ONE PERSON COMPANY (OPC)

VIMAL SOLANKI

What is One Person Company ?

• The concept of One Person Company [OPC] is a new vehicle/form of business, introduced by The Companies Act, 2013 [No.18 of 2013], thereby enabling Entrepreneur(s) carrying on the business in the Sole-Proprietor form of business to enter into a Corporate Framework.

• One Person Company is a hybrid of Sole-Proprietor and Company form of business, and has been provided with concessional/relaxed requirements under the Act.

Features of One Person Company

1. Only One Shareholder2. Nominee for the Shareholder3. Director

1. Only One Shareholder

• Only a natural person, who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company. 

• Explanation: The term "Resident in India" means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year.

2. Nominee for the Shareholder

• The Shareholder shall nominate another person who shall become the shareholders in case of death/incapacity of the original shareholder.

• Such nominee shall give his/her consent and such consent for being appointed as the Nominee for the sole Shareholder.

• Only a natural person, who is an Indian citizen and resident in India shall be a nominee for the sole member of a One Person Company.

3. Director

• Must have a minimum of One Director, the Sole Shareholder can himself be the Sole Director. The Company may have a maximum number of 15 directors.

Terms and Restrictions of One Person Company

1. A person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company.

2. Minor cannot shall become member or nominee of the One Person Company or can hold share with beneficial interest.

3. An OPC cannot be incorporated or converted into a company under Section 8 of the Act. [Company not for Profit].

4. An OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate. 

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5. An OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond Rs.50 Lakhs or its average annual turnover during the relevant period exceeds Rs.2 Crores i.e., if the Paid-up capital of the Company crosses Rs.50 Lakhs or the average annual turnover during the relevant period exceeds Rs.2 Crores, then the OPC has to invariably file forms with the ROC for conversion in to a Private or Public Company, with in a period of Six Months on breaching the above threshold limits.

1. Obtain Digital Signature Certificate [DSC] for the proposed Director(s).

2. Obtain Director Identification Number [DIN] for the proposed director(s).

3. Select suitable Company Name, and make an application to the Ministry of Corporate Office for availability of name. 

4. Draft Memorandum of Association and Articles of Association [MOA & AOA]. 

Steps to Incorporate One Person Company (OPC)

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5. Sign and file various documents including MOA & AOA with the Registrar of Companies electronically. 

6. Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp Duty. 

7. Scrutiny of documents at Registrar of Companies [ROC].

8. Receipt of Certificate of Registration/Incorporation from ROC.

Advantages

1. A Separate Legal Entity• One Person company is a separate legal entity and capable of doing

everything that an entrepreneur would do.

2. Easy Funding• Like a Private company, One Person Company can raise  funds

through venture capital, financial institutions, angel investors etc. A One Person Company can raise funds thus graduating itself to a private limited company.

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3. More Opportunities, Limited Liability• Since the liability of the One Person Company is limited to the extent

of the value of the share you hold, the individual could take more risk in business without affecting or suffering loss of personal assets. It is the encouragement to new, young and innovative start-ups.

4. Minimum Compliances• One Person Company have to face little compliance burden as

compared to private limited companies , hence One Person Company can  more focus on other functional and core areas.

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5. Credit Rating• The One Person company with bad credit rating may even get the

loan. Credit rating of One person company will not be material if the rating of One person company is as per norms.

6. Benefits under Income Tax Law• Any remuneration paid to the director will be allowed as deduction

as per income tax law unlike proprietorship. Other benefits of presumptive taxation are also available subject to income tax act.

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7. Benefits of being a Small Scale Industries • An One Person Company can avail the various benefits provided to

Small Scale Industries like lower rate of Interest on loans, easy funding from bank without depositing any security to a certain limit, manifold benefits under Foreign Trade policy and others. All these benefits can be boon to any business in initial years.

8. The Only Owner• You, only the owner helpful in quick decision-making, controlling and

managing the business without following any elongated processes and methodologies as adopted in other companies. The sense of belonging inspires to grow the business further.

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9. Receive Interest on any late Payment• One Person company avails all the benefits under Enterprises

development Act, 2006. The newly start-up One Person company is micro, small, or medium, hence they are covered under this act . As per the Act, if buyer or receiver receives any late payment (receives payment after specified period) , then he is entitled to receive interest which is three times the bank rate.

10.Increased Trust and Prestige• Any business entity that runs in the form of company always enjoys

an increased trust and prestige.

Partnership Firm V/S One Person Company

• Registration is Mandatory.• Minimum 2 Person Required.• Maximum 10 or 20.• Joint Ownership.• Registration is not Compulsory.• Ownership is not Transferrable.• Partner and Firm both are Same.

• Registration is not Mandatory.

• Only 1 Person is Required.• Maximum 2. (2nd :-

Nominee)• Single Ownership.• Registration is Compulsory.• Ownership is Transferrable.• Owner and Company both

are Different.