11/07/2014
One Person Company (OPC)
The introduction of OPC in the legal system is a move that would encourage corporatization of micro businesses and entrepreneurship with a simpler legal regime so that the small entrepreneur is not compelled to devote considerable time, energy and resources on complex legal compliances. This will not only enable individual capabilities to contribute economic growth, but also generate employment opportunity.
One Person Company of sole-proprietor and company form of business has been provided with concessional /relaxed requirements under the Companies Act, 2013.
With the implementation of the Companies Act, 2013, a single national person can constitute a Company, under the One Person Company (OPC) concept.
Global Practice
One person companies are in existence in certain countries. In India this concept has been mooted by the Ministry of Corporate Affairs by allowing One Person Companies in India in line with UK, China, USA, Australia, Singapore, Qatar, Pakistan and several other countries.
Origin of the concept in India
The concept of OPC was mooted, in the report of Dr. J.J. Irani
Committee. The Irani Committee briefly referred to OPC in its report.
Priority Sector lending advantage
The Reserve Bank of India under its Master Circular No. RBI/2013-14/107 RPCD.CO. Plan.BC9/04.09.01/2013-14 dated July 01, 2013 has instructed all Scheduled Commercial Banks (excluding Regional Rural Banks) to increase their involvement in financing of priority sectors, viz., agriculture and small scale industries. The Master Circular provides for the following activities as being eligible for priority sector lending:
Investment in Plant and Machinery
(Rs. Not exceeding)
Manufacturing Sector Enterprises Service Sector
Micro Enterprises
25 lacs 10 lacs
Small Enterprises 5 Crores 2 Crores
One Person Company, can take advantage of the priority sector lending policy, as maximum Paid Up capital of OPC under Companies Act 2013 shall not exceed Rs. 50 lacs.
One Person Company under Companies Act 2013
Section 2(62) of the Companies Act, 2013, “One Person Company” means a company which has only one person as a member”
Salient features of OPC
• OPCs are a separate legal entity similar to that of any registered corporate.
• A One Person Company is incorporated as a private limited
company.
• It must have only one member at any point of time and may have
only one director.
• The member and nominee should be natural persons, Indian Citizens and resident in India. 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.
• One person cannot incorporate more than one OPC or become
Nominee in more than one OPC.
• If a member of OPC becomes a member in another OPC by virtue
of his being nominee in that OPC then within 180 days he shall
have to meet the eligibility criteria of being Member in one OPC.
OPC to lose its status if paid up capital exceeds Rs. 50 lakhs or average annual turnover is more than 2 crores in three immediate preceding consecutive years.
• No minor shall become member or nominee of the One Person
Company or hold share with beneficial interest.
• Such Company cannot be incorporated or converted into a company under section 8 of the Companies Act, 2013.
• Such Company cannot carry out Non Banking Financial Investment activities including investment in securities of anybody corporate.
• No such company can convert voluntarily into any kind of company unless 2 years have expired from the date of incorporation, except in cases where capital or turnover threshold limits are reached.
• An existing private company other than a company registered under section 8 of the Act which has paid up share capital of Rs. 50 Lakhs or less or average annual turnover during the relevant period is Rs. 2 Crores or less may convert itself into One Person Company by passing a special resolution in the general meeting.
Director :One Person Company needs to have minimum of one director and maximum 15 directors - Can be increased by passing a special resolution as in case of any other company.
First directors will be named in MOA.
Board Meetings- In case of a OPC, which has only one director, all resolutions required to be passed by such a Company at a Board meeting can be entered in the minutes-book, signed and dated by the member and such date shall be deemed to be the date of the Board Meeting for all the purposes under this Act. For other One Person Companies, at least one Board Meeting must be held in each half of the calendar year and the gap between the two meetings should not be less than 90 days.
Financial statements of OPC can be signed by one director alone. Cash Flow Statement is not a mandatory part of financial statements for OPC. Financial statements of OPC 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.
Board’s report to be annexed to financial statements may only contain explanations or comments by the Board on every
qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
Who can be member and nominee of OPC?
Only a natural person who is an Indian citizen and resident in India shall be eligible to act as a member and nominee of an OPC.
"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 financial year.
A person can be member in only one OPC.
How to incorporate an OPC?
One person Company has similar process of incorporation.
Stage I-Name reservation: Form INC-1 shall be filed for name availability.
