One person Company ( OPC):
The Companies Act 2013 gets a warm welcome by corporate professionals due to the opening up of various avenues for professionals both in the field of practice and employment .
CS. Ragul Ramesh, PCS, Coimbatore
The Companies Act 2013 gets a warm welcome by corporate professionals due to the opening up of various avenues for professionals both in the field of practice and employment .
Our regulators have not left behind our entrepreneurs, Particularly for the budding entrepreneurs, they have created a new concept of 'One Person Company' (OPC). Entrepreneurs have a reason to smile with the Government introducing this novel idea namely ‘one person company.
‘One person company’ opens up plethora of business opportunities for small entrepreneurs through which they get all benefits that large corporate houses enjoy
Now let us look at the concept of OPC in a FAQ format.
1. How can a OPC be formed?
An OPC can be incorporated as a private limited company, where there is only one member
By saying that an OPC can be incorporated as a private limited company all other features with respect to minimum paid up capital, prohibition of invitation of shares to public will apply.
OPC can be formed as company Limited by shares or Company Limited by Guarantee .
An OPC company must specify 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.
2. What will happen if the single member of OPC Company dies?
Now let us look at the concept of OPC in a FAQ format.
1. How can a OPC be formed?
An OPC can be incorporated as a private limited company, where there is only one member
By saying that an OPC can be incorporated as a private limited company all other features with respect to minimum paid up capital, prohibition of invitation of shares to public will apply.
OPC can be formed as company Limited by shares or Company Limited by Guarantee .
An OPC company must specify 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.
2. What will happen if the single member of OPC Company dies?
The important feature of limited liability Company is perpetual succession. To protect this concept, the Companies Act has the following provision:
The member of an OPC has to nominate a nominee and his written consent to be obtained, filed with the Registrar of Companies (RoC). This nominee in the event of death or in the event of any other incapacity of the single member shall become a member of an OPC.
The member of an OPC at any time can change the name of the nominee by providing a notice to the RoC in such manner as prescribed. On account of Death of a member, the nominee is automatically entitled for all shares and liabilities of OPC.
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.
4. Can a OPC have more than one Director?
An One Person Company needs to have atleast one director and it can certainly have more than 1 Director. Only the member needs to be one and not more than that.
OPC can have a maximum of 15 directors which can also be increased by passing a special resolution as in case of any other company. (Possibility of this situation is remote though).
5. How shall sign the financials of OPC ?
The OPC shall file with the RoC a copy of financial statements along with all the relevant documents within 180 days from the closure of the financial year. 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.
The filing requirements is expected to be simple and with minimum documents
Having given them some privileges in the act the regulators has kept a check in certain issues / restrictions on OPC.
6. Is there any restriction on the formation or functioning of OPC ?
An individual can register a maximum of five such entities for business purposes.
An entity would lose the status of OPC if it exceeds certain limits of paid up share capital and turnover.
When the paid up share capital exceeds Rs. 50 lakh or average annual turnover during the relevant period crosses Rs. 2 crore, then the entity ceases to be an OPC.
Only a natural person who is an Indian citizen and resident in India would be eligible to set up OPCs.
7. Can a OPC be converted into a Private Limited Company?
Yes. An OPC can get itself converted into a private or public company by complying with relevant norms including having the requisite paid up capital for those class of entities.
8. What does the law say about contracts by OPC with its sole member?
The member of an OPC at any time can change the name of the nominee by providing a notice to the RoC in such manner as prescribed. On account of Death of a member, the nominee is automatically entitled for all shares and liabilities of OPC.
3. Should the OPC hold Board meeting and General Meeting?
Section 85(1) of the Act excludes One Person Company from holding Annual General Meeting. The Companies Act,2013 also provides that the provisions of S.98, S.100 to S.111(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.
Section 85(1) of the Act excludes One Person Company from holding Annual General Meeting. The Companies Act,2013 also provides that the provisions of S.98, S.100 to S.111(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.
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.
4. Can a OPC have more than one Director?
An One Person Company needs to have atleast one director and it can certainly have more than 1 Director. Only the member needs to be one and not more than that.
OPC can have a maximum of 15 directors which can also be increased by passing a special resolution as in case of any other company. (Possibility of this situation is remote though).
5. How shall sign the financials of OPC ?
The OPC shall file with the RoC a copy of financial statements along with all the relevant documents within 180 days from the closure of the financial year. 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.
The filing requirements is expected to be simple and with minimum documents
Having given them some privileges in the act the regulators has kept a check in certain issues / restrictions on OPC.
6. Is there any restriction on the formation or functioning of OPC ?
An individual can register a maximum of five such entities for business purposes.
An entity would lose the status of OPC if it exceeds certain limits of paid up share capital and turnover.
When the paid up share capital exceeds Rs. 50 lakh or average annual turnover during the relevant period crosses Rs. 2 crore, then the entity ceases to be an OPC.
Only a natural person who is an Indian citizen and resident in India would be eligible to set up OPCs.
7. Can a OPC be converted into a Private Limited Company?
Yes. An OPC can get itself converted into a private or public company by complying with relevant norms including having the requisite paid up capital for those class of entities.
8. What does the law say about contracts by OPC with its sole member?
Where a One Person Company enters into a contract with the sole member who is also director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum or are recorded in the minutes of the first meeting of the Board of Directors of the company held next after the entering into the contract. Provided that nothing in this sub-section shall apply to contracts entered into by the company in the ordinary course of its business.
The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors under sub-section (1) within fifteen days of the date of approval by the Board of Directors within the time specified, under section 364.
Where the company fails to inform the Registrar under sub-section (2) before the expiry of the period specified under section 364 with additional fee, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. Every officer who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.
Conclusion:
The concept of OPC is still very new in India; it will take time for such a new concept to be incorporated with complete efficiency. But it is hoped that OPC will have a sparkling future and it will be embraced as one of the most successful business concept. It is time that the entrepreneurial capabilities of the people are given an outlet for participation in economic activity. This OPC could open greater avenues for professionals like Chartered Accountants, Company secretaries , Cost accountants, architects and such others.
The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors under sub-section (1) within fifteen days of the date of approval by the Board of Directors within the time specified, under section 364.
Where the company fails to inform the Registrar under sub-section (2) before the expiry of the period specified under section 364 with additional fee, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. Every officer who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.
Conclusion:
The concept of OPC is still very new in India; it will take time for such a new concept to be incorporated with complete efficiency. But it is hoped that OPC will have a sparkling future and it will be embraced as one of the most successful business concept. It is time that the entrepreneurial capabilities of the people are given an outlet for participation in economic activity. This OPC could open greater avenues for professionals like Chartered Accountants, Company secretaries , Cost accountants, architects and such others.
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