Aditi Patni and Associates
Chartered Accountants
One Person Company Registration
One Person Company OPC Registration is suitable for STARTUPS who wish to work as a single owner. An OPC offers all benefits of Private Limited Company but limits the number of shareholders to 1.
What is One Person Company (OPC) Registration?
The One Person Company (OPC) in recent times was launched as a good refinement over the sole proprietorship. In OPC, a single promoter gains full authority over the company thereby restricting his/her liability towards their contributions to the enterprise. Therefore, the said person will be the sole shareholder and director (however, a director nominee is present, but has zero power until the real director proves incapable of getting into the contract). Also, there can be no opportunity for contributing to employee stock options or equity funding. Additionally, if an OPC company has an average hattrick turnover of Rs. 2 crores and over or acquires a paid-up fund of Rs. 50 lakh and over, it has to be converted to a private limited company or public limited company within six months.
Why prefer One Person Company?
Here are some major advantages of One Person Company:
- For incorporating an OPC only one person is required and that is the most predominant feature of an OPC. Hence, we can say that it is a registered form of sole proprietorship. One person is responsible for decision-making, controlling, and managing the affairs.
- An OPC can avail various benefits enjoyed by small scale industries like loans are available at a lower interest rate.
- An entrepreneur can take more risks without stressing over the loss of assets as an OPC has limited liability. This is a sort of encouragement to new, young, and innovative business start-ups.
- Every Company is required to prepare and file statements that include the balance sheets, Profit and loss account, cash flow statement, statement of changes in equity, and explanatory notes. In the case of an OPC, a cash flow statement is not required.
- As it is a registered form of business entity it enjoys the same privileges as a Private Limited Company. The legality of this type of business form makes it popular among banks and financial institutions
- Any remuneration made to the director will be allowed under deduction under Income Tax Law, unlike Proprietorship. Also, the benefits of Presumptive Taxation are available subject to Income Tax Law.
- All Companies are required to hold annual general meetings in addition to other meetings but One Person Company is exempt from this. The Resolution signed by the Director and entered in the minutes book is sufficient, instead of the annual general meeting.
What documents are required for registering a OPC in India?
An OPC has certain restrictions when it comes to incorporation, unlike a Private Limited Company. Hence, before beginning with the OPC registrations it is essential to understand the limits to ensure the promoter is eligible as per the Companies Act to register an OPC.
- Legal entities like Company or LLP cannot incorporate an OPC
- During incorporation, a nominee must be appointed by the promoter.
- Business involved in financial activities cannot incorporate as an OPC
- When the paid-up capital share exceeds Rs.50 lakh and the turnover crosses over Rs.2 crore an OPC must be converted into a Private Limited Company.
A person however cannot incorporate more than one OPC. Also, an OPC is prohibited for having a minor as its member.
How to Incorporate an OPC?
Here, we have simplified the process for Incorporating an OPC into 6 steps
Apply for DSC
The first Step is to obtain the Digital Signature Certificate (DSC) of the proposed Director which required the following documents:
Address Proof
Aadhaar card
PAN card
Photo
Email Id
Phone NumberApply 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 SPICe form for up to three directors.
Name approval Application
To obtain the name approval it is necessary to submit an application for name registration to the MCA. The applications are processed by MCA in 24-72 hours. The name suggested should end or include the word OPC.
Once the name is approved by the MCA we move on to the next step.
Documents Required
We have to prepare the following documents which are required to be submitted to the ROC:
a) The Memorandum of Association (MoA) which are the objects to be followed by the Company or stating the business for which the company is going to be incorporated.
b) The Articles of the Association (AoA) which lays down the by-laws on which the company will operate.
c) Since there are only 1 Director and a member, a nominee on behalf of such person has to be appointed because in case he becomes incapacitated or dies and cannot perform his duties the nominee will perform on behalf of the director and take his place. His consent in Form INC – 3 will be taken along with his PAN card and Aadhar Card.
d) Proof of the Registered office of the proposed Company along with the proof of ownership and a NOC from the owner.
e) Declaration and Consent of the proposed Director of Form INC -9 and DIR – 2 resp.
f) A declaration by the professional certifying that all compliances have been made.
