ONE PERSON COMPANY
Companies Act, 2013 has opened the corporate door for the individuals who have all the entrepreneurial expertise and always wanted to have their own company by the new concept of ONE PERSON COMPANY
DEFINITION:-
Section 2(62) of the Companies Act, 2013 defines OPC to mean a Company which has only one person as a member.
It can have only one member at any point of time.
It may have only one director but can however appoint more than 15 directors after passing a special resolution.
As per section 3(1) and (2), OPC can only be incorporated as a private limited company. Such a company may either be:
1. a company limited by shares; or
2. a company limited by guarantee; or
3. an unlimited company
The words ‘‘One Person Company’’ is required to be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.
ELIGIBILITY FOR INCORPORATION AND NOMINEE MEMBER
- As per Rule 3(1) of the Companies (Incorporation) Rules 2014, only a natural person who is an Indian Citizen and resident in India shall be eligible to incorporate / form a OPC. Indian resident means who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year.
- A nominee for OPC has to be natural person who is and Indian citizen and resident in India.
- No person shall be eligible to become a nominee in more than one OPC.
At the time of incorporation of OPC, the sole member of OPC is required to appoint another person as his nominee and his name shall have to be mentioned in the Memorandum of Association of the OPC.
The nominee so appointed shall become the MEMBER IN THE FOLLOWING SITUATION:
a. in the event of the sole member’s death; or
b. in the event of the sole member becoming incapacitated to contract;
A nominee so appointed is required to give his written consent for the same which is required to be filed with the ROC at the time of incorporation of the OPC along with its MoA and AoA.
A nominee has the right to withdraw his consent if he so desires.
As per Rule 4 of the Companies (Incorporation) Rules 2014:
1. Memorandum of OPC should mention the name of nominee by the OPC subscriber with the Registrar in Form No. INC.2.
2. The consent of his nominee is to filed in Form No. INC.3
3. OPC to file with the Registrar within 30 days any change in membership:
4. Form No INC.4 is to be filed for the intimation of such cessation and Nomination.
FOLLOWING PERSON CANNOT BE MEMBER OF OPC:-
1. Minor (as per Rule 3(4) of the Companies (Incorporation) Rules 2014). A minor cannot even hold share with beneficial interest.
2. Foreign Citizen
3. Non Resident
4. A person incapacitated to contract
5. Persons other than a Natural Person i.e. living human being
NUMBER OF DIRECTORS
OPC can have one or more Directors on its board. As per the provisions of Sec 149 a OPC can have a maximum of 15 directors. It can, however appoint more than 15 directors after passing a special resolution.
OPC is required to file Annual Return
As per the proviso to section 92(1) of the Companies Act 2013, the annual return in case of OPC shall be signed by the company secretary or where there is no company secretary, by the director of the OPC.
Financial Statements
a. The financial statements of a one person company can be signed by one director alone.
b. Cash Flow Statement is not a mandatory part of financial statements for a One Person Company. [Section 2(40)]
c. 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.
d. OPC should 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.
Annual General Meeting
As per section 96(1) of the Companies Act 2013, the provision relating to holding of AGM is not mandatory for a OPC.
BOARD MEETING
- Atleast one Board Meeting must be held in each half of the calender year and the gap between the two meetings should not be less than ninety days.
- For the purposes of holding Board Meetings, in case of a one person Company which has only one director, it shall be sufficient compliance if all resolutions required to be passed by such a Company at a Board meeting, are entered in the minutesâ€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.
Cessation of OPC status
As per Rule 6(1) of the Companies (Incorporation) Rules 2014, OPC shall cease to be entitled to continue as a OPC if:
1. Its paid up capital exceeds Rs.50 lacs; or
2. Its average annual turnover during the relevant period i.e. immediately preceding 3 consecutive financial years exceeds Rs.2 Crores
3. Intimation for increase in threshold limit has to be filed in Form INC 5.
Conversion of OPC into public or private company
As per Rule 6(2) of the Companies (Incorporation) Rules 2014, OPC is mandatorily required to be converted itself into either a private or a public company. Such conversion shall happen within 6 months from the:
1. date of increase of its paid up capital as mentioned in Rule 6(1), i.e. exceeding Rs.50 lacs; or
2. last day of the relevant period during which its average annual turnover exceeds Rs.2 Crores.
3. Application for conversion has to be made in Form INC 6.
As per Rule 6(2), (3) and (6) of the Companies (Incorporation) Rules 2014, OPC should ensure that the conversion shall happen in accordance with the provisions of Section 18 of the Companies Act, 2013 which provides for necessary alteration in memorandum and articles, read with section 122 of the Act. The other requirements of minimum capital, minimum number of directors and subscribers as the case may be need to be complied with at the time of any such conversion by OPC.
Conversion of Private Companies into OPC
A private company can be converted into a OPC provided:
1. it is not a Section 8 (with charitable objects) company
2. its paid up capital is equal to or less than Rs.50 lacs
3. its average annual turnover is equal to or less than Rs.2 crores in the relevant period
4. it obtains a NOC from members and ceditors
5. it passes a special resolution in its general meeting for such conversion and the same is filed with the Registrar within 30 days in form MGT 14
Provisions not applicable to OPC
As per Section 122, the following provisions shall not apply to a One Person Company:
Section 98 – Power of Tribunal to call meetings of members
Section 100 – Calling of extra ordinary general meeting
Section 101 – Notice of meeting
Section 102 – Statement to be annexed with 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 poll
Section 110 – Postal Ballot
Section 111 – Circulation of members’ resolution.
Contracts by One Person Company
If OPC limited by shares or by guarantee enters into a contract with the sole member of the company, who is also the director of the company and where the contract is not in writing, it should be ensured 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. The said provision is not applicable in case the contract is in writing and where the contract entered is by the company in the ordinary course of its business.
The company should 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
Opportunities to small Enterprenuers
Small entrepreneurs can carry on their business in form of OPC with status of separate legal entity. The concept is good for Entrepreneurs with new ideas and new ventures trying to explore the corporate world with minimum compliances and maximum benefits as exemptions. Various small and medium enterprises, doing business as sole proprietors, might enter into the corporate domain through OPC. The unorganized sector of the economy will find an outlet to show their entrepreneurial expertise.
So the small entrepreneurs enjoy the benefit of OPC and can hence boost the economy of our country.
CS Perila Sheth.
Practising Company Secretary
CAclubindia
