Step by step guide to Formation / Registration / Incorporation of a OPC (One Person Company) , in India.
Dilemma…while starting up a business the first question comes to anyone’s mind is, should I start it as a Proprietorship firm or make it a Partnership firm with someone I trust, or register it as a Private Limited Company. The decision is purely personal & depends on many factors. There has been one more entrant (effective April,2014) to make this decision more confusing, called OPC i.e. One Person Company.
To help you simplify the decision, let’s understand what is OPC in more details…,
According to section 2(62) of the Companies Act 2013, One Person Company means, a company which has only one person as a member.
A company may be formed for any Lawful purpose by one person, where the company to be formed is to be One Person Company that is to say, a Private Company, by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration.
As per the Companies (Incorporation) Rules, 2014, following person can be eligible to incorporate OPC in India
Only a natural person who is an Indian citizen and resident in India
(a) shall be eligible to incorporate a One Person Company;
(b) shall be a nominee for the sole member of a One Person Company.
Further the rules have explained the term of “resident in India” as follows ,
The term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.
Benefits in forming OPC
(a) OPC is legal entity separate from its members
(b) The liability of member is limited
(c) The OPC being a private Limited company, encourages new entrepreneurs to set up his/her own business without the help of a second member.
(d) The mandatory requirement of appointment of Statutory auditor and re-appointment of auditor is not applicable.
(e) The provisions of Section 98, 100 to 111 of Companies Act 2013 related to holding of general meetings shall not apply.
(f) Section 173 for holding and conducting minimum number of four Board meetings every year shall not apply.
(a) The person who is already a member or nominee of 1 OPC, cannot incorporate more than 1 OPC or become nominee in more than one such company.
(b) No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest.
(c) OPC cannot be incorporated or converted into a company under section 8 of the Act.
(d) OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.
(e) No such company can convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital)
Minimum requirements for the One Person Company
- Minimum 1 Director
- Minimum 1 member
- Minimum Share Capital shall be Rs. 100,000 (INR One Lac)
- Application of allotment Director Identification Number (DIN)
- DSC (Digital Signature Certificate)
The complete procedure is primarily divided into following 8 Steps.
Step 1. Application for Director Identification Number (DIN) in form DIR-3 & DSC (Digital Signature Certificate)
What is a Director Identification Number (DIN)?
Director Identification Number (DIN) is a unique identification number issued by the Ministry of Corporate Affairs (MCA), for an existing director or a person intending to become a director of a company.
Documents required for DIR-3 Application
a) Identity Proof: Copy of PAN Card (Income Tax Permanent Account Number (PAN) is mandatory in case of Indian National and in such cases applicant details should be as per Income tax PAN)
b) Address Proof: Copy of Passport/ Election/Voter ID/Driving license/ Aadhar Card Electricity/telephone (i.e. Utilities) bill. Address proof must be in the “Name of Applicant” only and utility bill shall not be older than 2 months from the date of filing of the e-form.
c) *Passport Size Photograph (latest) : 1 photocopy or a soft-copy in (.JPEG format)
d) *Current Occupation
e) *Email Address of the Applicant
f) *Mobile/Cell Number
g) *Educational qualification
h) *Verification to be signed by the Applicant. See the attached DIR4 format
Important Notes :
1. All the documents require “Self attestation”.
2. DIR-3 shall be digitally signed by the same person i.e. applicant who is filing the application and by either of the following:
a) Company Secretary (in whole-time practice) or a Chartered accountant (in whole-time practice) or Cost accountant (in whole-time practice)
b) Company secretary in full time employment or Director of the company in which the applicant is to be appointed as a director
3. While making DIR-3 Application following details are mandatory :
First Name, Middle Name, Last Name, Details of father of an applicant (even in case of a married woman)
In case of a Married woman, a photocopy of the Marriage Certificate is required (If DIN needs to be in the “Changed Name”)
4. There could be instances of DIR3/DIN Rejection. Refer “Common Causes of DIN Rejection” for the resolution.
5. * Starred items are mandatory fields of DIR-3 application
What is a Digital Signature Certificate (DSC)?
