What are the features of One Person Company? Register OPC

According to Section 2(62) of the Companies Act, 2013, One Person Company (OPC) is a company that consists of only one person as a member. It is incorporated and maintained by a single person. It is one among the major features of One Person Company. One Person Company can only be registered as a Private Limited Company and provisions applicable to a private company will also prevail for it. It is easy to convert a One Person Company into a Private Limited Company or a Public Company.

The word One Person Company must obligatorily be mentioned at the end of the company’s name. This blog explains the great number of advantages and features of One Person Company over other business types.

What are the features of One Person Company?

The features of One Person Company in India are as follows;

  • It can be incorporated into a Private Limited Company.
  • Only one member and a director are allowed.
  • In the name of the company, the term One Person Company should be included.
  • Only a natural person, Indian citizen, or a person residing in India can be the member or nominee.
  • A minor cannot become nominee, shareholder, etc. of the company.

What are the eligibility criteria for OPC Registration?

The guidelines to be complied before obtaining an OPC registration are:

  • Only an Indian Citizen or the resident of India can own a One Person Company. The Resident of India is a person who has stayed in India for a period not less than 180 days in the preceding year.
  • One Person Company cannot incorporate a company or the Limited Liability Partnership.
  • The promoter should choose a nominee during the process of incorporation.
  • A minimum authorized capital of INR 1 lakh should be present.
  • Appointing a minor as its member is restrained for an OPC.
  • If the One Person Company exceeds the turnover of rupees by INR 2 crores or has a paidup capital of more than INR 50 lakhs, then it must convert itself within 6 months either into a public or private limited company.
  • There should be at least one shareholder, nominee and director.
OPC Registration Service in Hyderabad

What are the exemptions granted for OPC under the Companies Act?

Under the Companies Act of 2013, the One Person Company is granted with some exemptions:

  • Sign on the company’s annual returns.
  • Hold Annual General Meetings (AGM) and the Board Meetings.
  • Sign up for the company’s Financial Statements.
  • The necessity of conducting an AGM (Annual General Meeting) can be dispensed.
  • The meetings of company’s members can be called for by the Power of the Tribunal.  
  • Calling for an EGM (Extraordinary General Meeting).
  • Notice of the concerned meeting.
  • A statement is required to be annexed with the notice concerned.
    • Quorum for the meetings.
    • Chairman of the meetings.
    • Proxies for the meetings
    • Restriction on voting rights.
    • Voting by the show of hands.
    • Voting by way of electronic means.
    • Demand for poll.
    • Postal ballot.
    • Circulation of the members’ resolution.

What compliances should OPC fulfill annually?

Annual compliance of OPC
  • Minimum two board meetings are required to be held as per the provisions of the Companies Act, 2013.
  • A practicing Chartered Accountant should conduct a Statutory Audit.  
  • Appointment of an Auditor.
  • Income Tax Return Filing.
  • Submission of annual fillings to the Registrar of Companies (ROC).
  • Maintenance of Statutory Registers and Minutes.
  • Filling for the financial statement using the Form AOC-4.
  • Filling annual return using Form MGT-7.

What are the advantages of One Person Company?

Over other company types, there are various advantages of One Person Company,

  • Easier fund raising:
    • Easily raise funds from various sources such as Angel investors, venture capitals or other financial institutions.
  • Rights like Private Limited Company:
    • The rights and benefits like that of a Private Limited Company can be enjoyed by OPC, since it is incorporated in similar way.
  • Minimum requirement for forming a company:
    • Simple requirements such as 1 shareholder, 1 director, 1 nominee are required for forming an OPC.
    • A single person can be the shareholder and the director. 
  • Benefits of being a Small Scale Industry:
    • Benefits that are given to Small Scale Industries like; easy funding from a bank, loans with lower interest rates, and benefit from Foreign Trade Policies, etc.
  • Ownership by Single Person:
    • Having only one owner accelerates the decision making, managing the business, the need to take suggestion and permissions from other managing officials is eliminated, and being motivated to work and find ways to help grow the business due to the sense of self belonging by the owner.
  • Borrowings not affect by credit score:
    • OPC can get loans despite having a bad credit score unlike any other type of company.
  • All late payments receive interest:
    • As per the Enterprise Development Act, 2006, any late payment gives three times the rate of bank interest to OPCs. Since they are micro, small or medium in nature, they get covered under this act.
Advantages of One Person Company
  • Trusted by public:
    • Since the public trust’s companies and OPCs run in the form of a company, they gain trust and prestige.
  • Filing Annual Returns:
    • The company director signs Annual returns, and it is not mandatory to be signed by a company secretary.
  • Benefits under Income Tax Law:
    • Unlike proprietorship firms, Under the Income Tax Law the OPCs are eligible for deductions.
  • Statement of Cash Flow:
    • Preparing a cash flow statement is not mandatory for an OPC.
  • Annual general meeting:
    • It isn’t needed to hold an annual general meeting or board meeting for OPCs. They need to maintain a minute book which should be signed and dated by the members.
  • Low investment:
    • Presence of only INR 5,000 in your bank account is enough to register a One Person Company.
  • In case ownership changes, the company isn’t harmed:
    • When the ownership of the company changes, there is almost no effect on the company.

What are the disadvantages of One Person Company?

  • It is not possible for a single person to be a nominee or incorporate in more than one OPC.
  • Carrying out Non Banking Financial Corporation (NBFC) activities or investing in securities of any other corporate body is not allowed.
  • It isn’t possible to convert OPC into Section 8 companies.
  • Until two years from the date of incorporation, an OPC cannot be converted into a Private/Public Limited company.
  • Earning profits by selling its shares isn’t allowed for an OPC.
  • OPCs are suitable only for small businesses.

Know in detail about the advanatages and disadvantages of OPC.

Conclusion

One Person Company incorporation has many benefits of its own. The rights and features of One Person Company are like a Private Limited Company. Moreover, it is defined under Private Limited Company in the Companies Act, 2013.

In these types of companies, if the owner wants to reduce his workload, he cannot appoint any partner. NBFC activities aren’t allowed and selling their shares is not allowed for an OPC.

FAQs

1. Can a One Person Company have more than one director?

No, A One Person Company can have only one member and one Director.

2. What is the minimum authorized capital for a One Person Company?

The minimum authorized capital for a One Person Company is INR one lakh.

3. When can a One Person Company be converted to a Public or Private Limited Company?

When a One Person Company exceeds the turnover of INR by two crores or has a paid-up capital more than INR fifty lakhs, then within six months, it must convert into a private or a public limited company.

4. How many board meetings is a One Person Company required to conduct annually?

As per the provisions of the Companies Act, 2013, a One Person Company needs to conduct minimum two Board Meetings annually.

5. What are the features of One Person Company in India?

The various features of One Person Company under Companies Act, 2013 in India are;
Single Entrepreneurship
Limited Liability
Separate Legal Entity
Nominee Director
Minimum and Maximum Capital Requirement
Conversion to Private Limited Company
Tax Benefits
No Annual General Meeting
Single Owner Decision Making
Ease of Compliance

6. Can a One Person Company be converted into Section 8 companies?

No, a One Person Company cannot be converted into Section 8 companies.

7. Can a One Person Company earn Profits by selling its shares?

No, a One Person Company cannot earn profits by selling its shares.

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