Stage II-After name approval, form INC-2 shall be filed for incorporation of the OPC within 60 days of filing form INC-1.
Stage III-Form DIR-12 shall be filed along with form INC-2 except when promoter is the sole director of the OPC.
Stage II-The company shall file form INC-22 within 30 days once form INC-2 is registered in case the address of correspondence and registered office address are not same.
How to inform ROC about change in membership of OPC?
The company shall file form INC-4 in case of cessation of member of OPC on account of death, incapacity to contract or change in ownership. In the same form, user needs to provide details of the new member of the OPC.
When OPC has to mandatorily get converted into either private or public company?
If paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover exceeds during the *relevant period exceeds two crore rupees, then the OPC has to mandatorily convert into private or public company.
A One Person company can get itself converted into a Private or Public company after
, and by maintaining the minimum paid-up capital as per requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion.
Step I- The OPC shall inform ROC in form INC-5, if the threshold limits is exceeded, within 60 days; and is required to be converted into private or public company.
Step II- OPC shall alter its memorandum and articles by passing a resolution to give effect to the conversion and to make necessary changes incidental thereto and increase the minimum number of members and directors to two or minimum of seven members and two or three directors as the case may be.
Step III- File Form INC-6 within 6 months.
How to convert Private Company into OPC?
Private Company, other than Section 8 Company, can convert itself into OPC, provided-
i) The paid up share capital of private company should not be exceeding fifty lakh rupees and
ii) Should not have average annual turnover more than two crore rupees at the time of such conversion into OPC.
The company shall be having one member and shall appoint one nominee to act as member in case of death or incapacity of the member at the time of conversion into OPC.
Step I- It shall obtain No Objection Certificate from all its members and creditors.
Step II- It shall pass Special Resolution to the effect in general meeting.
Step III- It shall file copy of the special resolution with the Registrar of Companies within thirty days from the date of passing such resolution in Form No. MGT.14.
Step IV- Private Company will file form INC-6 for converting itself into an OPC within 30 days: attached with following:
a) Declaration from all directors in affidavit confirming that all members and creditors of the Company have give their consent for conversion, paid up capital of the Company is fifty lacs rupees or less or average turnover is less than two Crores.
b) List of Members and Creditors
c) Latest Audited Balance sheet and profit and loss account and
d) NOC from Secured Creditors.
Withdrawal of consent by the nominee or intimation of change in nominee-
a) The person nominated by the subscriber or member of a One Person Company may, withdraw his consent by giving a notice in writing to such sole member and to the One Person Company.
b) The sole member shall nominate another person as nominee within fifteen days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person so nominated in Form No- INC 3.
c) The company shall within thirty days of receipt of the notice of withdrawal of consent file with the Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No INC4
Contract by One Person Company
One Person Company limited by shares or by guarantee shall enter into a contract with the sole member of the company who is also the 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 entering into contract:
This shall not 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 within a period of fifteen days of the date of approval by the Board of Directors.
Annexure I
Exemptions available to OPCs under the Companies Act, 2013
Section 96 Option to dispense with the requirement of holding an AGM
Section 98 Power of Tribunal to call meetings of members
Section 100 Calling of extraordinary general meeting
Section 101 Notice of meeting
Section 102 Statement to be annexed to notice
Section 103 Quorum for meetings
Section 104 Chairman of meetings
Section 105 Proxies
Section 106 Restriction on voting rights
Section 107
Voting by show of hands.
Section 108 Voting through electronic means
Section 109 Demand for poll
Section 110 Postal ballot
Section 111 Circulation of members’ resolution.
Annexure II
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 31st March, 2014
G.S.R. 250(E).
1. Short title and commencement
(1) These rules may be called the Companies (Incorporation) Rules,2014.
(2) They shall come into force on the 1st day of April, 2014.
….
3. One Person Company
(1) Only a natural person who is an Indian citizen and resident inIndia-
(a) shall be eligible to incorporate a One Person Company;
(b) shall be a nominee for the sole member of a One Person Company.
Explanation.
- For the purposes of this rule, the term "residentin India" means a person who has stayed in India for a periodof not less than one hundred and eighty two days during theimmediately preceding one calendar year.
(2) No person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
(3) Where a natural person, being member in One Person Company in accordance with this rule becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the eligibility
criteria specified in sub rule (2) within a period of one hundred and eighty days.
(4) No minor shall become member or nominee of the One Person
Company or can hold share with beneficial interest.
