OPC – An Over View
Before implementing the Companies Act of 2013, the Company Law Committee took into account a number of requirements for business owners and individual proprietors. In contrast to members of a private limited company or limited liability partnership, sole proprietors’ rights are not as secured.
As a result, the Companies Act of 2013 created a new entity called a one-person company (OPC). This type of corporate entity has similar advantages that a private limited company has. A one-person company can be operated by just one person at a time. Future growth of a one-person business is not necessary. Therefore, business owners who desire to remain the sole beneficiary of their company frequently employ this type of corporate structure.
One Person Company registration under the Companies Act of 1956 had no definition prior to the passage of the Companies Act of 2013. As a result, the Companies Act of 2013 substantially changed the requirements for people wishing to register a One Person Company. One Person Company is referred to by the acronym OPC.
Only one person must be chosen to serve as a director in a one-person Company. This one-person business will have the same director nominated as a shareholder or member.
The OPC enjoys the benefits of a sole proprietorship under the 2013 Companies Act. However, an OPC enjoys the status of a separate legal body and restricted responsibility. An OPC shareholder’s obligations and liabilities may be restricted to a certain degree.
One Person Company has a legal definition according to the 2013 Companies Act. A company or entity that meets the definition of an OPC under Section 2(62) of the Companies Act, 2013 is one where the director and member are the same individual. As a result, one person will be in charge of running the business. In a private limited corporation, the directors often serve as the firm’s representatives and oversee business operations.
In a private limited company, the shareholders are not involved in day-to-day operations.The shareholder and director, however, are the same person in an OPC. The one person must be in charge of all affairs.
Advantages of OPC
The concept of limited liability is one of the main benefits of one person company registration. The concept of limited liability can be explained as the limitation of the liability of shareholders and directors. Therefore, creditors cannot seize any of the shareholders’ or directors’ personal assets in the event that there are disagreements over debt the firm owes. In contrast, there is just one shareholder and director in an OPC. The liability is very limited for the solitary shareholder and director.
Distinct legal entity
The idea of a separate legal entity is another benefit of using this type of company. The independence of the shareholder and director within the organization would be referred to as the separate legal entity principle. A one-person business might also appreciate the idea of a distinct legal entity.
The idea of a single director and shareholder is one element that an OPC values (member). In this type of entity, a person wears two hats. To comply with the 2013 Companies Act, there are no extra duties or burdens associated with hiring additional directors.
According to the Companies Act of 2013, a one person corporation has just one director who oversees all business operations. There is no requirement for an executive director or any type of independent director, as there is for publicly traded corporations.
Only one stockholder
A one-person firm needs just one member. As a result, the shareholder will fulfill duties like managing the OPC’s business activities. The member will furthermore serve as a director. One of the duties of the OPC’s director and shareholder is to oversee the OPC.
Lower Level of Compliance
The number of compliances necessary for a one-person firm is minimal in comparison to that of a private limited or public limited company. These compliances can be completed faster. Less compliance translates to less registration paperwork and procedures for one-person businesses.
In contrast to other types of business entities, a one-person business has simple filing requirements. Additionally, enhanced transparency when interacting with various government bodies is a further benefit of creating this business. Both the applicant side and the government side can attain transparency.
There are different agreements, such as the LLP agreement and the shareholders agreement, for partnerships and private limited corporations. As just one person is operating the business entity, there is no need for a contract as part of the one person company incorporation process.
Benefits for Particular Sectors Like MSME and SME
OPC registration has benefits for industries like MSME and SME. The success of MSME and SMEs is a result of the numerous enterprises in rural areas.
Rural locations can readily get services by following the OPC registration process. A one-person business also draws heavily on funding from government programs and other organizations. Therefore, the limited liability principle would shield the director and shareholder from any debts owed to the OPC.
The establishment of a single person business is advantageous for improving MSME and SMEs’ overall reputation.
One shareholder and one director are necessary.
At least one individual must serve as a shareholder and director for the OPC during the incorporation of a one-person business. Therefore, in this type of company, one person assumes the roles of both a shareholder and a director. If there are more than two people, an application for one person company registration will not be accepted.
Amount of Shares Authorized
For the incorporation of a One Person Company, Rs. 1 lakh in authorized share capital is required. Therefore, the applicant must confirm that the one-person company’s authorized share capital is 100,000. A private limited company or LLP cannot join an OPC. The OPC does not allow for the membership of other legal entities like private limited companies or limited liability partnerships.
