One Person Company OPC Registration

Introduction

To promote entrepreneurship and facilitate the formalization of small enterprises, the Companies Act, 2013 created the idea of a One Person Company (OPC) in India. A one person company (OPC) is a special kind of business structure that combines the advantages of a sole proprietorship with the legitimacy and legal safeguards of a private limited company.

Definition

A One Person Company (OPC) is a type of private company where a single individual can incorporate and run the company as the sole member and director. It has perpetual succession, limited liability, and is a separate legal entity from its members. The Companies Act, 2013, and the Companies Rules, 2014, govern the establishment and functioning of OPCs in India.

Advantages of One Person Company (OPC)

Limited Liability

One of the primary advantages of an OPC is the limited liability it offers to its sole member. The member’s liability is restricted to the unpaid amount on the shares held, protecting their personal assets from the company’s liabilities and debts.

Separate Legal Entity

An OPC is recognized as a distinct legal entity, separate from its members. This allows for perpetual succession, meaning the company’s existence continues despite changes in its membership or management.

Ease of Formation and Management

Incorporating an OPC is a relatively simple process, as it requires only one member and director. This streamlined structure facilitates efficient decision-making and management without the need for consensus among multiple stakeholders.

Tax Benefits

OPCs can avail tax benefits similar to those enjoyed by private limited companies, such as availing depreciation on assets and carrying forward losses, subject to compliance with the relevant tax laws.

Professional Credibility

Operating as a company enhances the credibility and professional image of the business, which can be advantageous when seeking funding or engaging with larger organizations.

Disadvantages of One Person Company (OPC)

Suitable for Small Businesses

The design of OPCs primarily targets small-scale businesses due to the restriction of having only one member. As the business grows and requires additional capital or human resources, the OPC may need to be converted into a private limited company.

Restricted Business Activities

The Companies Act, 2013 prohibits OPCs from undertaking certain business activities, such as non-banking financial investment activities.

Ownership and Management Overlap

Since the sole member can also be the director of the OPC, there is a potential for conflicts of interest and ethical concerns due to the lack of separation between ownership and management.

Essential Licenses and Documents Required for One Person Company Registration

Digital Signature Certificate (DSC)

The individual incorporating the OPC must obtain a Digital Signature Certificate (DSC) to electronically sign and authenticate documents during the registration process.

Director Identification Number (DIN)

The proposed director of the OPC must acquire a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).

Name Approval

The Registrar of Companies (ROC) must approve the proposed name before incorporating the OPC to ensure its uniqueness and compliance with naming regulations.

Memorandum of Association (MoA) and Articles of Association (AoA)

The MoA and AoA are crucial documents that define the objectives, powers, and internal rules and regulations of the OPC. These must be prepared and submitted during the registration process.

Proof of Registered Office Address

The individual incorporating the OPC must provide documentation proving the address of the registered office, such as a lease agreement, utility bills, or ownership documents.

Identity and Address Proofs

The individual incorporating the OPC must furnish valid identity and address proofs, such as a PAN card, Aadhaar card, passport, or utility bills.

Nominee’s Consent, PAN, and Aadhaar Card

During the incorporation process, the individual must appoint a nominee, and their consent, PAN card, and Aadhaar card details must be submitted.

Compliances for One Person Company (OPC)

Appointing a Company Secretary (Optional)

While it is not mandatory for OPCs to appoint a Company Secretary, engaging one can help ensure compliance with various legal and regulatory requirements.

Holding Annual General Meetings (AGMs) and Filing Annual Returns

The Companies Act, 2013 requires OPCs to hold Annual General Meetings (AGMs) and file annual returns with the Registrar of Companies (ROC).

Maintaining Statutory Registers and Records

OPCs must maintain statutory registers and records, such as the register of members, register of directors, and minutes books, as mandated by the Companies Act, 2013.

Filing Financial Statements and Auditor’s Report

OPCs must prepare and file annual financial statements, along with an auditor’s report, with the ROC within the prescribed time frame.

Obtaining Necessary Business Licenses and Registrations

Depending on the nature of the business, OPCs may need to obtain various licenses and registrations, such as trade licenses, GST registration, and professional licenses, as required by the relevant authorities.

Mandatory Conversion to Private Limited Company

If the paid-up capital of an OPC exceeds ₹50 lakhs or its average annual turnover exceeds ₹2 crores in any financial year, the OPC must convert into a private limited company within six months from the end of that financial year.

OPC Registration Process

The OPC registration process in India is facilitated through the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form, which has replaced the previous application forms for company incorporation.

Step 1: Obtain a Digital Signature Certificate (DSC) and Director Identification Number (DIN)

The first step is for the individual incorporating the OPC to obtain a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).

Step 2: Apply for Name Reservation

Using the SPICe+ form (Part A), the individual must apply for name reservation for the proposed OPC. The desired name should be unique and comply with the naming regulations outlined in the Companies Act, 2013.

Step 3: Prepare the Memorandum of Association (MoA) and Articles of Association (AoA)

The MoA and AoA must be drafted, outlining the objectives, powers, and internal rules and regulations of the OPC.

Step 4: File the SPICe+ Form (Part B)

After completing the necessary preparations, the individual must file the SPICe+ form (Part B) with the MCA, attaching the required documents, such as the MoA, AoA, proof of registered office address, nominee’s consent, and identity and address proofs.

Step 5: Issuance of Certificate of Incorporation

Upon approval and verification of compliance requirements by the Registrar of Companies (ROC), a Certificate of Incorporation will be issued, signifying the successful OPC registration.

It is important to note that during the incorporation process, the PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) for the OPC are generated automatically, eliminating the need for separate applications.