Digital Signature Certificate (DSC) is the digital equivalent (i.e. electronic format) of physical or paper certificates. Examples of physical certificates are driver’s license, passport. Certificates serve as proof of identity of an individual for a certain purpose; for example, a driver’s license identifies someone who can legally drive in a particular country. Likewise, a digital certificate can be presented electronically to prove your identity, to access information or services on the Internet or to sign certain documents digitally. Since MCA accepts electronic submission of Forms on its website the DSC is mandatory for all the users.
Documents required for obtaining DSC
a) Digital Signature Certificate application Form (duly signed by an applicant). An applicant is required to sign across the photo.
Download the DSC Application Form (Class II Individual Certificate)
b) All other documents are same as required for the DIR-3 Application
Note: All the documents require “Self attestation” and identity proof and address proof should be attested by either a Gazetted officer (Class I) or Bank manager or Post Master.
Step 2. Search for Company Name availability
An applicant has to provide at least 6 names in the order of their preference/priority along with their meaning and significance of each word. He can himself search for the available names by visiting the MCA Website: Check Name Availability
It is also advisable to check any pre-existing Trademarks already registered with the Company name being Proposed, since RoC normally scrutinises the same & may reject the Proposed names on that basis (if similar TM Name is already registered). Promoters should search for any existing Trademark using http://ipindia.nic.in/ website Check Trademark .
Step 3. Application for the Name availability
After drafting of Main Object of the proposed company, need to file e-Form INC-1 (Application for reservation of name) with Registrar of Companies for name availability. The proposed name shall end with Private Limited (OPC).
Note: Refer the “undesirable names” rules extracts from the Companies (Incorporation) Rules, 2014.
Also refer MCA General Circular on Use of word ‘National’, ‘Bank’, ‘Exchange’, ‘Stock Exchange’ in the names of Companies or Limited Liability Partnerships (LLPs). Refer General Circular No. 2/2014
As per Section 4(5)(i) of the Companies Act 2013 upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of sixty days from the date of the application.
Step 4. Drafting of Memorandum of Association (MoA) & Articles of Association (AoA)
What is a Memorandum of Association (MoA)?
Memorandum of Association covers fundamental provisions of the company’s constitution. It covers main object and other objects of the company.
What is Articles of Association (AoA)?
Articles of Association contain rules and regulations governing the internal management of the company. It is a binding contract between company and its member defining his rights and duties.
After name approval from ROC, the next step is to draft MoA & AoA. The subscriber needs to specify Name, Address, and Occupation in his own handwriting & sign the subscription pages of MoA & AoA.
Step 5. Filing of e-forms with RoC (Registrar of Companies)
Following Forms to be filed/uploaded on the MCA Website.
Form INC-2 : For application of Incorporation of the Company
i) Mandatory attachments to e-form INC-2
Memorandum of Association
Articles of Association
Proof of identity of member and nominee
Residential proof of Member and nominee
Copy of PAN card of member and nominee
Consent of nominee in Form No. INC-3
- Affidavit from the subscriber and first Director to the memorandum in Form NO. INC-9
- Specimen Signature in Form No. INC-10
- Consent to act as Director of company in DIR-2 format
- Proof of Registered Office address (Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts)
Copies of the utility bill (proof of evidence of any utility service like telephone, gas electricity etc. depicting the address of the premises not older than two months is required to be attached).
Proof that the Company is permitted to use the address as the registered office of the Company if the same is owned by any other entity/Person (not taken on lease by company)
Declaration by Professional in INC-8
Particulars of Subscriber to Memorandum and Articles of association
Step 6. Payment of RoC Fees & Stamp Duty
After filing of documents online, we need to make payment of RoC fees and Stamp Duty electronically which is based upon the Authorised Capital of the Company.
Step 7. Verification of documents/forms by RoC
After payment of all RoC Fees & Stamp duties, RoC verifies/scrutinises all the documents and form and may suggest few changes to be made in the attachments or form itself. We need to make necessary changes accordingly.
Step 8. Issue of Certificate of Incorporation by RoC
Once all the Forms are duly approved by RoC, the digitally signed “Certificate of Incorporation” is emailed to the Directors.
As part of the Green Initiative by the MCA (Ministry of Corporate Affairs), few Certificates including “Certificate of Incorporation” are now issued only in the electronic format i.e. soft-copy (having digital signature of RoC Registrar). Once the Incorporation Certificate is received, Company can start it’s operations.