Choosing a nominee
The director and shareholder should designate another individual at the time of the one-person company’s incorporation.
The applicant’s age must be taken into account while forming a one-person business. A candidate who is younger than 18 or is regarded as a minor is ineligible to form an OPC. Therefore, a minor is not permitted to join an OPC.
Turnover requirements per year
The OPC must be transformed into a private limited company if it exceeds a certain threshold. The cap on turnover is 20 crores of rupees. Therefore, if the OPC exceeds this threshold, a private limited company conversion is required.
There is a necessity for an OPC to have another person as an OPC nominee in addition to having someone who serves as both a director and a member.
Paid-Up Capital in Shares
The OPC is responsible for ensuring that the share capital does not exceed Rs. 2 crores. If this occurs, the OPC must be changed right away into a private limited company. The same would apply if the yearly turnover exceeded Rs. 20 crores.
Request a director identification number and a digital signature certificate.
To obtain the director identification number and the digital signature certificate, the applicant must submit an application. This is an essential stage in the incorporation of a one-person business.
Request for Reservation of Name
The candidate must then submit an application for the name reservation process. Through the MCA portal, this is possible. When choosing a name for a one-person business, the applicant must submit Form INC-1. The words OPC private limited must come after the company name when founding an OPC. Either the SPICe 32 form or the MCA site may be used to submit an application for reserving the OPC’s name. For the one person company registration process, the applicant must use the MCA web portal’s RUN (Reserve Unique Name) Service to submit an appropriate name.
If there are any clauses pertaining to entrenchment, Form INC-2 must be used to file them. This procedure is typically carried out when a one-person firm is incorporated. If this must be avoided, the one-person company’s articles of organization might be changed to achieve the same result. Existing businesses will experience this. Therefore, Form MGT-14 must be submitted within the allotted time.
Submitting an OPC application
The promoter must submit an application for OPC incorporation in the specific jurisdiction where the OPC is located. When submitting an application for OPC incorporation, form INC-2 is required.
The applicant must then sign crucial papers including the articles of association and the memorandum of association. This is an important stage that must be completed with one witness present. This phase requires the applicant to give personal information. Details will include the applicant’s name, age, description, and proof of address.
Creating a Promoter/Director Affidavit
A sworn statement must be made in the promoter/name. The INC-9 form must be used to submit this affidavit. This essential step is necessary for the registration of a one-person business.
Details about the shareholders
During the one person company registration process, the registrar of companies must receive any information pertaining to the only shareholder.
A formal declaration must be made by a Chartered Accountant, a Company Secretary, or an Advocate when incorporating an OPC. Form INC-8 must be used to make this declaration.
Filling Out Forms
All necessary forms and paperwork must be submitted. To the SPICe Form, SPICe-MOA, and SPICe-AOA, the documents must be annexed. Both the DSC and the DIN must receive these filings. Such data must be posted on the Ministry of Corporate Affairs’ official website. Following completion of this process, PAN and TAN documentation will be generated using Forms 49A and 49B.
Incorporation of OPC
The Registrar of Companies will issue the OPC’s certificate of incorporation after validating all the details.
Compliances Post OPC registration
Following the OPC registration procedure, the following requirements must be met:
- Organizing Annual Board Meetings: This requirement must be met in accordance with the 2013 Companies Act’s guidelines.
- Filing tax returns for income.
- Filing of source-deducted taxes.
- Annual Financial Statements shall be filed on Form AOC-4.
- Submitting annual returns using MGT-7.
- Appointing a chartered accountant in practice to satisfy the statutory audit requirement.
- Filing tax returns at a 25% rate.
- If profits are distributed to OPC shareholders, dividend distribution tax will apply.
- Tax Deducted at Source for the OPC: The OPC is required to submit TDS returns on a quarterly basis.
- An OPC would need to register for ESI if it had more than 10 employees.
Required Documents for Registration
- Declarations from the relevant people
- MOA and AOA digital signature certificates
- Promoter’s Non-Deposit Rule Declaration under the Foreign Exchange Management Act Member and Director Consent.
- DIR-2 Registered Business Premises- If the property is rented, a No Objection Certificate must be obtained from the landlord.
- Utility bill information for the property, including the owner’s name and address
- Owner’s Aadhaar Card, Passport-Sized Photographs, and Property Proof