Incorporation of One Person Company: Register OPC in India

When starting a business, many options are available. A One Person company (OPC) has many advantages and is one of the most preferred business models by Single Owners looking to start small and grow gradually. This blog article enumerates the issues related to the Incorporation of One Person Company.

For a single owner, there are usually two options:

• Private Limited Company and
• One Person Company.

Who is eligible for Incorporation of One Person Company?

• Only a person who is Indian origin and a person residing in India is eligible to act as a member and nominee of an OPC.
• The person must be at least 18 years old to form an OPC.
• The shareholder and director of an OPC can be the same person.

Can a single person incorporate a company?

Yes, a single person can incorporate a company in India. The Companies Act of 2013 introduced the concept of a One Person Company, which allows a single individual to establish and manage a company. An OPC is a separate legal entity but has all the features of a company such as perpetual succession, and limited liability.

A single person could not establish a company before the enforcement of the Companies Act, 2013. If an individual wanted to establish their business, they could opt only for sole proprietorship as there had to be a minimum of two directors and two members to establish a company.

According to Section 2 (62) of the Company’s Act 2013, a company can be formed with just 1 Director and 1 member. One person can be both the director and the member. OPC has lesser compliance requirements than those of a private company. Thus, a One Person Company means one individual who may be a resident or NRI can incorporate his business that has the features of a company and the benefits of a sole proprietorship.

The process for incorporating an OPC involves applying for a Digital Signature Certificate (DSC), Director Identification Number (DIN), and Name Approval Application. Though there is no minimum paid up capital requirement, the minimum authorized capital for incorporating OPC is INR 1 lakh.

What is OPC under the Companies Act of 2013?

The concept of One Person Company was introduced in India by the Companies Act of 2013. A single individual setups and manages the company. An OPC is a separate legal entity but also contains all the features of a company, such as perpetual succession, and limited liability.

The Companies Act, 2013 defines an OPC as a company that has only one person as its member. The introduction of OPC in the legal system is a move that encourages the corporatization of micro-businesses and entrepreneurship with a simpler legal regime.

This enables small entrepreneurs to contribute to economic growth without being compelled to devote considerable time, energy, and resources to complex legal compliances.

What are the conditions to incorporate an OPC?

An OPC can only be incorporated by a natural person who is an Indian citizen and resident of India. The term “resident in India” refers to a person who has stayed in India for at least 182 days immediately preceding one calendar year.

An OPC can have only one member at any point in time and may have only one director. The process of incorporating an OPC involves two stages:

1. Name Reservation:
   • Form INC-1 should be filed for name availability.
2. Incorporation of One Person Company:
   • After name approval, form INC-2 should be filed for incorporation within 60 days of filing form INC-1.

An OPC provides several privileges such as limited liability and ease of incorporation. It allows entrepreneurs to create a single person economic entity while enjoying the benefits of a separate legal entity.

How to incorporate a One Person Company?

As per the Rule 3 of the Companies (Incorporation) Rules 2014 says,

• Only a natural person who is an Indian citizen and resident in India:-
  • Can incorporate a One Person Company;
  • Can be a nominee to the sole member in an OPC.
  • (If stayed in India, for less than 182 days during the immediately preceding calendar year, such a person is called a Resident in India).
• Only a single OPC can be incorporated by a person at any point in time. He cannot be a nominee of more than one OPC.
• After obtaining the prior written consent of a person, the subscriber to the memorandum of a One Person Company can nominate a person who, in the event of the subscriber’s death or his incapacity to contract, becomes a member of that OPC.

What are the procedure to incorporate One Person Company?

