OPC UNDER COMPANIES ACT, 2013 By CA. P.RAJA, Partner Partner P R N & Associates, Chennai

Origin of the concept in India The concept of OPC was mooted, in the report of Dr. J.J.Irani Committee. The concept of OPC was mooted, in the report of Dr. J.J.Irani Committee. Suggestion of the committee -With increasing use of information technology and computers, emergence of the service sector, it is time that the entrepreneurial capabilities of the people are given an outlet for participation in economic activity. Such economic activity may take place through the creation of an economic person in the form of a company.

Contd… Yet it would not be reasonable to expect that every entrepreneur who is capable of developing his ideas and participating in the market place should do it through an association of persons. We feel that it is possible for individuals to operate in the economic domain and contribute effectively. To facilitate this, the Committee recommends that the law should recognize the formation of a single person economic entity in the form of ‘One Person Company’. Yet it would not be reasonable to expect that every entrepreneur who is capable of developing his ideas and participating in the market place should do it through an association of persons. We feel that it is possible for individuals to operate in the economic domain and contribute effectively. To facilitate this, the Committee recommends that the law should recognize the formation of a single person economic entity in the form of ‘One Person Company’. Such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters. Such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters.

What is one person company? Section 2(62) of the CA, 2013 Section 2(62) of the CA, 2013 Company formed by a single person Company formed by a single person One-person company in the legal system is a move that would encourage corporatization of business and entrepreneurship One-person company in the legal system is a move that would encourage corporatization of business and entrepreneurship OPC is a one shareholder corporate entity. OPC is a one shareholder corporate entity. Legal and financial liability is limited to the company only. Legal and financial liability is limited to the company only.

Type Of OPC As per section 3(1) and (2) of the CA, 2013, OPC can only be incorporated as private limited company, such as ; As per section 3(1) and (2) of the CA, 2013, OPC can only be incorporated as private limited company, such as ; i. A company limited by shares; or ii. A company limited by guarantee; or iii. An unlimited company

Features of OPC It can be incorporated by one person as private limited. It can be incorporated by one person as private limited. Name of the company should be end with (OPC). Eg., ABC India Private Ltd(OPC). Name of the company should be end with (OPC). Eg., ABC India Private Ltd(OPC). Only One Director. Only One Director. Minimum capital – Rs 1 lakh and Maximum Rs 50 lakhs Minimum capital – Rs 1 lakh and Maximum Rs 50 lakhs Lock-in-Period - Two Years from Incorporation Lock-in-Period - Two Years from Incorporation

Benefits of OPC Limited Liability Limited Liability Legal Status and Social recognition Legal Status and Social recognition Complete control with single person Complete control with single person Easy to get loan from banks Easy to get loan from banks Ample time limit to file annul returns – 180 days from the closure of financial year Ample time limit to file annul returns – 180 days from the closure of financial year Minimum compliance with Companies Act Minimum compliance with Companies Act

Who can Incorporate a OPC ? As per Rule 3(1) of the Companies(Incorporation) Rules, 2014, Only a natural person who is an Indian citizen and resident in India shall be eligible. As per Rule 3(1) of the Companies(Incorporation) Rules, 2014, Only a natural person who is an Indian citizen and resident in India shall be eligible. As per the explanation given to Rule 3(1) - “Resident in India” means a person who has stayed in India for a period of not less than 182 days during immediately preceding one Calendar year. As per the explanation given to Rule 3(1) - “Resident in India” means a person who has stayed in India for a period of not less than 182 days during immediately preceding one Calendar year.

Who can not become member/nominee of OPC Minor (as per Rule 3(4) of the CR(INC), Minor (as per Rule 3(4) of the CR(INC), Foreign Citizen Foreign Citizen Non Resident Non Resident A person incapacitated to contract A person incapacitated to contract Persons other than a Natural Person (i.e.,) Living human being Persons other than a Natural Person (i.e.,) Living human being

Can OPC engage in all business ? As per Rule 3(6) of the Companies(Incorporation) Rule, 2014; As per Rule 3(6) of the Companies(Incorporation) Rule, 2014; Such companies CAN NOT engage in NBFC activities including investment in securities of any body corporate. Such companies CAN NOT engage in NBFC activities including investment in securities of any body corporate. OPC can not be incorporated or converted into Section 8 company. OPC can not be incorporated or converted into Section 8 company.

Process for the Incorporation of OPC Step 1 : Obtain DSC for the proposed Director Step 2 : Obtain DIN for the proposed Director Step 3 : Select suitable company name- Maximum 6 names

Contd.. Step 4 : File Form INC 1 – Name Availability Step 5 : File Form INC 2 with in 60 days from the date of INC 1 filed – Registration of the company along with the following documents  MOA & AOA  ID, Address proof and photo’s of the Director

Contd..  Written consent of the Nominee - Form INC 3.  Declaration by professional – Form INC 8  Affidavit of the subscriber and First Director – Form INC 9  Specimen signature – Form INC 10  Correspondence address if its different from registered address – Form INC 22 with in 30 days from the date of incorporation.

