PVT LTD CO

Mandatory Conversion - OPC is mandatorilyrequired to be converted itself into either a

private or public company within 6 months from

the:

- Date of increase of its paid up capital above

Rs. 50 lacs, or

- Last day of the relevant period during whichits average annual turnover exceeds Rs.2 cr


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CONVERSION OF OPC ..(Contd..)

Application for conversion has to be made inForm No. INC.6.

No clarity on process for voluntary conversion of

OPC into any other form like proprietorship orPvt Ltd or public ltd company.

However, OPC can not convert itself voluntarily

into any kind of company unless two years hasexpired from the date of incorporation of OPC.


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CONVERSION OF PVT LTD. INTO OPC

Pvt Ltd Company other than registered under Sec8 (Not for Profit Companies) can convert itself

into an OPC by passing a special resolution at a

general meeting, provided

- its share capital is less than 50 Lacs

- its average turnover during the relevant period

( avg of last three years) is Rs. 2 crores or less No objection in writing from members and

creditors is required before passing resolution


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CONVERSION OF ..... (Contd..)

A copy of special resolution has to be filed withRegistrar within 30 days

The company shall file an application to the

Registrar along with the following documents:- Declaration by Directors by Affidavit*

- List of members and creditors

- The latest audited financial statements-copy of no objection letter of secured creditors


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WINDING UP /STRIKING OFF OF NAME

General provisions of Winding up of a company,Voluntary or otherwise as contained in Chapter XX

of the Companies Act, 2013 apply to OPC also

Power of issuance of order of winding up is

entrusted with National Company Law Board

Section 248 gives power to Roc to remove the name

of any company including OPC from Register of

companies as defunct company.

The sole member of OPC can apply for removal of

name on any ground laid in the section.


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CHALLENGES / SHORTCOMINGS

Getting Recognition as an entity separate fromits sole shareholder

Statutory compliances like audits, filing of

various documents and returns etc. Requirements of maintaining Minimum capital

in certain cases of businesses.

Taxation related issues and complexities Noclarity on these matters as of now. *


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CHALLENGES (Contd..)

No specific provisions in Tax laws, specially inIncome Tax. So the taxation burden may be higher

than proprietorship.

At present the applicable tax rates are 30% plus

surcharge @5%, if applicable, plus education cess

@ 3%

Reverse process of converting OPC into

Proprietorship Whether OPC can become subsidiary of a company


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CHALLENGES (Contd..)

Linking of liabilities of member in his personalcapacity to business - banks or financial

institutions will insists on personal guarantee of

director shareholder which will mean unlimited

liability in reality.

In short, beyond the ideals of the concept and

few procedural concessions, it is it is not yet

clear that whether substantial and real benefits

will be available in practice.


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To conclude

So let us wait and Watch ..


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Thank You

Mrs. Padma Kapse

1.One Person Company

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