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The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. One of the biggest advantages of a One Person Company (OPC) is that there can be only one member in an OPC, while a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership (LLP). Similar to a Private Limited Company, a One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.

Though a One Person Company allows a lone Entrepreneur to operate a corporate entity with limited liability protection, an OPC does have a few limitations. For instance, every One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the Company - who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of Companies. Therefore, it is essential for the Entrepreneur to carefully consider the features of a One Person Company before incorporation.

As per section 2(62) of the Companies Act, 2013, One Person Company is the one in which only one person is the member. The concept of one person company was introduced for the first time by the Companies Act, 2013. Before this, the old Companies Act of 1956, specifically provided that a minimum of two directors and shareholders are required to form a private limited company. However, in case of a one person company, a single one person can act as the shareholder as well as the director of that company.

Thus, the concept of OPC gives immense opportunities for sole proprietors and entrepreneurs who can take advantage of limited liability and corporation but were held back in doing so because of the non-availability of a second director or second shareholder.

​Here are some general features of a one-person company:

Section 3(1)(c) of the Companies Act says that a single person can form a company for any lawful purpose. It further describes OPCs as private companies.

OPCs can have only one member or shareholder, unlike other private companies.

A unique feature of OPCs that separates it from other kinds of companies is that the sole member of the company has to mention a nominee while registering the company.

Since there is only one member in an OPC, his death will result in the nominee choosing or rejecting to become its sole member. This does not happen in other companies as they follow the concept of perpetual succession.

OPCs need to have minimum one person (the member) as director. They can have a maximum of 15 directors.

Companies Act, 2013 has not prescribed any amount as minimum paid-up capital for OPCs.

OPCs enjoy several privileges and exemptions under the Companies Act that other kinds of companies do not possess.

A single person can form an OPC by subscribing his name to the memorandum of association and fulfilling other requirements prescribed by the Companies Act, 2013. Such memorandum must state details of a nominee who shall become the company’s sole member in case the original member dies or becomes incapable of entering into contractual relations.

This memorandum and the nominee’s consent to his nomination should be filed to the Registrar of Companies along with an application of registration. Such nominee can withdraw his name at any point in time by submission of requisite applications to the Registrar. His nomination can also later be canceled by the member.

Only natural persons who are Indian citizens and residents are eligible to form a one-person company in India. The same condition applies to nominees of OPCs. Further, such a natural person cannot be a member or nominee of more than one OPC at any point in time.

It is important to note that only natural persons can become members of OPCs. This does not happen in the case of companies wherein companies themselves can own shares and be members. Further, the law prohibits minors from being members or nominees of OPCs.

OPC enjoy the following privileges and exemptions under the Companies Act:
  1. They do not have to hold annual general meetings.
  2. Their financial statements need not include cash flow statements.
  3. A company secretary is not required to sign annual returns; directors can also do so.
  4. Provisions relating to independent directors do not apply to them.
  5. Their articles can provide for additional grounds for vacation of a director’s office.
  6. Several provisions relating to meetings and quorum do not apply to them.

Minimum two administrators are required to comprise a non-public limited organization. Companies Act, 2013, has added the idea of One Person Company (OPC) personal limited, wherein a single man or woman can begin a private limited corporation. Thus, if you plan to include OPC, you could contain it with simplest one director.

Unlike a private limited company, a one person company has certain restrictions associated with its incorporation. Hence, before starting an OPC registration, its essential to understand the constraints and ensure the promoter is eligible as per the Companies Act to register a OPC.
  1. Only a natural person who is Indian Citizen and resident in India can incorporate OPC.
  2. Resident in India means a person who had resided in India for a period not lesser than 182 days in the prior calendar year.
  3. Legal entities like Company or LLP cannot incorporate a OPC.
  4. The minimum authorised capital is Rs 1,00,000.
  5. A nominee must be appointed by the promoter during incorporation.
  6. Businesses involved in financial activities cannot be incorporated as a OPC.
  7. OPC must be converted to a private limited company when paid-up share capital exceeds Rs.50 lakhs or turnover crosses Rs.2 crores.

The rules for incorporation of one person company requires that the sole member of a One Person Company should include the name of a nominee in the Companies MOA, who will undertake the entity after the expiry or incapacity of the former. Moreover, the document must contain the written consent of the nominee, which must also be filed with the Registrar during incorporation along with the MOA and AOA.

The nominee is entitled to withdraw his/her consent, in which case the sole member is required to nominate another member as a legal heir within 15 days of the notice of withdrawal. The nomination of new personnel must be intimated to the Company through a written consent in Form INC-3. The Company, in turn, is required to file the notice of withdrawal of consent along with the intimation of the new nominee with the Registrar in Form INC 4.

The sole member of a 'One Person Company' is empowered to change the nominee of the Company for any reason whatsoever, by providing notice in writing to the Company. Again, the new nominee must consent to the nomination in Form INC 3, and the Company must file the notice of change and consent of the nominee with the Registrar along with the applicable fee, within 30 days of receiving the intimation of change.

If a nominee becomes in-charge of the one person company due to the cessation of the original member's term owing to the death or incapacity of the latter, the new member must appoint a nominee as a replacement.

If a One Person Company or an officer of such Company is not compliant with the specified regulations, the entity or the officer will incur penalties which could be as high as Rs 10,000. Further, the penalty will be increased by a fine of Rs 1,000 for each day of default.

The process for incorporation of a One Person Company can be divided into four steps as under:
  1. Obtaining Digital Signature
  2. Obtaining Name Approval
  3. Incorporation Filing
  4. Commencement of Business

In order to incorporate your company, you will have to fill the e- form (INC-32) and will have to submit it to the Registrar of the area within whose jurisdiction the registered office of your company will be located. The form must be accompanied by the following documents-
  • Name of the company- Once you have decided the form of the company, you are also required to decide the name of the company. An applicant is required to provide at least six names in the order of their preference along with the meaning and significance of each word.This can be done by filling the INC-1 form.
  • Memorandum of Association(MOA)
  • Articles of Association (AOA) With the introduction of SPIC e-form, the applicant is now no more required to file the soft copies of MOA and AOA.
  • Proof of identity of the member and the nominee
  • Residential proof of the member of the nominee
  • A copy of PAN card of member and nominee
  • Consent of nominee
  • An affidavit from the subscriber and the first director to the memorandum
  • Specimen signature
  • Copies of the utilities bill
  • Consent from the directors
  • Details of stamp duty
After completing all the formalities, the subscriber shall receive the final incorporation certificate from the registrar of the companies.

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