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Concept of One Person Company(OPC) under Companies Act, 2013

One Person Company is newly added in the newly passed Companies Act in the year 2013, earlier there was no concept of a one-person Company. The J.J Irani Committee in its report suggested the formation of One Person Company. The main aim was to promote the individual having the resources to form a company by reducing the complications and challenges faced while incorporation of a legal entity. It can be said as it is a company which is owned by a single person.

Section 2(63) of Companies Act 2013 defines about the OPC as one-person company means a company which has only one person as member.

Now while incorporating a One Person Company is there are various Preliminary conditions which are to be fulfilled as per the Companies (Incorporation Rules) 2013.

According to it only a natural person who is Indian citizen and Resident of India:

  1. Is eligible to incorporate a One Person Company.
  2. Shall be the Nominee for the Sole member of a One Person Company.
    The term resident in India means a person who has stayed in India for a period of not less 182 days immediately preceding one calendar year
  3. Minor shall not become member or nominee of the One Person Company or can hold share with beneficial interest in such One Person Company.
  4. One Person Company are restricted to do business of Non-Banking Financial Investment activities including investment in securities of any other body corporate.
  5. It is Mandatory for a OPC to write OPC in bracket after the name of the Company.
  6. OPC can be incorporated as a Private Limited Company only.
  7. OPC cannot be incorporated or converted under Section 8 of the Act.
  8. OPC cannot be converted to any form of company before the expiration of two years of incorporation.

Privileges to incorporate OPC

  1. The privilege to incorporate OPC is that the owner has a limited liability, unlike in a sole Proprietorship where the owner has unlimited liability.
  2. OPC has a minimum requirement of One director only which can be extend up to maximum of 15 directors.
  3. The annual general meeting is not mandatory in OPC.
  4. The OPC is required to conduct minimum two board meetings in a calendar year, and one meeting in each half of a calendar year.
  5. The sole proprietor business can easily be converted into OPC.
  6. Only Rs. One Lakh is required as minimum authorized share Capital to incorporate OPC.

Restrictions imposed on OPC

  1. No such company can convert voluntarily into any kind of company unless 2 years have expired from the date of incorporation, except in cases where capital or turnover threshold limits are reached.
  2. Such Company cannot be incorporate or converted into a company under section 8 of the Act.
  3. Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any-body corporate.

Conversion of OPC into Public Company or Private Company

The OPC has a beautiful feature of conversion as provided by law, and a OPC can be converted into other form of company other than company under section 8 of the Act.

The Conversion can be done by two ways:
  1. Compulsory Conversion.
  2. Voluntary Conversion.

Compulsory Conversion of OPC

  • When the paid up Capital of OPC exceeds 50 lacs or the average annual turnover gets exceeded more the 2Cr. For the three consecutive Financial years
  • For such OPC then it becomes mandatory for to convert it into Public company or Private Company in accordance with Section 18 of the Act.
     
  • As per section 122(3) the Shall make amendments in its Articles of Association and also in its Memorandum of Associations, by passing a resolution and has to give effect to such conversion and make necessary changes as required.
     
  • Within the period of sixty days from the date of such conversion the OPC has to send a notice to the Registrar and informing him that the OPC has been ceased to exist by Conversion into a Private or Public Company by the virtue of its paid up capital or the exceeded the limit of average annual turnover as prescribed in the Act.

Voluntary conversion of OPC

· A OPC can be voluntary be converted itself into a Private or Public company by increasing the minimum number of members and directors to two or minimum of seven members and two or three directors as the case may be, or by maintaining the minimum paid up capital as per requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion.

Procedure of incorporation of OPC

In order to incorporate an OPC some major steps are necessary to be followed. They are:

Applying and filling up of DIR3 and DSC- DIR3 form is the form launched by the Ministry of Corporate Affairs which has to be duly filled by every person who has applied DIN (Director Identification Number). This form has to be filled by the person who is the existing director or is going to be the director of the company. In OPC, the person starting the company will be the director himself so, in order to commence his company, this is one of major formality that has to be completed by that person. along with this form, the person also needs to fill the DSC (Digital Signature Certificate), it is an electronic form to be signed by the person as a proof. It is governed under IT Act so that no fraud occurs.

There are some important documents that need to be attached with the DIR3 form in order to complete it. They include some of the common things that are necessary for the verification such as ID proof, PAN card, address proof, passport size phot, email Id, contact number etc. it basically includes all the documents that are necessary to for the identification and verification of the person filling it.

The documents needed along with DSC are similar to that of needed along with DIR3 form. Both the forms need to be signed by the person who is filling it.

Applying for reservation of name- according to Section 4(4) of the Companies Act, 2013, an application has to be made to the registrar of the company for the reservation of the name. kit is not necessary that accompany gets the name which it wishes for. Two references can be given for it. Along with the name, its reference and explanation also need to be given. This is a very important step as the name of the company plays a vital role.

Preparation and making of SPICe MOA and SPICe AOA- The memorandum and article of association are two most of the important documents of a company and they need to be made and formed by the director. These documents describe the working and rules and regulations of the company.

Pre filling of SRN of INC-1 AND RUN will automatically generate the name of the company. The name, address, pan, email and other details of the subscriber of the forms have to be filled. Then these forms have to be submitted to the registrar of the company.

Making online payment- Online payment has to be made to the Registrar Office for the stamp duty and fees of the Registrar of the Company. This payment depends on the capital and business of the company.

Approval of Documents by RoC- The registrar of the company approves the documents submitted and calls for necessary changes needed. The company cannot commence the working before the approval, of the documents. If any changes are needed, they have to be made in a specified time period.

Certificate of Incorporation- after the final approval of the documents. The RoC issues the certificate of incorporation to the director of the company after which the company can commence its working but, it also includes some of the formalities to completed before the commencement. They are as follows. These are required for the validation of the certificate of incorporation.

Opening of a current bank account, to apply for shop act licence etc. along with it some other major things also such preparation of a financial statement according to Section 134 of the Companies Act, 2013. This financial statement may include the financial provinces of the company along with some rules and regulations.

After this, an OPC is finally incorporated and can commence its working according to the terms and conditions mentioned.

Conclusion
OPC enables a person to incorporate a company on its own conditions and prevents interference. Thus, this concept creates opportunities too. The process is a bit lengthy but a valid one so, it is important to follow them in order to start an OPC legally and to work efficiently under it.

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