Till last year, it was not possible to form a private limited company without 2 subscriber or shareholder. With the introduction of New Companies’ Act 2013, an individual can set up companies alone without taking another subscriber or shareholder.
With this new concept, small entrepreneurs can set up a one person company (OPC) without sharing their profit with another individual. They can register with just one shareholder with limited regulatory costs and other requirements.
“One person company” is a new concept introduced by the companies Act 2013. As the name suggests, a one person company is formed with only one person as its member. Since such companies have only one member, these companies enjoy certain privileges or exemption as compared to other companies.
• SAILIENT FEATURES:
a. A one person company can be incorporated as a private limited company only.
b. It can have only one member at any point of time.
c. It may have only one director.
d. “One person company” must be mentioned in brackets below the name of the company.
e. Exemption is available from holding board meeting (in case of only one director) and general meetings.
f. A person shall be eligible to incorporate and be a nominee of not more than 5 OPC
g. Name of the person nominated shall be mentioned in the memorandum of One Person Company and the nomination in Form No. 2.1 with consent of such nominee obtained in Form No. 2.2 and fee as provided in Annexure ‘B shall be filed with the Registrar at the time of incorporation of the company along with its memorandum
h. Withdrawal of Consent by Nominee: The company shall within 30 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.2.3 along with fee as provided in Annexure ‘B’ and the written consent of such another person so nominated in Form No.2.2.
i. Member Wants To Change The Nominee: Member or Subscriber need to intimate the $change in Name of nominee to company after obtaining Form 2.2 from the nominee provided that the company shall, on the receipt of such intimation, file with the Registrar a notice of such change in Form No. 2.4 along with fee as provided in Annexure ‘B’ and with the written consent of the new nominee in Form no. 2.2 within 30 days of receipt of intimation of the change.
j. When Nominated Nominee Becomes Member: When Nominee person become the member of OPC due to Death Incapacity or any other reason then he has to nominate his nominee in Form No. 2.5 along with the fee as provided in Annexure ‘B’ within 30 days of the change in membership and with the prior written consent of the person so nominated in Form No. 2.2
k. Conversion OPC into Private company or Public Company: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 Rs.50,00,000/-
- the last day of the 3 Consecutive financial year during which its average annual turnover exceeds Rs.2 Cr
- the close of the financial year during which its balance sheet total exceeds Rs.1 crore. into –A Private company with minimum of 2 members and 2 directors or A Public company with minimum of 7 members and 3 directors
1. It shall alter its memorandum and articles by passing an ordinary or special resolution.
2. Within thirty days of conversion, the One Person Company shall give a notice to the Registrar in Form No. 2.6 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
l. Penalty: If OPC or any officer of the OPC contravenes the provisions of these rules, then either of the two or both shall be punishable with a fine of a maximum of Rs. 5000/- and if the default continues then a further fine which may extend to RS. 500/- for every day.
• SPECIAL PROVISION AND EXEMPTION AVAILABLE TO A ONE PERSON COMPANY:
Incorporation and Nomination (refer section 3, 4, 12)
a) MEMORANDUM of One Person Company shall indicate the name of the other person, who shall, in the event of the subscriber’s death or his incapacity to contact become the member of the company.
b) Prior written consent from the other should be obtained along the consent should be filed with register of companies at the time of incorporation along with the memorandum and articles.
c) Member of One Person Company may at any time change the name of such other person by indicating it in the memorandum or by giving notice in such manner as may be prescribed. Such change should be intimated to the company by the member and the company in turn will intimate to the register.
d) Provided that the sole member shall nominate another person as nominee within 15 days on 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. 2.2.
e) Any such change in the name of the person shall not be deemed to be an alteration of the memorandum. Annual Return (refer section 92) Provided that in relation to One Person Company (OPC) and small company, the annual return shall be Signed by the company secretary, or where there is no company secretary, by the director of the company.
GENERAL MEETINGS (REFER SECTION 122)
The provisions of the SECTIONS 98 AND SECTIONS 100 TO 111 (Regarding AGM and EGM) shall NOT apply to a One Person Company (OPC).
• All provision regarding calling AGM like notice period ,content of notice, explanatory statement, quorum requirement , proxies, voting etc do not apply to OPC
• It shall be sufficient compliance if all resolutions ( Ordinary Resolution and Special Resolution) required to be passed by a OPC at any GM are communicated by the member to a company and enter in a minutes book signed and dated by member such date shall be deemed to be date of the meeting
BOARD OF DIRECTORS AND BOARD MEETINGS
(REFER SECTIONS 149, 152 AND 173)
a) ONE PERSON COMPANY needs to have minimum 1 director and a maximum of 15 directors
Provided that a company may appoint more than 15 directors after passing a special resolution.
b) Where no provision is made in the articles of a company for the appointment of the first director, the subscribers to the memorandum who are individuals shall be deemed to be the first directors of the company until the directors are duly appointed
c) A One Person Company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than 90 days:
#Provided that nothing contained in this sub-section and in section 174 (Quorum for meetings of Board) shall apply to One Person Company in which there is only one director on its Board of Directors
Financial statements (REFER SECTION 134 AND 137)
• In the case of a One Person Company, Financial Statements CAN BE SIGNED BY one director ALONE, for submission to the auditor for his report thereon.
• The report of the Board of Directors to be attached to the financial statement under this section shall, in case of a One Person Company, mean 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.
• Provided also that a 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 180 days.
Contract by a one person company ( REFER SECTION 193)
• In case of One Person Company enters into any contract, not in the ordinary course of business, with its sole member who is also a directors, then such contract must :
o Either be in writing or
o Entered in the Memorandum or
o Recorded the minutes of meeting held for the first time after entering of the contract
o Particular of the said contract must be filled by the company with Registrar within 15 days of approval of the contract by Board
ADVANTAGES OF FORMING OPC:
• SEPERATE LEGAL ENTITY i.e. the one person company and the shareholders are separate persons. If the company embroiled in a legal controversy, the owner will not be sued, but the company will.
• Personal assets of the owner or shareholders are protected in case of credit default.
• Liabilities of shareholders or directors are limited up to their share capital contribution in to the opc.
• OPC can have one director up to the max. 15 directors.
• It can also use the name of private limited at the end of its name.
• A one person company is not required to have annual general meeting.
Disadvantages:
• The basic income tax rate for a one person company is 30% which may result in a higher tax as compared to the income tax slab rates of an individual (i.e. 10% to 30%).
• Setting up a opc involves more paper work compare to a sole proprietorship.
BY-CA M.K.AGARWAL
MKCACS@GMAIL.COM
CAclubindia
