ONE PERSON COMPANY: A COMPLETE OVERVIEW
Companies Act, 2013 introduced the concept of One Person Company (OPC), which can be formed by one person who has to be a natural person. Entrepreneurs choose this type of company over sole proprietorship so that they can get the benefits of body corporate and overcome the difficulties faced by the sole proprietorship business.
FEATURES OF OPC:
- OPC is incorporated as a Private Limited Company.
- The promoter can be a Sole Member as well as Director of the company.
- Promoter (member) is required to appoint a Nominee after receiving his written consent who in the event of his death and incapacity becomes the member of the company.
- The term OPC is to be included in the name of the company.
- The sole Member/nominee should be a natural person, Indian citizen whether resident or not.
- Like any other company a minor is not allowed to become member or nominee of the company.
- An OPC is not allowed to carry out the objects stated in Section 8 of Companies Act, 2013.
ADVANTAGES OF OPC:
- Easy to raise fund: An OPC with good credit score is eligible to get good access of capital from bank and financial institution.
- It enjoys rights similar to Private Limited Company: It enjoys the privileges that of Private Limited Company, as it is registered as a Private Limited Company.
- Minimum requirement for company formation: OPCs have the least requirements for company registration, only one subscriber and one director are required. On the top of that the sole member can be the director as well.
- OPCs enjoys the benefits available to small scale industries: OPC can apply for MSME registration and avail the benefits available to small scale industries such as easy finance from banks, Low rate of interests, benefits of foreign trade policies.
- Sole Ownership: one of the reasons for choosing a OPC is 100% shareholding in the hands of a single person (individual member).
- OPC are trusted organisations: OPCs are registered entities whose records are maintained by Registrar of Companies (ROC). Therefore, transparency and accountability is maintained for them.
- Tax deductions: Unlike sole Proprietorship firms OPCs are eligible for deductions under Income Tax Laws.
- No cash flow statement requirement: It is not mandatory for OPCs to prepare a cash flow statement.
- No Annual General Meeting: Since OPCs have only on member hence there is no requirement for them to hold AGM.
DISADVANTAGES OF OPC:
- One person is not allowed to be a member or nominee of more than one OPC.
- This type of company is not allowed to carry out NBFC activities or invest in securities of the company.
- OPCs cannot be incorporated or converted into section 8 company.
- This form is suitable for only small businesses.
COMPARISON BETWEEN OPC AND PUBLIC LIMITED COMPANY
| Point of comparison | One Person Company (OPC) | Private Limited Company |
| Minimum and maximum Members | Minimum Member- 01
Maximum Members- 01 |
Minimum Members-07
Maximum Members-No limit |
| Minimum and maximum Directors | Minimum Director-01
Maximum Directors-15 More than 15 directors are also allowed after passing Special resolution. |
Minimum Director-03
Maximum Directors-15 More than 15 directors are also allowed after passing Special resolution. |
| Registration as Section 8 company | OPC is not allowed to be registered with the objects specified under Section 8 of Companies Act, 2013. | Section 8 company can be formed either as Private Limited Company or Public Limited Company. |
| Board Meetings | One Board Meeting in each half of calendar year, with minimum gap of 90 days. | At least 4 board meetings in a year, with maximum gap between two meetings of 120 days. |
| Company name | The name Shall end or shall include the word OPC in its name | The name shall end with words Limited. |
| Conversion into Private Limited company/Public Limited company or OPC | OPC can be converted into Private Limited Company or Public Limited Company after complying with such legal requirements as may be prescribed. | Public limited company can be converted into Private Limited Company or OPC subject to certain conditions and complying with such requirements as may be prescribed. |
CONVERSION OF OPC INTO PUBLIC LIMITED COMPANY
(Recent change through Companies (Incorporation) Second Amendment Rules, 2021 with effect from 01.04.2021)
| Situation before Amendment | Situation after Amendment |
| Mandatory Conversion: If,
Paid up share capital beyond Rs.50 Lakh, or Its average annual turnover exceeds beyond Rs. 2 Crore
Then it shall mandatorily require converting itself into either a Public Company or Private Company.
|
Mandatory Conversion: Not applicable
|
|
Voluntary Conversion: On an application made to ROC in this regard in Form INC-6 along with necessary documents OPC may be converted into any other kind of company.
Note: such application cannot be made until 2 years has been expired from the date of incorporation.
|
Voluntary Conversion:
Company shall file application to ROC in Form INC-6 along with following documents:
|
Compliance Calendar LLP is committed to help budding entrepreneurs to incorporate their dream venture and help them to grow it by taking all pains related to compliance requirements on its shoulder giving complete handholding.
If you are looking for professional assistance relating to OPC Registration/Private Company Registration or conversion of OPC into public company then consult to our expert team at Compliance Calendar LLP at info@ccoffice.in or 9988424211 and we will be happy to assist you in your startup journey.