One Person Company is a new form of business incorporated in the Companies Act 2013. This enabled the persons carrying out business as a sole-proprietor to enter into a corporate framework. This form of business is a hybrid of sole-proprietor and company form of business provided with concessional/relaxed requirements under the Act.
For better understanding of the concept lets move on to the salient features of one person company:
- Only One Shareholder: In case of One Person Company, only one natural person who is a Citizen of India as well as Resident of India can incorporate such a company.
Explanation: “Resident of India’ here means that the person should have stayed in India not less than 182 days during the immediately preceding one calendar year.
- One Director: The next important feature of One Person Company is that it shall have only one Director, though there is no bar on having more than one Director, but, the maximum number can only be 15. The general practice is to mention the name of the Director in the Incorporation Document, but if incase, there is nothing mentioned in the incorporation document then, the role of proprietor will be assumed as the sole Director of that One Person Company.
- Nominee: Like in every other corporate body, incase of One Person Company also the person forming it has to nominate a nominee with his written consent that incase of death, inability to contract or any other issue, the person so nominated will take care of the reins of that One Person Company. Incase of a nominee also the same rule applies that the nominee must be a citizen of India as well as Resident of India. Also, if at the time of nomination he is already a part of another One Person Company then he has to decide within a period of 6 months that as to which One Person Company he would want to continue with. On the death of the sole member, the nominee shall have all the rights over the shares of the company. He will be entitled for the same dividends and other rights and liabilities to which such sole member of the company was entitled or liable. On becoming the member after the death of the sole member, such nominee will nominate another person with a written consent to become the member of the Company.
- Taxation: In relation to taxation, there is no provision as such incorporated by the Finance Ministry. Therefore, it is assumed that the rate of taxation applicable for a private limited company shall apply to a One Person Company. Net Profits which are calculated by deducting all allowable expenses from the turnover of sales shall be taxable at the rate of 30% + Education Cess.
- Freedom from Compliance: Unlike other Private Limited Companies, One Person Company gets a freedom from complying with many requirements that are applicable to other private limited companies. Sections 96,98,100 to 111 are not applicable to One Person Company. Some of the provisions which are not applicable are as follows:
- OPC’s are not required to hold annual or extra-ordinary general meetings. A resolution is required to be communicated by the member and is required to be entered into the minutes book.
- In the annual financial statements, the cash flows are not required to be prepared.
- There is no need of a Company Secretary. The Director can sign the annual returns himself.
- Conversion of OPC to Private Limited Company and Vice-Versa:-The provision of the Act says that when a One Person Company’s paid up reaches to 50 Lacs or more or average turnover of the company which is 2crore or more for a period of 3 years, then the company shall be converted into a private limited company and incase of a private company to be converted into a One Person Company the above conditions should be exactly opposite.
Process of Incorporation of a One Person Company:
- Director Identification Number (DIN): Initially, the sole shareholder shall get a Director Identification Number as well as a Digital Signature Certificate.
- Name of the Company: The sole shareholder is then requested to apply for the name of the company.
- Consent of the nominee: Thirdly, the sole shareholder is required to get a written consent of the nominee so as to confirm his nomination for the purpose.
- Filing of Documents: It is a major step. In this the shareholder is required to file all the documents including consent of the nominee, Memorandum and Articles and any other documents so needed.
- Receipt of Incorporation Certificate: After all the above procedures, the shareholder receives the final incorporation certificate after which he is eligible to commence business under his name.
The concept of One Person Company is expected to give great propulsion to corporatization in the country. It is one of the steppingstone towards creating India a corporate India. This concept is a concept of new age business ownership and is very revolutionary in nature. OPC has a bright future and will soon have a great impact globally. OPC will have the accessibility to target the markets, execution of business places in a corporate framework, loans, bank etc. directly, there will be no middleman conjuring the profits.