One Person Company (OPC) is a corporate framework, which incorporates the features of both sole proprietorship and a company. It has only one person as a constituent who will perform in the capacity of a director as well as a shareholder. Thus, OPC will have all the benefits of a private limited company i.e. they will have access to credits, bank loans, limited liability, legal protection for business, access to market etc., all in the name of a separate legal entity.All the provisions applicable to a private company are applicable to an OPC also, unless otherwise expressly excluded.

Advantages of OPC

  • One Person Company is the only form of corporate entity that can be incorporated and run by a single promoterwith limited liability safeguard in India.
  • Businesses currently run under the proprietorship model could get converted into OPCs without any difficulty.
  • An OPC has ‘perpetual succession’ until it is legally put to an end. Being a distinct legal person, the existence of an OPC is unaffected by the demise of the member or other changes in ownership.
  • Like a Private company, One Person Company can raise funds through venture capital, financial institutions etc.
  • An OPC will have to face only limited compliance burden in comparison to private limited companies.
  • OPC needs to conduct at least one Board of directors meeting in each half of a calendar year and the gap between two meetings is not less than 90 days. Further, an OPC is not required to hold an AGM.

Other salient features

  • The words ‘One Person Company’ must be mentioned with the name of the company in brackets wherever it appears.
  • Only a natural person who is an Indian citizen and resident in India shall be
  • eligible to incorporate a One Person Company;
  • Shall be a nominee for the sole member of a One Person Company.
  • A person shall not be eligible to become a member of more than one OPC or become a nominee in more than one such company.
  • The minimum and maximum number of members in an OPC can be only one
  • The minimum and maximum number of directors in an OPC can be one (1) and fifteen (15) respectively.In order to increase the number of directors beyond 15 directors, a special resolution must be passed by the OPC to that effect
  • Financial Statement of an OPC has to be approved by the Board and needs to be signed by only one director for submission to the auditor. Also, an OPC need not prepare Cash Flow Statement as part of its financial statement. The copy of such financial statement along with other documents etc. must be filed with the ROC within 180 days from the closure of the financial year.
  • Such Company cannot be incorporated or converted into a company under section 8 of the Act.
  • Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.

Stages of Incorporation

  • Obtain Digital Signature Certificate [DSC] for the prospective director.
  • Attain Director Identification Number [DIN] for the prospective director.
  • Select suitable Company Name, and produce an application to the Ministry of Corporate Affairs for approval of company name.
  • Draft Memorandum of Association and Articles of Association [MOA & AOA].
  • Sign and file various documents and forms including MOA & AOA with the Registrar of Companies electronically.
  • Payment of Requisite fee to Ministry of Corporate Affairs including Stamp Duty.
  • Scrutiny of documents at Registrar of Companies [ROC].
  • Receipt of Certificate of Incorporation from ROC.

Capital & Turnover threshold limits for compulsory conversion

  • Where the paid up share capital of an OPC exceeds Rs. 50 lacs or its average annual turnover of immediately preceding three consecutive financial years exceeds Rs. 2 crores;
  • Such OPC shall be required to convert itself, into either a private company or public company in accordance with the provisions of section 18 of the Act within 6 month of the date as mentioned above.
  • The OPC shall alter its memorandum and articles by passing a resolution to give effect to the conversion and to make necessary changes incidental thereto;
  • The OPC shall within period of sixty days from the date of applicability of above provisions, give a notice to the Registrar in Form No. INC-5 informing that it has ceased to be an OPC and that it is now required to convert itself into a private company.

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