Lapse status of OPC As per Rule6(1) of the CR(INC),2014 As per Rule6(1) of the CR(INC),2014 If paid up share capital is increased beyond FIFTY lakhs. If paid up share capital is increased beyond FIFTY lakhs.{OR} It’s average annual turnover during the relevant period exceed TWO crore rupees. It’s average annual turnover during the relevant period exceed TWO crore rupees. Note : “Relevant Period" means the period of immediately preceding three consecutive financial years

Withdrawal or death of nominee or member of OPC  As per Rule 4(3) and (4) of CA(INC), Can withdraw his consent by giving notice in writing to the sole member and OPC.  Sole member should nominate another person within 15 days of the above and intimate to the company along with his consent in Form No : INC 3  The company shall within 30 days of receipt of withdrawal of consent file with the registrar Form No. INC 4 along with INC 3 of new nominee.

Conversion of OPC into PVT Ltd Voluntary Conversion : (i.e.,) after completion of two years from the date of incorporation - File Form No. INC 6 within 30 days. Voluntary Conversion : (i.e.,) after completion of two years from the date of incorporation - File Form No. INC 6 within 30 days. Mandatory Conversion : Threshold limit specified exceeded – Intimate in Form No. INC 5 to the ROC within 60 days –Rule 6(4) Mandatory Conversion : Threshold limit specified exceeded – Intimate in Form No. INC 5 to the ROC within 60 days –Rule 6(4)AND File Form No. INC 6 within Six Month for conversion into private limited

Conversion of Private Ltd into OPC Check share capital and Average annual turnover of the relevant period. Check share capital and Average annual turnover of the relevant period. Obtain “No Objection” in writing from members and creditors Obtain “No Objection” in writing from members and creditors Special resolution to be passed in GM. Special resolution to be passed in GM. File copy of special resolution in Form No. MGT 14 within 30 days of passing special resolution. File copy of special resolution in Form No. MGT 14 within 30 days of passing special resolution.

Conversion Of Private Ltd into OPC As per Rule 7(1) and (2) As per Rule 7(1) and (2) The company shall file an application in Form No. INC 6 for its conversion. The company shall file an application in Form No. INC 6 for its conversion. Directors of the company should provide ; Directors of the company should provide ; Declaration by way of affidavit conforming that the members and creditors has given no objection. Declaration by way of affidavit conforming that the members and creditors has given no objection. List of members and creditors List of members and creditors Latest Audited balance sheet and Profit & Loss Account. Latest Audited balance sheet and Profit & Loss Account. the copy of no objection letter of secured creditors the copy of no objection letter of secured creditors

Penalty As per Rule 6(5) of the Companies (Incorporation) Rules, 2014: If OPC or any officer of OPC contravenes the provisions of the Companies(Incorporation) Rule 2014, then such OPC or any officer of the OPC shall be punishable fine which may extend to Rs. 10,000/- and with further may extend to Rs. 1,000/- for every day after first day during which such contravention continues.

Chapter VII ( Management & Admin) - Exemption As per the provision of section 122 of the CA,2013 As per the provision of section 122 of the CA,2013 Cash Flow Statement Cash Flow Statement Section 96 – Holding AGM Section 96 – Holding AGM Section 98 – Power of Tribunal to call meeting Section 98 – Power of Tribunal to call meeting Section 100 – Calling EGM Section 100 – Calling EGM Section 101 – Notice to meeting Section 101 – Notice to meeting Section 102 – Statement to be annexed to the meeting. Section 102 – Statement to be annexed to the meeting. Section 103 – Quorum of meeting Section 103 – Quorum of meeting

Chapter VII ( Management & Admin) - Exemption Section 104 – Chairman of the meeting Section 105 – Proxies Section 106 – Restriction on voting rights Section 107- Voting by hands Section 108 – Voting Through Electronically Section 109 – Demand for poll Section 110 – Postal ballot Section 111 – Circulation of members resolution

Company vis-à-vis ONE PERSON COMPANY Common Seal Perpetual Succession Separate legal entity Separate property Limited liability Management and Control

OPC Vs SOLE PROPRIETORSHIP OPC Separate legal entity Separate legal entity Limited Liability Limited Liability Debt- not the sole responsibility of the owner Debt- not the sole responsibility of the owner Finance- credit record of the company Finance- credit record of the company Legal requirements- will need to register itself as such Legal requirements- will need to register itself as such Separate tax Separate tax Sole proprietorship Owner & entity is same personality Unlimited Liability Debt - sole responsibility of the owner Finance- credit history of the owner Legal requirements- will not have to draw up paper declaring its status Tax paid by the owner

Practical Questions  Is OPC required to file Annul Returns ?  Is mandatory to nominate a person ?  Should MOA carry nominee details?  Is it mandatory to maintain minutes book?

Practical Questions Is OPC suitable for medium & Large business? Is OPC suitable for medium & Large business? Whether a person form more than 1 one OPC? – Rule 3(2) Whether a person form more than 1 one OPC? – Rule 3(2) Whether a minor become member of OPC? Whether a minor become member of OPC? Whether an OPC can carryout NBFC activities? Whether an OPC can carryout NBFC activities?

Practical Questions  What If a member of an OPC becomes a member In another OPC by virtue of being a nominee in that other OPC ?  Can have more than one director in OPC ?  Can a person form OPC who is already Director in a existing Private Ltd ?

Practical Questions Whether only an individual or even a legal entity can form a one-person company? Whether only an individual or even a legal entity can form a one-person company? Who can be a nominee of OPC ? Who can be a nominee of OPC ? Is OPC exempted to hold Board Meeting ? Is OPC exempted to hold Board Meeting ? Is OPC required to obtain commencement of business? Is OPC required to obtain commencement of business?

QUESTIONS ???

THANK YOU By CA. P. RAJA Partner P R N & Associates, Chennai Cell: