The concept of One Person Companies was introduced in India through the Companies Act, 2013 to support entrepreneurs who are capable of starting ventures on their own. It allows them to create a single person economic entity. Like a Company, an OPC is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.
Who is eligible?
As per the Companies (Incorporation) Rules, 2014, the following persons can be eligible to incorporate an OPC in India Only a natural person who is an Indian citizen and a resident of India
- Shall be eligible to incorporate a One Person Company;
- Shall be a nominee for the sole member of a One Person Company
Further, the rules have explained the term of a resident in India as follows: The term ?resident in India? means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one calendar year.
What are the benefits of choosing this entity type?
- It is a legal entity separate from its members
- Member liability is limited.
- Being a private company, an OPC encourages entrepreneurs to set up their own businesses without the help of a second member.
- The statutory requirement of appointment of Statutory Auditor and re-appointment of the auditor is not applicable.
- The provisions of Sections 98, 100 to 111 of the Act relating to the holding of general meetings shall not apply.
- Section 173 for holding and conducting a minimum number of 4 board meetings shall not apply.
Hey, are there any restrictions?
- The person who is already a member or nominee of 1 OPC, cannot incorporate more than 1 OPC or become a nominee in more than one such company.
- No minor shall become a member or nominee of the One Person Company or hold shares with beneficial interest.
- OPC cannot be incorporated or converted into a Company under Section 8 of the Act.
- OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any corporate body.
- No such company can 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).
Alrighty, what are the minimum requirements to form one?
- Minimum one Director
- Minimum one Member
- Minimum share capital shall be INR Rs. 1,00,000/-.
- Application for allotment of Director Identification Number (DIN).
- Digital Signature Certificate (DSC).
- Director Identification Number:
This is a unique identification number issued by the Ministry of Corporate Affairs., for an existing Director or a person intending to become the Director of a Company. Documents required:
- Identity Proof: Copy of PAN Card for this is mandatory.
- Address Proof: Copy of Passport/Voter/Election ID/Driving License/Aadhar Card/Electricity/Telephone (Utilities) Bills. Address proof must be in the name of the applicant only and utility bill must not be older than 2 months from the date of filing of the e-form.
- Passport size Photo: 1 soft copy or photocopy of the applicant?s latest photo in JPEG format.
- Current Occupation
- Email Address of the Applicant
- Contact Number
- Educational Qualification
- Verification to be signed by the applicant. For this purpose, there is a DIR4 form.
- Digital Signature Certificate:
This is the digital equivalent (electronic format) of physical or paper certificates. Examples of physical or paper certificates are driver’s license, passport. A digital certificate can be presented electronically to prove your identity, to access information or services on the Internet or to sign certain documents digitally. Since the MCA accepts electronic submission of Forms on its website, the DSC is mandatory for all users. Documents required:
- Digital Signature Certificate application Form (duly signed by an applicant). An applicant is required to sign across the photo.
Download the DSC Application Form (Class II Individual Certificate).
- All other documents are same as required for the DIR-3 Application.
So, after Registration compliance? The following are the requirements to be followed mandatorily,
- To apply for ShLicenselicense, PAN TAN.
- To open Current Bank account.
- To pay subscription money with Current Bank account.
- To issue share certificate to subscriber by company.
What about the Annual Return Filing for OPC? Every company shall prepare an annual return in the prescribed form containing the particulars:
- Its registered office, principal business activities, particulars of its holding, subsidiary and associate companies.
- Its shares, debentures and other securities and holding patterns.
- Its indebtedness
- Its members and debenture-holders
- Its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year.
- Meetings of members or a class thereof, board and its various committees along with attendance details.
- Remuneration of directors and key managerial personnel.
- Penalty or punishment imposed on the company.
- Matters relating to certification of compliances.
- Details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration, and percentage of shareholding held by them; and
- Such other matters as may be prescribed,
The annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company.
Should you be generating Financial Statements for Annual Returns Filing of an OPC?
Financial statements of a one-person company need to be filed with the Registrar, after they are duly adopted by the member, within 180 days of closure of financial year along with all necessary documents.
- The financial statement, signed by one director, for submission to the auditor for his report thereon.
- The report of the Board of Directors to be attached to the financial statement.
- Board of Directors Report of OPC means a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
- Filed with ROC within 180 days from the closure of the financial year.
- Financial statement, may not include the cash flow statement.
Startup entails complex procedures and many bureaucratic hurdles, entrepreneurs are better off using professional services. Hiring a virtual lawyer and virtual accountant can save time and help ensure that the process goes smoothly.