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One Person Company

Overview of One Person Company

The Companies Act, 2013 introduced a new concept of the Forest Person Company (OPC). As the name suggests, an OPC is a company founded by a single person. A single person establishes and manages the company. An OPC has all the characteristics of a company, such as always succession, limited liability and a separate legal unit.

Prior to the enforcement of the Companies Act, 2013, a single person could not establish a company. If a person wanted to establish his business, he could only choose the option for a only ownership because a minimum of two directors and two members should have been to establish a company.

In a private company, minimum 2 directors and 2 members are required, while in a public company, minimum 3 directors and minimum 7 members. A single person could not include a company earlier.

According to Section 2 (62) of the company’s Act 2013, a company can be formed with only 1 director and 1 member. Directors and members can be the same person. This is a form of a company where compliance requirements are lower than a private company. Thus, a person company means a person who may be a resident or NRI can include his business that has the features of a company and the benefits of the only ownership.

Eligibility criteria for One Person Company in India

Before you can register OPC (one-person company), there are some requirements for which you need to keep an eye. The following OPC registration requirements you need to know:

  1. A natural person who should be an Indian citizen can become a candidate from India.
  2. A minor cannot create an OPC in India, according to laws, children are unable to form a company.
  3. During the previous financial year, a person should stay in India for at least 182 days.
  4. An OPC company should not have more than one member. A nominated person can be and when the member is unable to do the company’s activities or he dies, he/he can take it.

Advantages Of OPC

Legal status – The OPC receives a separate legal entity status from the member. The separate legal entity of the OPC gives protection to the single individual who has incorporated it. The liability of the member is limited to his/her shares, and he/she is not personally liable for the loss of the company. Thus, the creditors can sue the OPC and not the member or director.

Easy to obtain funds – Since OPC is a private company, it is easy to go for fundraising through venture capitals, angel investors, incubators etc. The Banks and the Financial Institutions prefer to grant loans to a company rather than a proprietorship firm. Thus, it becomes easy to obtain funds.

Less compliances – The Companies Act, 2013 provides certain exemptions to the OPC with relation to compliances. The OPC need not prepare the cash flow statement. The company secretary need not sign the books of accounts and annual returns and be signed only by the director.

Easy incorporation – It is easy to incorporate OPC as only one member and one nominee is required for its incorporation. The member can be the director also. The minimum authorised capital for incorporating OPC is Rs.1 lakh but there is no minimum paid-up capital requirement. Thus, it is easy to incorporate as compared to the other forms of company.

Easy to manage – Since a single person can establish and run the OPC, it becomes easy to manage its affairs. It is easy to make decisions, and the decision-making process is quick. The ordinary and special resolutions can be passed by the member easily by entering them into the minute book and signed by the sole member. Thus, running and managing the company is easy as there won’t be any conflict or delay within the company.

Perpetual succession – The OPC has the feature of perpetual succession even when there is only one member. While incorporating the OPC, the single-member needs to appoint a nominee. Upon the member’s death, the nominee will run the company in the member’s place.

Disadvantages Of OPC

Suitable for only small business – OPC is suitable for small business structure. The maximum number of members the OPC can have is one at all times. More members or shareholders cannot be added to OPC to raise further capital. Thus, with the expansion and growth of the business, more members cannot be added.

Restriction of business activities – The OPC cannot carry out Non-Banking Financial Investment activities, including the investments in securities of anybody corporates. It cannot be converted to a company with charitable objects mentioned under Section 8 of the Companies Act, 2013.

Ownership and management – Since the sole member can also be the director of the company, there will not be a clear distinction between ownership and management. The sole member can take and approve all decisions. The line between ownership and control is blurred, which might result in unethical business practices.

Documents required to obtain an One Person Company

Step 01 Apply for DSC – The first step is to obtain the Digital Signature Certificate (DSC) of the proposed Director which required the following documents:

  1. Address proof
  2. Aadhaar card
  3. PAN card
  4. Photo
  5. Email Id
  6. Phone number

Step 02 Apply for DIN – Once the Digital Signature Certificate (DSC) is made, the next step is to apply for the Director Identification Number (DIN) of the proposed Director in SPICe + Form along with the name and the address proof of the director. Form DIR-3 is the option only available for existing companies. It means with effect from January 2018, the applicant need not file Form DIR-3 separately. Now DIN can be applied within the SPICe + form for up to three directors.

Step 03 Name Approval Application – The next step while incorporating an OPC is to decide on the name of the Company. The name of the Company will be in the form of “ xyz (OPC) Private Limited”.

The name can be approved in the Form SPICe + 32 application. Only one preferred name along with the significance of keeping that name can be given in the Form SPICe + 32 application. If the name gets rejected, another name can be submitted by applying another Form SPICe + 32 application.

Once the name is approved by the MCA we move on to the next step.

Following are the documents required for One Person Company (OPC) Registration

  • For Directors/Nominee,
  1. ID proof of the nominee
  2. Copy of PAN Card
  • Identity Proof,
  1. Voter Card
  2. Passport
  3. Driving License
  4. Address Proof like,
  5. Bank Statement
  6. Mobile bill
  7. Telephone bill
  8. Electricity Bill
  9. Passport Size Photo
  • For Registered Office
  1. Ownership Proof like,
  2. Electricity Bill
  3. Gas Bill
  4. Electricity Bill
  5. Mobile Bill
  6. NoC (Download Format)
  • Other documents required to submit by a company are as follows:
  1. The Memorandum of Association (MOA) are the objects to be followed by a company.
  2. The Article of Association (AOA) has the laws on which the companies will operate.
  3. Proof of registered office with the proof of ownership and a NOC from the owner.
  4. Declaration and Consent of the Director in Form INC-9 and DIR-2.
  5. Declaration by a professional that all the compliances are followed by the company.

FAQs About One Person Company?

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