One Person Company

Introduction

OPC i.e. ‘one person company’ is a step towards ease of doing business in india. The concept of OPC is new in India. But it is a very successful form of business in UK and several European Countries. An OPC is a hybrid structure. It combines most of the benefits of a sole proprietorship and a company from of business. And it also does away with the hassles of finding a co-partner/s for starting a business. Before the introduction of an OPC, starting a company required atleast 2 members. That is 2 directors and 2 shareholders at minimum. So for the person wanting to venture alone, the only option was proprietorship. However, an OPC is a single person business. It can have just one shareholder and one director. And a single person can be both!

Features

Number of Members

So a single individual can open an OPC. And that individual becomes the shareholder and the director. However, another person is still required for opening the one person company. And that person is a nominee. It is mandatory to nominate a person while forming and OPC. Apart from this, there cannot be any other shareholders. However, directors may still be appointed.

Constitution

We classify OPC as a private company for all the legal purposes with only one member. All provisions related to a private company are applicable to an OPC (unless expressly excluded).

Liability/Legality

The member of an OPC has limited liability to the extent of the value of their shares. This probably is the most beneficial feature of an OPC when compared to a proprietor. This means that the OPC is a separate legal entities from its member. That is the personal assets of the shareholders are not liable for any loss incurred by the business.

Audit and other compliance

An OPC needs to appoint an auditor within 30 days of its incorporation. Auditor appointment provisions are quite similar to a regular private limited company. Other compliance are relatively less when compared to a regular company.

Taxes

At the moment, the income tax act does not differentiate between a regular company and a OPC. Thus taxation of income of both the entities is at the same rate as per the provisions of Income Tax Act

Members

Following cannot be member of an OPC:

• A minor cannot become a member or nominee
• Foreign citizen.
• Nonresident.
• A person incapacitated to contract.
• Persons other than natural person (living human being).

But note that only “NATURALLY BORN” Indian who is also a resident of India is eligible to incorporate an OPC. Thus, only a natural person who is an Indian citizen and resident in India can incorporate an OPC. And the same conditions apply for the nominee of the OPC.

Nominee

A person who cannot be a member of an OPC also cannot be nominee. A nominee for OPC has to be a natural person who is an Indian citizen and resident in India. A single person cannot become a nominee in more than one OPC.

Succession

The Nominee becomes the member in the following situations:

1.      In the event of the sole member’s death; or

2.      In the event of the sole member becoming incapacitated to contract.

Restrictions

• A nominee for OPC has to be a natural person who is an Indian citizen and resident in India.
• A single person cannot become a nominee in more than one OPC.
• An one person company has to restrict the rights to transfer its shares. And cannot invite the public to subscribe to the securities of the company.
• The words “one person company” should b mentioned in the name of the company.
• Maximum turnover is Rs. 2 Crore and Capital 50 Lakh.

Conversion

On reaching a turnover of Rs. 2 Crore, we have to convert an OPC. It is converted into a regular Private Limited Company. The same applies if the share capital exceeds Rs. 50 Lakh.