Filing of Forms with MCA
All these documents will be attached to SPICe Form, SPICe-MOA and SPICe-AOA along with the DSC of the Director and the professional, and will be uploaded to the MCA site for approval. The Pan Number and TAN is generated automatically at the time of incorporation of the Company. There is no need to file separate applications for obtaining PAN Number and TAN.
Issue of Certificate of Incorporation
The Registrar of Companies (ROC) approves filing for incorporation. In case of discrepancies, the application can be resubmitted.
Once the Incorporation Certificate is obtained the OPC would initiate the process for bank account opening. Post incorporation the director is required to deposit the paid-up capital he has mentioned in the MOA.
After the equity capital is infused in the current bank account, the company can file for commencement of business certificate with the MCA. The Business commencement certificate must be obtained within 180 days of incorporation to avoid penalty.
In case during the process of incorporation, if the notice of situation related to the office is not filed, it must be filed after incorporation but within 30 days. Here's the document required for filling INC 22 are :
i Lease Deed or rent agreement with the rent receipts
ii Copies of utility bills as mentioned above but should not be older than 2 months
iii A proof that the company is allowed to use the address as the registered office of the Company.
How to convert an OPC into a Private Limited Company?
An OPC can be converted into a Private Limited Company either voluntarily or mandatory. Take a look at the detailed explanation of both the type of Conversions
Voluntary Conversion
An OPC can be converted into a Private Limited Company before it satisfies the criteria mentioned below A-One Person Company can be converted into a Private Limited
- Company after two years from the incorporation
- If more than one Director is appointed in a company then a board meeting will be required to convert an OPC into a Private Limited Company.
Mandatory Conversion
Mandatory conversion is required in case a One Person Company meets the parameters mentioned below:
- If the paid-up capital of an OPC is beyond Rs.50 lakh.
- The average turnover of the immediate preceding three consecutive years is beyond Rs. 2 crores.
Thus, in either of the cases, a One Person Company needs to get converted into a Private Limited Company within six months.
The conversion is done by passing a special resolution in the General Meeting. A NOC is required from the creditors and the other members before the resolution is passed
Documents Required for Conversion
- The directors of the company should be given a declaration by an affidavit that confirms that all the members and directors are have provided their consent for the conversion.
- The list of members and the creditors
- The recently audited Balance sheets and the profit and loss accounts
- A copy of the NOC of secured creditors
Steps to be taken for conversion into a Private Limited Company
In case an OPC does not take steps for conversions within the prescribed time when it is mandatory, the OPC or any officer of the OPC is punishable with a fine of five thousand rupees. Which can be further extended to an Rs. 500 for each day with such inaction.
Intimation of Registrar of Companies
It is necessary to intimate the concerned Registrar of Companies that the company is now required to convert itself into a Private Limited Company by the virtue of its paid-up capital or the annual average turnover, having exceeded the threshold limit.
Passing of Board resolution
A general meeting must be held by the shareholders to pass the relevant resolution for increasing the paid-up capital, number of shareholders, appointment of directors to meet the requirement of a Private Limited Company. It should be ensured that there are at least two shareholders and two Directors.
In addition to this, a board resolution must also be passed by the shareholders to approve the alteration of the Memorandum of Association and Articles of Association of the OPC to confirm the requirement of a Private Limited Company.
Application Process
Once the above steps are completed, the OPC can make an application in the prescribed format to the Registrar of Companies. The Company has to file a special resolution passed by the shareholders and Form MGT -14 must be filed within 30 days of passing a special resolution with the concerned Registrar of Companies.
The Registrar will then verify and approve the application and associated documents. By this, a Registrar would issue a fresh Incorporation Certificate thereby converting a One Person Company into a Private Limited Company.