The Certificate of Incorporation (CoI) received in the .pdf (which opens in “Adobe Reader”) format, may display “Validity Unknown” for the Digital Signature. Please follow the steps mentioned here to validate the same.
Post Incorporation Formalities for OPC
According to New Companies act, 2013, after incorporation of every company, it shall be required to follow the provisions of the Act. Following are the immediate requirement to be followed mandatorily,
A) To apply for shop act licence, PAN TAN
B) To open Current Bank account
C) To pay subscription money with Current Bank account
D) To issue Share certificate to subscriber by company
D) To file e-form INC-21 (Certificate of Commencement of Business) with Registrar of Companies within 180 days from the date of incorporation. Refer (Note No. 1)
1. Filing of e-Form INC-21 with Registrar of Companies
Pursuant to Section 11 (1) (a) of the Companies Act, 2013, company having share capital shall not commence any business or exercise any borrowing powers unless a declaration is filed by a director with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him and the paid up capital of the company is not less than Rs. 1 lakh in case of a private limited company.
Hence, the company shall file e-form 21 with the Registrar of Companies within 180 days of date of incorporation of the company.
Annual Return Filing for OPC
Annual Return (Section 92)
Every company shall prepare an annual return in the prescribed form containing the particulars as they stood on the close of the financial year regarding—
(a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies,
(b) its shares, debentures and other securities and shareholding pattern; (c) its indebtedness;
(d) its members and debenture-holders along with changes therein since the close of the previous financial year;
(e) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;
(f) meetings of members or a class thereof, Board and its various committees along with attendance details;
(g) remuneration of directors and key managerial personnel;
(h) penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;
(i) matters relating to certification of compliances, disclosures as may be prescribed;
(j) details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them; and
(k) such other matters as may be prescribed,
The annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company.
Financial Statement (Section 134)
Financial statements of a one person company need to be filed with the Registrar, after they are duly adopted by the member, within 180 days of closure of financial year along with all necessary documents.
• The financial statement, signed by one director, for submission to the auditor for his report thereon.
• The report of the Board of Directors to be attached to the financial statement.
• Board of Directors Report of OPC means a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
• Filed with ROC within 180 days from the closure of the financial year.
• Financial statement, may not include the cash flow statement.
Frequently Asked Questions (FAQ’s) on OPC
Q1. What is a One Person Company?
Ans. As per Section 62 of Companies Act, 2013, One Person Company means a company which has only one person as a member. One Person Company is popularly known as OPC.
Q2.Who is eligible to incorporate OPC?
Ans. A natural person who is an Indian citizen and resident in India:-
(a) shall be eligible to incorporate a One Person Company;
(b) shall be a nominee for the sole member of a One Person Company.
(Resident means a person who has stayed in India for period of not less than 182 days in the immediate preceding Financial Year)
Q3. How many OPC’s can one person incorporate?
Ans. A person cannot incorporate more than one, One Person Company.
Q4. What are the nomination requirements?
Ans. A subscriber to memorandum of a OPC shall nominate a person to become the member of OPC in the event of subscriber’s death or his incapacity to contract.
Q5. Whether prior consent of nominee shall be required to become a nominee?
Ans. Prior written consent of nominee shall be required.
Q6. Can nominee withdraw his/her consent?
Ans. Nominee can withdraw his consent by giving a notice in writing and subscriber shall nominate another person within 15 days on the receipt of withdrawal.
Q7. Can subscriber change nominee?
Ans. Yes. The subscriber or member of a One Person Company may, by intimating in writing to the company, change the name of the person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the prior consent of such another person.
Q8. What if subscriber ceases to be member, in the event of death?
Ans. If subscriber ceases to be member then his nominee becomes the member of such One Person Company and such new member shall nominate another person as nominee within 15 days of becoming the member.
Q9. Can OPC be converted itself into a public limited company or private limited company?
Ans. Yes, OPC can be converted itself into a public limited company or private limited company. 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.
Q10. Can private Limited company convert into OPC?
Ans. Yes. As per Companies (Incorporation Amendment Rules, 2015, a private company other than a company registered under section 8 of the Act having paid up share capital of fifty lakhs rupees or less and average annual turnover during the relevant period is two crore rupees or less may convert itself into One Person Company by passing a special resolution in the general meeting.
