Section 2(62) of the Companies Act, 2013 defines an “One Person Company” (OPC) as a company that has only one individual as its member. The individual must be a natural person, not a minor, and can be an Indian citizen, whether residing in India or not, including NRIs (Non-Resident Indians). The timeline for non-resident individuals to incorporate an OPC has been reduced to 120 days.
Entrepreneurs who wish to start a proprietorship business but desire the advantages of a company structure should consider opting for an OPC. An OPC is considered a legal entity separate from its owner, allowing it to act independently. It can sue or be sued in its own name.
An OPC has the option to convert into a Private Limited Company, either voluntarily or automatically. If an OPC is more than 2 years old, it can choose to convert voluntarily into a private limited company. Additionally, if the revenue of the OPC crosses 2 Crore, it will automatically be converted into a Private Limited Company. However, specific filings need to be completed before the conversion process.
The essential features of an OPC are as follows:
- Minimum paid-up capital: There is no prescribed limit.
- An individual cannot incorporate more than one OPC or become a nominee in more than one OPC.
- The memorandum of an OPC must include the name of another person who will become the member of the company in the event of the subscriber’s death or incapacity to contract.
- The other person mentioned in the memorandum must provide prior written consent, in the prescribed form, which should be filed with the Registrar of Companies during the incorporation process.
- The person mentioned in the memorandum may be granted the right to withdraw their consent.
- The member of an OPC can change the name of the mentioned person by giving notice to the company, and the company must inform the Registrar of the change.
- Changing the name of the mentioned person does not constitute an alteration of the memorandum.
The advantages of an One Person Company (OPC):
- Limited Liability: The shareholder of an OPC enjoys limited liability, meaning their personal assets are protected in case of any unfortunate events or business liabilities. The liability is limited to the investment made in the OPC, providing a safeguard for the individual’s personal finances.
- Reduced Compliance Burden: Compared to other company structures, an OPC has fewer compliance requirements. It is exempted from conducting quarterly board meetings and annual general meetings (AGMs), resulting in reduced administrative burden and paperwork.
- Legal Status & Social Recognition: Being a registered entity, an OPC holds a legal status that grants it recognition in the business world. Large organizations and government entities prefer to work with an OPC rather than a sole proprietorship due to its corporate identity and credibility.
- Easier Loan Access: Banks and financial institutions tend to be more inclined to provide loans and financial assistance to OPCs compared to sole proprietorships. The registered entity status and limited liability structure make it more favorable for lenders to extend credit to an OPC.
In summary, the benefits of an OPC include limited liability protection, reduced compliance burden, legal recognition, and improved access to loans and financial services.
Checklist/Requirements for setting up an One Person Company (OPC):
Basic Requirements:
- Minimum of 1 shareholder: The OPC must have at least one shareholder who will be the sole owner of the company.
- Nominee: A natural person needs to be appointed as a nominee who will take over the company’s ownership in case of the shareholder’s death or incapacity.
- Shareholder and Director: The same person can act as both the shareholder and the director of the OPC.
- Registered Address: The OPC should have a proposed office address that will serve as its registered address.
Document Requirements:
For Shareholder cu Director:
- PAN (Permanent Account Number) and Aadhar: PAN and Aadhar cards of each director and shareholder are required for identification and verification purposes.
- Address Proof: Recent address proof documents (not older than 2 months) need to be provided. Acceptable documents include bank statements, phone/mobile bills, or electricity bills.
For Registered Address:
- NOC from Owner: If the proposed registered address is not owned by the OPC, a No Objection Certificate (NOC) from the owner of the premises is required.
- Rent Agreement: In case the registered address is on a rental basis, a valid rent agreement needs to be provided.
- Utility Bill: A recent utility bill, such as an electricity bill, displaying the registered address is required as proof of address for the OPC.
In summary, the requirements for setting up an OPC include having a minimum of one shareholder and appointing a nominee, providing necessary identification and address proof documents for each director and shareholder, and ensuring compliance with address-related documentation such as NOC, rent agreement, and utility bills for the registered address.
How to Register One Person Company?
Once the founders of the company finalize on the name of the company. Then the process of incorporation of One Person Company starts as below (Note: Name of the company can be different from the brand name, it is not mandatory to have same brand name as a company name)
- Apply for a Digital Signature Certificate (DSC). A DSC is a secure electronic signature that is used to sign digital documents. It is required for filing documents with the Ministry of Corporate Affairs (MCA).
- Apply for name reservation. The name of your OPC must be unique and cannot be similar to the name of any other existing company. You can apply for name reservation online through the MCA website.
- Draft the Memorandum of Association (MOA) and Articles of Association (AOA). The MOA and AOA are the governing documents of your OPC. They set out the company’s objectives, structure, and management. You can either draft the MOA and AOA yourself or hire a lawyer to do it for you.
- Apply for registration. Once you have the DSC, name reservation, and MOA and AOA, you can apply for registration of your OPC online through the MCA website. You will need to pay a registration fee.
- Receive the Certificate of Incorporation. Once your OPC is registered, you will receive a Certificate of Incorporation from the MCA. This document is proof that your OPC is a legal entity.
Key deliverables for registering a One Person Company (OPC):
- Digital Signature Certificate (DSC): A DSC is a secure electronic signature that is used to sign digital documents. It is required for filing documents with the Ministry of Corporate Affairs (MCA).
- Permanent Account Number (PAN): A PAN is a 10-digit alphanumeric number that is issued by the Income Tax Department. It is required for all financial transactions in India.
- Tax Deduction and Collection Account Number (TAN): A TAN is a 10-digit alphanumeric number that is issued by the Income Tax Department. It is required for all businesses that are required to deduct tax at source.
- Certificate of Incorporation (COI): A COI is a document that is issued by the Registrar of Companies (ROC). It is proof that the company has been incorporated and is a legal entity.
- Memorandum of Association (MOA): The MOA is a document that sets out the company’s objectives, structure, and management. It is a legal document that is binding on the company.
- Articles of Association (AOA): The AOA is a document that sets out the company’s internal rules and regulations. It is a legal document that is binding on the company.
- Share Certificate A share certificate is a document that is issued to a shareholder as evidence of their ownership of shares in a company. It is a legal document that is binding on the company.
What do you want to know?
Yes, OPC can be formed by an NRI, and it is possible only when the scriber of the company stayed more than 120 days in the previous calendar year in India.
No, an OPC cannot raise investment as it cannot introduce more than 1 shareholder in the company as offering equity shares is not possible.
After the Amendment Act in 2015, now there is no minimum Capital required under the Act for incorporation of a One Person Company (OPC).
Yes, one person company can get import export license. If an individual want to get import export code. check below points.
- PAN copy.
- Address proof- Rental agreement along with Recent electricity bill.
- Open current account in any nationalized bank.