The new Companies Act 2013 (2013 Act) has amended favourably to
suit the requirements and the dynamics of the present day economy.
One such change is the One Person Company (OPC) which has been
introduced as a new and refreshing concept.
This idea of OPC was propagated in 2005 by the JJ Irani
Committee which had been set up for the sole purpose of
incorporating necessary changes in the Companies Act, 1956 (1956
Act). They made observations regarding the changing economy and the
need for giving a chance to individuals to operate in the economic
domain on their own and contribute efficiently. This update is to
provide you the salient features of the OPC.
Salient Features Of OPC
Definition: Section 2(62) of the 2013 Act defines OPC as a
company which has only one person as a member. While under the 1956
Act, it was not possible to form a company with only one person as
its member, 2013 Act provides for a new entity in the form of OPC,
empowering the Central Government to provide for a simpler
compliance regime for OPC and small companies.
Company Rules: The Companies (Incorporation) Rules, 2014
provides as following:
A natural person who is an Indian citizen and resident in India
shall be eligible to incorporate an OPC and to become a nominee for
the sole member of the OPC. Hence, body corporate, foreigners or a
non resident individual cannot incorporate an OPC;
A person cannot incorporate more than one OPC or become a
nominee in more than one OPC. However, such a person can be a
member of one OPC and nominee of another OPC;
Where a member of an OPC becomes a member of another OPC by
virtue of his nomination in that second OPC, he shall opt out of
either one of the OPC within a period of 180 days;
A minor cannot become a member or nominee of an OPC or hold
shares with beneficial interest; An OPC cannot carry out NBFC
activities including investment in securities of anybody
Name Clause: Every OPC will mention ``One Person Company`` in
brackets below the name of such company wherever it is printed,
affixed or engraved. Hence, the name should be mentioned as
(One Person Company)``
and not any other format
From OPC into Private/ Public Companies:When the paid-up share
capital of an OPC exceeds INR 5 million or its average annual
turnover during the relevant period exceeds INR 20 million then
within 6 months from the date on which its paid up share capital
increased as above or the last day of the relevant period for the
turnover purposes, it shall convert itself into either a private
company or a public company.
From Private Company into OPC:An existing private company other
than a not for profit company having paid up share capital of INR 5
million or less or an average annual turnover during the relevant
period of INR 20 million or less can convert itself into an OPC by
passing a special resolution in the general meeting.
Compliance:OPC carries the compliance burden similar to any
private company with certain exemptions which relatively reduce the
compliance burden on them such as:
Not required to prepare a cash flow statement as a part of a
Not need to appoint a Company Secretary ;
Not required to mandatorily hold Board or General Meetings;
OPC is a seemingly risky concept, in terms of its mere
dependence on one person. However, the Section 3 of the Act 2013
provides for the memorandum of the OPC to indicate the name of
another person (nominee) who shall, in the event of the
subscriber`s death or any other incapacity which makes it
impossible for him to contract, act as the member of the Company.
The nominee retains with him the option to withdraw his consent
from becoming a nominee director.
OPC is beneficial to be formed because it often gives advantages
to the entrepreneur whereby the liability gets limited to the
extent of the unpaid subscription money. However, undertaking any
Business under the OPC structure may effectively result in higher
tax implications on the small businesses because once you become a
company, the rates of taxes are higher. Moreover, OPC being a
separate Legal entity, distribution of dividend will attract
dividend distribution tax under the (Indian) Income Tax Act, 1961
as opposed to sole proprietors who are taxed at the rates
applicable to individuals.
Alongwith the abovementioned reason, the concept of OPC should
attract criticism for its oxymoronic nature. While a company
denotes the coming together of more than one person; OPC suggests
one person who is himself the promoter, the director and the member
- all rolled into one – in spite of this it`s a company! So
to say, it becomes something of a process of incorporating oneself.
However, due to its various advantages, OPC looks like a promising
concept which needs to be put to test in the Indian Economy.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
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