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Incorporation of OPC

One Person Company Registration – OPC Registration Procedure in India

The concept of One Person Company is first introduced in the companies act 2013. In a Private Company, a minimum of 2 Directors and 2 Members are required whereas in a Public Company, a minimum of 3 Directors and a minimum of 7 members. As the word company usually requires minimum two persons to constitute, so the concept of company with one person does not arise. But the new Company Law created following the JJ Irani report, introduced the concept of one person company for the first time.

Previously there was only an option to start a sole proprietorship for a single person to start a business. The new provisions of the law for the first time enables a single person to start a company of his own.

As per Section 2(62) of the Company’s Act 2013, a company can be formed with just 1 Director and 1 member. It is a form of a company where the compliance requirements are lesser than that of a private company.

The Companies Act, 2013 provides that an individual can form a company with one single member and one director. The director and member can be the same person. Thus, one person company means one individual who may be a resident or NRI can incorporate his/her business that has the features of a company and the benefits of a sole proprietorship.

Advantages Of OPC

Legal status

The most important aspect of One Person Company is that it is incorporated as a company under the companies act. The separate legal entity status gives one person company the special advantage of limited liability. The liability of the member of the OPC limited to the shares held by them, so the creditors of the company can only sue the OPC and not the member or director.

Easy to obtain funds

Company form of business always have an image of legal status in the eyes of the public. Since OPC is a private company, it is easy to go for fundraising through venture capitals, angel investors, incubators, crowd funding 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 either from financial institutions or from outside.

Less compliances

There is no requirement of company secretary signature on various compliances for a one person company. There are lesser number of compliances for a one person company when we compare with other form of organisations. The annual returns and books of accounts need to be signed by only director.

Easy incorporation

Incorporation of one person company is comparatively easy. The member can be director also. At present there is no capital requirement for incorporating a one person company.

Easy to manage

It is as good as a sole proprietor ship the management of an OPC is easy. Since a single person can establish and run the OPC, it becomes easy to manage its affairs. It is easy to make decisions, and the decision-making process is quick as well the execution. 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.

Perpetual succession

The OPC has the feature of perpetual succession even when there is only one member. While incorporating the OPC, the single-member needs to appoint a nominee. Upon the member’s death, the nominee will run the company in the member’s place. So the one person company is as good as other type of companies, and can survive even if all the members are no more.

Disadvantages Of OPC

Suitable for only small business

OPC is suitable for small business structure. The maximum number of members the OPC can have is one at all times. More members or shareholders cannot be added to OPC to raise further capital. Thus, with the expansion and growth of the business, more members cannot be added.

Restriction of business activities

There are some restrictions for one person companies to run the business. The OPC cannot carry out Non-Banking Financial Investment activities, including the investments in securities of anybody corporates. It cannot be converted to a section 8 company, a company with charitable objects.

Ownership and management

Since the sole member can also be the director of the company, there will not be a clear distinction between ownership and management. The sole member can take and approve all decisions. The line between ownership and control is blurred, which might result in unethical business practices.

One Person Company (OPC) Registration Process

Step 1: Apply for DSC

The first step is to obtain the Digital Signature Certificate (DSC) of the proposed Director which required the following documents:

  1. Address proof

  2. Aadhaar card

  3. PAN card

  4. Photo

  5. Email Id

  6. Phone number

Step 2: Apply for DIN

Once the Digital Signature Certificate (DSC) is made, the next step is to apply for the Director Identification Number (DIN) of the proposed Director in SPICe Form along with the name and the address proof of the director. Form DIR-3 is the option only available for existing companies. It means with effect from January 2018, the applicant need not file Form DIR-3 separately. Now DIN can be applied within the SPICe form for up to three directors.

Step 3: Name Approval Application

The next step while incorporating an OPC is to decide on the name of the Company. The name of the Company will be in the form of “XYZ (OPC) Private Limited”.

The name can be approved in the Form SPICe+ 32 application. Only one preferred name along with the significance of keeping that name can be given in the Form SPICe+ 32 application. If the name gets rejected, another name can be submitted by applying another Form SPICe+ 32 application.

Once the name is approved by the MCA we move on to the next step.

Step 4: Documents Required

Following documents which are required to be submitted to the ROC:

  1. The Memorandum of Association (MoA)

  2. The Articles of the Association (AoA)

  3. Since there are only 1 Director and a member, a nominee on behalf of such a person has to be appointed because in case he becomes incapacitated or dies and cannot perform his duties the nominee will perform on behalf of the director and take his place. His consent in Form INC – 3 will be taken along with his PAN card and Aadhar Card.

  4. Proof of the Registered office of the proposed Company along with the proof of ownership and a NOC from the owner.

  5. Declaration and Consent of the proposed Director of Form INC -9 and DIR – 2 respectively.

  6. A declaration by the professional certifying that all compliances have been made.

Step 5: Filing of Forms With MCA

All these documents will be attached to the SPICe Form, e-MOA and e-AOA along with the DSC of the Director and the professional, and will be uploaded to the MCA site for approval. The Pan Number and TAN is generated automatically at the time of incorporation of the Company. There is no need to file separate applications for obtaining PAN Number and TAN.

Step 6: Issue of the Certificate of Incorporation

On verification, the Registrar of Companies (ROC) will issue a Certificate of Incorporation and we can commence our business.

Checklist For Registering OPC

  1. Minimum and Maximum of one member.

  2. A nominee should be appointed before incorporation.

  3. Consent of the nominee should be obtained in Form INC-3.

  4. The name of the OPC must be selected as per the provisions of the Companies (Incorporation Rules) 2014.

  5. Minimum authorised capital of Rs.1 lakh.

  6. DSC of the proposed director.

  7. Proof of registered office of the OPC.

Time required for OPC registration

The DSC and DIN of the proposed directors can be obtained in 1 day. The Certificate of Incorporation of an OPC is obtained in 3-5 days. The whole incorporation process of an OPC takes approximately 10 days, subject to departmental approval and revert from the respective department.

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