Q11. Under what circumstances OPC shall be liable to convert itself into a public limited company or private limited company?
Ans. OPC shall be liable to convert into Public limited company or private limited company where the paid up share capital of OPC exceeds Rs. 50 lakhs or its average annual turnover of last three years exceeds Rs. 2 crore it shall cease to be entitled to continue as a One Person Company. OPC can be converted into Private or Public company after two years from the date of incorporation of OPC.
Q12. What are the compliances to be followed after conversion of OPC into a public limited company or private limited company?
Ans. Refer below compliances
i) Alter its memorandum and articles by passing an ordinary or special resolution
ii) Intimate to ROC within 30 days that it ceased to be OPC.
iii) OPC can get itself converted into a private limited or public limited after increasing minimum number of members & directors to two or minimum to seven members & three directors.
Q13. What are the naming guidelines for OPC?
Ans. The same naming guidelines which are applicable to private limited or public limited company are applicable to OPC.
Q14. What are the secretarial compliance applicable for OPC?
Ans.The OPC shall be deemed to have complied with the provisions of holding board meeting if at least one meeting of board of directors has conducted in each half of the calendar year and the gap between the two meetings is not less than 90 days. If OPC has only one director on its board of directors, the provision shall not apply.
The OPC shall not be required to hold Annual general meeting in each year. The provisions of calling of Extra Ordinary General meeting, notice of General meeting, statement to be annexed to the notice, quorum, chairman, proxy for the meetings, restrictions on voting rights, postal ballot, circulation of members’ resolution are not applicable.
The financial statement of OPC may not include the Cash Flow Statement.
After incorporation of OPC, the company shall paint or affix its name as “One Person Company” in brackets below the name of the company.
Q15. Can I convert my Proprietorship business to OPC? Since I have already established brand name can I retain the same name while registering for OPC?
Ans. Yes, surely you can convert proprietorship firm to OPC and can retain the same name while registering for OPC.
Q16. Can I nominate my friend or family member ?
Ans. Yes member can nominate his friend, spouse, relative.
Q17. What is a difference between One Person Company and a Proprietorship concern? What is recommended? Could you specify some comparison points? advantages and drawbacks of both?
a) Proprietorship firm is single person firm, where the liability is not defined, it is unlimited and in case of OPC liability of member is limited.
b) Firm is not separate legal entity. OPC is legal entity and has perpetual succession
c) Being OPC, member can represent his company.
d) In case of OPC, on the demise of the original One Person Company (OPC) director, the nominee director will manage the affairs of the company till the date of transmission of shares to legal heirs of the demised member. This is not possible in case of proprietorship firm.
Q18. Can I sell my OPC to another person?
Ans. Yes, you can sell OPC to another person.
Q19. Can I purchase already established OPC from another person?
Ans. Yes, you can purchase already established OPC from another person.
Q20. I am a 15 year old student. Can i start my own OPC in Software Development? Initially I would like to register a OPC, once the business grows can I convert it to a Private company or LLP?
Ans. For being member of OPC, one should have completed 18 years of age.
Q21. If I am a director, can I appoint another partner as a sleeping partner in OPC?
Ans. No, appointment of sleeping partner in OPC is not possible
Q22. If my OPC makes a loss, still I need to file the Statutory returns with the RoC?
Ans. Yes, though there is no business transaction during the year till end of financial year, annual filing must be done on time.
Q23. Do I need to apply for the Shop Act Establishment License, once registered as OPC?
Ans. Yes, in Maharashtra, as per Bombay Shop and Establishment Act, OPC must apply for shop act licence.
Q24. What is the Statutory return filing frequency? Is it annual ?
Ans. Financial statements of a One Person Company need to be filed with the Registrar of Companies (RoC), after they are duly adopted by the member, within 180 days of closure of financial year.
Q25. What are the different Taxes I have to pay for OPC?
Ans. Director shall pay Profession tax, Income tax to the Government.
Q26. Do I need to apply for IEC for exporting Software once the OPC is registered?
Ans. Yes, OPC can make application for IEC license (Importer Exporter Code).
Q27. Can OPC become a member of another Private Limited company
Ans. Yes, there is no restriction with respect to OPC becoming a member of Private Limited company.
Q28. Can member of OPC incorporate a company outside India?
Ans. Yes, a member of OPC can incorporate a company outside India.
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