Incorporation of One Person Company under Companies Act, 2013

Incorporation of One Person Company under Companies Act, 2013

Incorporation of One Person Company under Companies Act, 2013

n India, the JJ Irani Expert Committee recommended the formation of a one-person company (OPC). It has suggested that such an entity may be provided with a simpler legal regime through exemptions so that the single entrepreneur is not compelled to fritter away time, energy, and resources on procedural matters.

With the implementation of the Companies Act 2013, a single person will constitute a Company, under the One Person Company (OPC) concept. OPC will help small single entrepreneurs, who are currently operating under a proprietorship model, move to the corporate structure with benefits of limited liability but with minimal compliance.

The One Person Company (OPC) is a newly incorporated type of company that was introduced in the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. There can be only one, natural person resident of India who can be a member of OPC. As the name itself suggests it is a company that is owned by one single person. 

Preliminary Conditions (As per Rule 3 of Companies (Incorporation) Rules, 2014)
  1. Only a natural person who is an Indian citizen and resident in India can be a member and nominee of an OPC.
  2. A natural person shall not be a member and nominee of more than a One Person Company at any point in time.
  3. No minor shall become member or nominee of the One Person Company or can hold share with a beneficial interest in such OPC.
  4. Such a Company cannot be incorporated or converted into a company under section 8 (Company with Charitable Objects) of the Act.
  5. Such a Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any other body corporate.
  6. No such company can convert voluntarily into any kind of company unless two years is expired from the date of incorporation of One Person Company except in the case if it falls under the mandatory conversion criteria.
  7. The company shall state the word ‘OPC’ in the bracket after the name of the Company, like XYZ (OPC) Private Limited.
Procedure for Incorporation of OPC
  1. DIN (Director Identification Number) and Digital Signature Certificate– First of all, the sole shareholder/director should get Director Identification Number from the Ministry of Corporate Affairs and also get Digital Signature Certificate.
  2. Name of the Company– The second step involves the sole shareholder to apply for the name of the company.
  3. Consent of the Nominee– The subscriber to the memorandum of ‘one person company’ shall nominate a person, after obtaining the written consent of such person, who shall, in the event of subscriber’s death or his incapacity to contract, become the member of that one-person company.
  4. Incorporation- Form INC- 2 is the form for incorporation of ‘one person company’ which has to be submitted to the registrar along with the following attachments-
    1. Memorandum of Association
    2. Articles of Association
    3. Proof of identity of the member and the nominee.
    4. Residential proof of the member and the nominee.
    5. A copy of the PAN card of member and nominee.
    6. Consent of nominee in form INC- 3.
    7. An affidavit from the subscriber and first director to the memorandum in Form INC-9.
    8. List of all the companies (specifying their CIN) having the same registered office address, if any.
    9. Specimen signature in form INC- 10.
    10. Entrenched articles of association.
    11. Proof of registered office address.
    12. Copies of the utility bills. (not older than 2 months)
    13. Proof that the company is permitted to use the address as the registered office of the company if the same is owned by any other entity/person.
    14. Consent from the director.
    15. Optional attachments.
  5. Final Incorporation Certificate– After doing all the formalities, the subscriber shall receive the final incorporation certificate from the registrar of the companies. The business can be commenced henceforth.
  6. E– filing– the subscriber can also do e-filing for the incorporation of the company by filing e- form INC-2 and attaching other relevant documents.
Conversion of Private Company into One Person Company

A private company other than a company registered under section 8 of the Act having paid-up share capital of fifty lakh rupees or less or average annual turnover during the relevant period is two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting. The company shall obtain NO objection certificate, and such resolution shall be filed with the registrar of companies within 30 days in Form no. MGT14.

The company shall file an application in form no. INC 6 for its conversion into a ‘one person company’. On satisfaction and compliance with requirements, the registrar shall issue the certificate.

Other Important Point About Management of OPCs
  1. In case the paid-up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC has to mandatorily convert itself into a private or public company.
  2. One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year.
  3. The provision of holding of Annual General Meeting is not applicable to OPC
  4. The OPC is required to hold a minimum of two Board meetings during a calendar year and one meeting in each half of the calendar year and the gap between two meetings is not more than 90 days.
  5. For the purposes of quorum, in case of a single Director, it shall be sufficient if the passed resolutions are entered in the minutes’ book and signed and dated by such director.