(5) Such Company cannot be incorporated or converted into a company under section 8 of the Act.
(6) Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporates.
(7) 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) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.
4. Nomination by the subscriber or member of One Person Company
For the purposes of first proviso to sub-section (1) of section 3-
(1) The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
(2) The name of the person nominated under sub-rule (1) shall be mentioned in the memorandum of One Person Company and such nomination in Form No INC.2 along with consent of such nominee obtained in Form No INC.3 and fee as provided in the Companies (Registration offices and fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the company along with its memorandum and articles.
(3) The person nominated by the subscriber or member of a One Person Company may, withdraw his consent by giving a notice in writing to such sole member and to the One Person Company:
Provided that the sole member shall nominate another person as nominee within fifteen days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of
such other person so nominated in Form No. INC.3.
(4) The company shall within thirty days of receipt of the notice of withdrawal of consent under sub-rule (3) file with the Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No INC.4 along with fee as provided in the Companies (Registration offices and fees) Rules, 2014 and the written consent of such another person so nominated in Form No. INC.3.
(5) The subscriber or member of a One Person Company may, by intimation in writing to the company, change the name of the
person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the prior consent of such another person in Form No INC.3:
Provided that the company shall, on the receipt of such intimation, file with the Registrar, a notice of such change in Form No INC.4 along with fee as provided in the Companies (Registration offices and fees) Rules, 2014 and with the written
consent of the new nominee in Form No.INC.3 within thrity days of receipt of intimation of the change.
(6) Where the sole member of One Person Company ceases to be the member in the event of death or incapacity to contract and his nominee becomes the member of such One Person Company, such new member shall nominate within fifteen days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company, and the company shall file with the Registrar an intimation of such cessation and nomination in Form No INC.4 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 within thirty days of the change in membership and with the prior written consent of the person so nominated in Form No.INC.3.
5. Penalty
If One Person Company or any officer of such company contravenes the provisions of these rules, One Person Company or any officer of the One Person Company shall be punishable with fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.
6. One Person Company to convert itself into a public company
or a private company in certain cases
(1) Where the paid up share capital of an One Person Company exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, it shall cease to be entitled to continue as a One Person Company.
(2) Such One Person Company shall be required to convert itself, within six months of the date on which its paid up share capital is increased beyond fifty lakh rupees or the last day of the relevant period during which its average annual turnover exceeds two crore rupees as the case may be, into either a private company with minimum of two members and two directors or a public company with at least of seven members and three directors in accordance with the provisions of section 18 of the Act.
(3) The One Person Company shall alter its memorandum and articles by passing a resolution in accordance with sub- section (3) of section 122 of the Act to give effect to the conversion and to make necessary changes incidental thereto.
(4) The One Person Company shall within period of sixty days from the date of applicability of sub-rule (1), give a notice to the Registrar in Form No.INC.5 informing that it has ceased to be a One Person Company and that it is now required to convert itself into a private company or a public company by virtue of its paid up share capital or average annual turnover, having exceeded the threshold limit laid down in sub-rule (1).
Explanation.
-For the purposes of this rule,- "relevant period" means the period of immediately preceding three consecutive financial years;
(5) If One Person Company or any officer of the One Person Company contravenes the provisions of these rules, One Person Company or any officer of the One Person Company shall be punishable with fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.
(6) A One Person company can get itself converted into a Private or Public company after increasing the minimum number of members and directors to two or minimum of seven members and two or three directors as the case may be, and by maintaining the minimum paid-up capital as per requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion.
7. Conversion of private company into One Person Company.-
(1) A private company other than a company registered under section 8 of the Act having paid up share capital of fifty lakhs 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.
(2) Before passing such resolution, the company shall obtain No objection in writing from members and creditors.
(3) The one person company shall file copy of the special resolution with the Registrar of Companies within thirty days from the date of passing such resolution in Form No. MGT.14.
(4) The company shall file an application in Form No.INC.6 for its conversion into One Person Company along with fees as provided in in the Companies (Registration offices and fees) Rules, 2014, by attaching the following documents, namely:-
(i) The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion, the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be;
(ii) the list of members and list of creditors;
(iii) the latest Audited Balance Sheet and the Profit and Loss Account; and
(iv) the copy of No Objection letter of secured creditors.
(5) On being satisfied and complied with requirements stated herein the Registrar shall issue the Certificate.
