One person company (OPC) – Registering in India

The Companies Act 2013 has introduced a new concept of “One person company”. One person company (OPC) provides an avenue for a person who wants to venture into a business under the guise of organized business structure. Such a company will be in the nature of a private company. This article shall focus on the formation of a “One Person Company”.

In the case of a one-person company at the time of registration, a second person’s name is also required to be registered who shall become the member of the company if the first member dies or become incapacitated to contract. The second member in this respect is required to give written consent of his willingness.

The “One Person Company” may, by intimation in writing to the company, change the name of the person nominated by him at any time for any reason. (Form No INC.3 is required to be filed).

Requirements of a One person company:

1. Only Indian citizen and resident* in India (for both the member and the nominee). (*resident refers to a person who has resided for 180 days or more in the country in the preceding year.)

2.  A person can incorporate more than 1 “one person company”. The same relaxation is available for a nominee as well.

3. Such a “one person company” cannot be formed for a charitable purpose, neither can such a company carry out Non-Banking Financial Investment activities (including investment in securities).

4. Such “one person company” can be converted into any other kind of company. However such conversion is not possible unless two years have expired from the date of incorporation of “One Person Company.”

Application For Incorporation Of “One Person Company”.

The Name Reservation, Allotment of Director Identification Number (DIN), Incorporation of New Company, Allotment of PAN and Allotment of TAN by in one form by applying for Incorporation of a new company through SPICe (Simplified Proforma for Incorporating Company electronically) form (INC-32; 33;34) in addition the name of the nominee as mentioned above is also required to be filed.

When Ceases To Operate As “One Person Company”

When the paid-up share capital of a One Person Company exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, it shall cease to be entitled to continue as a One Person Company.

The company then within 6 months from the date the threshold was crossed has to mandatorily convert itself into a public company (minimum of 7 members and 3 directors) or a private company (2 members and 2 directors).  The “one person company” is also required to reflect such a change in its MoA and AoA.

Notice to Registrar of Companies in Form No.INC.5 informing that it has ceased to be a One Person Company

Penalty

  1. Failure to mention the name of the nominee or re-nominate a nominee: Fine which may extend to Rs.10,000 and with a further fine which may extend to Rs. 1000 for every day after the first during which such contravention continues.
  2. Failure to convert to a public company or private company: Fine which may extend to Rs.10,000 and with a further fine which may extend to Rs. 1000 for every day after the first during which such contravention continues. 

— Advocate Ravindra Vikram, Ph: +91-94100-22521

The content here is for educational purposes only. User access at your own volition. Click the link to read the full Disclaimer.

Registering a Business in India

How To Form A Business Establishment.

A business establishment can be incorporated in the form of a company, partnership firm, limited liability partnership, one person company, and proprietorship. Though it is not mandatory to register a company before starting a business in India however, the nature of the business establishment depends upon the requirement of the individual, such as tax exemption, funding requirements, liability assessment, membership, etc.

Formation of a Company

The incorporation of a company in India is primarily governed by the Companies Act 2013.  A company formed under the companies act can be either

  1. A company limited by shares; or
  2. a company limited by guarantee; or
  3. an unlimited company

The companies can further be divided into public companies; private companies; one-person company. For a public limited company, the act prescribes in section 3 of the act that the minimum number of members should be 7 or more. Two or more persons are required for making a private limited company.

Other modes of registering the business in India:

  1. Proprietorship: A sole proprietorship firm is an entity that is owned by a single individual.
  2. Partnership Firm: The Partnership Act, 1932 defines partnership in Section 4 of the Act as – “An agreement between persons who have agreed to share profits of the business carried on by all or any one of them acting for all.”
  3. Limited Liability Partnership (LLP): A LLP is a partnership that allows the partners to have limited liabilities. An LLP has a legal entity separate from its partners and perpetual succession. The LLP Act, 2008 is separate legislation, and the provisions of the Indian Partnership Act, 1932 are not applicable.
  4. One Person Company (OPC): OPC provides an avenue for a person who wants to venture into a business under the guise of an organized business structure.
  5. Section 8 Company (Non-Profit Company): The Companies Act allows an association of persons to register under this Act a limited company for purpose of fulfilling objectives promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives.

Establishing a new business is always a challenging and exciting process in India. To build the business and gradually to upgrade is a continuous process and one must be familiar advantages and disadvantages of the available options before starting your business in India.

— Advocate Ravindra Vikram, Ph: +91-94100-22521

The content here is for educational purposes only. User access at your own volition. Click the link to read the full Disclaimer.

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