• Step 1: Name approval
  • The name of the person nominated shall be mentioned in the memorandum of a One Person Company and such nomination in Form INC-32 (SPICe), At the time of Incorporation of One Person Company, along with its memorandum and articles, a single Application for Incorporation of One Person Company, along with consent of such nominee obtained in Form INC-3 and the Companies (Registration offices and fees) Rules, 2014 based fee shall be filed with the Registrar.
  • According to Rule 3 of Companies (Incorporation) Rules, 2014, Incorporation of One Person Company requires filing an INC-32 form.
  • Only an Indian citizen who is a natural person and resident in India is eligible to incorporate or be a nominee for the sole member of a One Person Company.
  • A natural person cannot be a member or nominee of more than a One Person Company at any point in time. In accordance with this rule, when a natural person is a member of a One Person Company and by virtue of his being a nominee becomes a member in another such Company, such person should meet the eligibility criteria within a period of one hundred and eighty days, specified in sub-rule (2).
  • No minor can hold a share with beneficial interest or become a member or nominee of the One Person Company.
  • Under Section 8 of the Act, such Company cannot be considered as Incorporation of One Person Company.
  • Non-Banking Financial Investment activities including investment in securities of any other corporates cannot be carried out by such companies.
  • Unless two years have expired from the date of incorporation of One Person Company, no such company can convert voluntarily into any kind of company, except its average annual turnover during the relevant period exceeds INR 2 crore or the threshold limit (paid up share capital) is increased beyond INR 50 lakhs.

• Step 2: Obtain necessary documents
  • Identity Proof:
    • Mandatory submission of Permanent Account Number (PAN) of all the Directors and Promoters.
  • Proof of Address:
    • Valid Passport / Driving License / Aadhar Card / Telephone or Electricity Bill, copy not older than 2 months.
    • A recent passport-size photograph of the Directors / Promoters;
    • A Rent Agreement or Leave & License Agreement is mandatory if the office premises are taken on rent.
  • Registered office’s utility bills.
    • Form DIR-2 mentions the consent to act as the Director.
    • Directors’ Directorship in any other Companies/LLPs, if any.

• Step 3: Preparing DSC and DIN
  • Obtaining Digital Signature Certificate (DSC) and Directors Identification Number (DIN) for all the directors and promoters of the company.
  • An application should be filed to the Registrar of Company (ROC) in RUN FORM. A maximum of 2 names may be provided by the applicant for name approval.
  • The approved name is valid for 20 days.
  • In accordance with the Company (Incorporation) Rules, 2014, the name must include words such as foundation, association, forum, council, chambers, etc. as

• Step 4: Drafting MOA and AOA
  • Draft the Memorandum of Association and Articles of Association of the proposed company in the required E-form.

• Step 5: FIlling all other necessary forms with ROC
  • Forms like Form No. INC – 7, Form No. INC – 22, Form No. DIR – 12 are to be filed with ROC along with the appropriate documents.

• Step 6: Getting Certificate of Incorporation of the company
  • A Certificate of Incorporation is issued by the Registrar of Companies with a unique Company Identification Number (CIN) after the filed forms and documents are satisfactory according to the ROC.

The company can be directed by the Central Government to convert its status to Private or Public Company and change its name by adding the suffix ‘Limited’ or ‘Private Limited,’ after which the Registrar shall register the company accordingly.

Such a company may be directed by the Central Government to be wound up or amalgamated with another company registered under this section. However, such orders can only be given after the company is given a reasonable chance to be heard, and then a copy of the order is given to the Registrar.

The terms laid down in Section 8, Sub-section (11) of the Companies Act states the company shall be punishable if it violates it, based on the fraudulent actions of the company:

• With fines up to INR 1 crore but not less than INR 10 Lakh.
• Every director and officer of the company in default shall be punishable with imprisonment for a term that can be three years with a fine which can extend to INR 25 Lakh but not be less than INR 25,000.

Conclusion

In conclusion, the Incorporation of One Person Company provides a favorable option for single owners in India, allowing them to establish and manage a business with reduced compliance requirements compared to private companies. Eligibility criteria, including Indian citizenship and residency, age of at least 18 years, and adherence to the Companies Act of 2013, make it accessible for individuals to incorporate an OPC.

The step-by-step procedure involves name approval, obtaining necessary documents, acquiring Digital Signature Certificates (DSC) and Directors Identification Numbers (DIN), drafting Memorandum and Articles of Association, filing required forms with the Registrar of Companies, and ultimately obtaining a Certificate of Incorporation.

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