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INCORPORATION OF A ONE PERSON COMPANY IN INDIA
Incorporating a One Person Company (“OPC”) in India is an efficient and beneficial way for sole entrepreneurs and small business owners to solemnize their businesses. An OPC offers limited liability and legal recognition to businesses while allowing single individual to own and manage the company, simplifying compliance and reducing personal risk. This unique corporate structure promotes entrepreneurship and is governed by the Companies Act, 2013, making it an attractive option for aspiring business owners in India.
KEY POINTS FOR CONSIDERATION
While setting up an OPC, there are several pointers that are to be kept under consideration. These are:
- Governing Act: OPC is a separate legal entity registered under the Companies Act, 2013. The directors are liable for defaults made under the Companies Act, 2013.
- Members: OPC consists of only one member as mandated under the Companies Act, 2013.
- Directors: Minimum 1 and maximum 15 directors are required in an OPC. However, by passing a special resolution, number of directors can be increased. Additionally, the Companies Act, 2013 mandates appointment of a resident director in an OPC.
- Subscription of shares: In an OPC, public subscription of shares is not allowed.
- Annual Statutory Filings: An OPC is required to file the annual statement of accounts and annual returns with registrar of companies. An OPCs’ annual return should be attached to Form MGT-7, which is the official document for reporting the company’s activities during the financial year. OPCs must file Form MGT-7 within 180 days from the end of the financial year, which typically ends on 31st March.
documents required for an OPC
The documents required for an OPC are:
- Articles of Association (“AOA”);
- Memorandum of Association (“MOA”);
- Proof of registered office address, lease agreement, Non-Objectional Certificate (NOC) from the owner, and utility bill not older than 2 months
- Consent or declaration form from the proposed director (Form DIR 2), proposed nominee director (Form INC 3) and subscribers
- Interest of first director in entity
- Proof of identity and address of subscriber, nominee director and director(s), and
- Proof of identity and address of the witness to MOA and AOA.
BENEFITS OF INCORPORATING AN OPC
- Legal status – An OPC receives a separate legal entity status from the member. The separate legal entity of the OPC gives protection to the single individual who has incorporated it. The liability of the member is limited to his/her shares, and he/she is not personally liable for the loss of the company. Thus, the creditors can sue an OPC and not the member or director.
- Easy to obtain funds – An OPC is a private company, it is easy to go for fundraising through venture capitals, angel investors, incubators etc. The banks and the financial institutions prefer to grant loans to a company rather than a proprietorship firm. Thus, it becomes easy to obtain funds.
- Less compliances – The Companies Act, 2013 provides certain exemptions to an OPC with relation to compliances. An OPC need not prepare the cash flow statement. The company secretary and the director needs to sign the books of accounts and annual returns.
- Easy incorporation – It is easy to incorporate an OPC as only one member and one nominee is required for its incorporation. The member can be the director also. The minimum authorised capital for incorporating OPC is Rs.1 lakh but there is no minimum paid-up capital requirement. Thus, it is easy to incorporate as compared to the other forms of company.
- Easy to manage – Since a single person can establish and run an OPC, it becomes easy to manage its affairs. It is easy to make decisions, and the decision-making process is quick. The ordinary and special resolutions can be passed by the member easily by entering them into the minute book and signed by the sole member. Thus, running and managing the company is easy as there will not be any conflict or delay within the company.
- Perpetual succession – An OPC has a feature of perpetual succession even when there is only one member. While incorporating an OPC, the single-member needs to appoint a nominee. According to the Companies Act, 2013, the nominee is required to be a resident of India.
REGISTRATION PROCEDURE FOR AN OPC
The registration procedure for an OPC in India comprises of the following key procedures:
- Obtain Digital Signature Certificate (“DSC”): The first step is to acquire the DSC of the proposed director, which is necessary for filing the forms electronically.
- Apply for Director Identification Number (“DIN”): The director of an OPC must have a DIN, which is a unique identification number.
- Name Approval Application: The owner is required to get the name of their OPC approved and to ensure that the name is not similar to any existing company or trademark.
- Prepare Documents: Draft MoA and AoA which are the charter documents of the company.
- Filling of Forms with Ministry of Corporate Affairs (“MCA”): Fill the required form of the MCA, including the SPICe+ incorporation form.
- Issue of the Certificate of Incorporation: After the verification of the documents and forms, the MCA will issue the Certificate of Incorporation, and the OPC will be registered thereafter.
Furthermore, an OPC is required to have a minimum authorised capital of Rs. 1 lakh but there is no minimum paid-up share capital requirement.
HOW WE CAN HELP ?
- The compliance and guidance process involves obtaining various documents, filling forms, and ensuring adherence to the Companies Act, 2013. We guide the client through the legalities and ensure the application complies with regulations.
- Our team helps in drafting the MOA and AOA, which are crucial documents defining the clients’ company’s structure and operations.
- We can advise on obtaining registrations for taxes as well as opening a bank account for an OPC along with understanding the legalities and choosing a suitable nominee.
For more information or queries, please email us at
[email protected]
