For a long time, a single person could not form a company. The minimum limit on the number of directors for a private company was two and two members. In the case of a public company, it was three directors and seven members. Where would a small businessman who wants to form a company go? He had only one option of being a proprietor. To end this hurdle, the Companies Act, 2013 has introduced a fresh concept of the one person company (OPC).
Did you know?
After the Company Act 2013, a single person can register a one-person company (OPC) as a private limited business and can own 100% shares of the Company.
Define a One Person Company
A single person can form a company called a one person company. This company has one member and one director, unlike a private or a public limited company. This is as per Section 2(62) of the Companies Act, 2013.
Forming a one-person company involves lesser formalities than other types of companies. This is relatively hassle-free. It combines the features of a sole proprietor and a company. It is also known as a one-man company.
Registration Process for a One Person Company
You might think that it would be difficult to register to form an OPC, but it is actually really easy. So let us check out the steps for registering an OPC.
The broad framework for OPC registration is as follows-
Step 1- Apply for DSC
Step 2- Apply for DIN (Director Identification Number)
Step 3- Application for name approval
Step 4- Documents required
Step 5- Filing and approval of forms with MCA
Step 6- Issuance of Certificate of Incorporation
Detailed Procedure
Step 1- Application for DSC
The first step is applying for a digital signature certificate (DSC) with the following documents:
- Address Proof
- Aadhaar Card
- PAN Card
- Photo
- Email-id
- Phone number
A digital signature certificate is a pendrive with the contents for digitally signing documents. One such drive can have the signature of only one person. Its validity ranges from 1 year to 3 years, depending on the class.
Also Read: How to Register a Private Limited Company Online?
Step 2- Application for DIN
After the application for DSC, the next step is the application for a director identification number (DIN). The application of DIN can be made through the SPICe form, unlike form DIR 3 earlier, which was to be filed separately. You have to mention the name and provide address proof of the director.
Step 3- Application for name approval
The third step is deciding and applying for the name of the company. The name of the company will be in the form of “ABC (OPC) Private Limited”.
You can apply for a name in forms SPICe and 32. While applying for the name, give only one name in the application, along with the significance of the name. In case the name gets rejected, one can apply again in form SPICe 32 application.
After the name gets approved by the Ministry of Corporate Affairs (MCA), we can proceed to the next step.
Step 4- Documents required in an OPC
Since you are registering a company, you need to prepare a few documents. These documents need to be submitted to the MCA as a part of the documentation procedure.
- Memorandum of Association- Memorandum of Association (MoA) is the objective of the company. They state the business for which the company is to be incorporated.
- Articles of Association- Articles of Association (AoA) lays the by-laws on which the company will operate.
- Appointment of a nominee- Since OPC has only one member and director, a nominee should be appointed. This is done in case the sole member becomes incapacitated or dies, or cannot perform his duty, then the nominee will carry out his function. His appointment is made in form INC-3 along with the PAN card and Aadhaar card.
- Proof of registered place of business- Attach proof of registered place of business along with ownership proof and NOC from the owner.
- Declaration of the proposed director- You have to state the declaration and consent of the director in forms INC- 9 and DIR-2, respectively.
- Declaration by a professional- You should obtain a declaration from a professional that all the compliances have been made.
Step 5-Filing of forms with MCA
You need to file all the documents as mentioned in step-4 as an attachment to SPICe forms, SPICe MoA, and SPICe AOA, along with the DSC of the director and the professional. The MCA site, after going through all the forms and documentary proofs, will approve your application.
After the application is approved, PAN and TAN will be generated. This is when the company is incorporated. So you don’t have to file a separate application for obtaining PAN and TAN.
Step 6- Issuance of Certificate of Incorporation
After verifying all the forms and documents, the registrar of the company will issue a certificate of incorporation. This is when you can start your business.
Timeline of the application process
If you want to know how many days does a one person company registration take, here is the approximate time:
- The DSC would take one day
- The DIN would take one day.
- Certificate of Incorporation would take about 3 to 5 days.
- The entire process would take around 10 days, depending on the approval granted by the department.
Benefits of a One Person Company
This is a new concept, and the government has made it very simple for the sole businessman to apply and take benefit from this form of organization. Let us have a look at the benefits of a one person company.
- Simple incorporation- The registration of a one person company is very easy as only one member and one nominee are required. The member can also be the director of the company. The minimum authorized capital is ₹ 1 lakhs, and there is no requirement for minimum paid-up capital. The OPC registration fees are also less.
- Few Compliances- Many compliance burdens are reduced for one person company. They include no need to prepare a cash flow statement. The company secretary need not sign the books of accounts and annual returns. The director can simply sign those documents.
- Easy to manage- Since only one person is involved, the decision-making process becomes easy and quick. The ordinary and special resolution is easily passed, and details are entered into the minute books. Thus there is no conflict.
- Legal Status- A one person company receives a separate legal status from its member. Hence the member has protection, and liability is limited to the number of shares held. He bears no personal loss to the company. A creditor can hence sue the one person company and not the member.
- Easy to get funds- A one person company has the name private limited attached to it. Hence venture capitals, angel investors and banks easily provide loans and equity.
- Perpetual succession- If the member dies, one person company can continue. This is because it has a separate legal status. A nominee can continue the business thereafter.
Also Read: How To Get A Business License In India?
Drawbacks of a One Person Company
After knowing the benefits of a one person company, let us check the drawbacks of forming a one person company.
- Suitable for small businesses- The maximum number of members a one person company can have at all times is 1. Hence, its growth is restricted. Other directors or members cannot be added. This affects the growth and expansion of business.
- Restriction of business activities- A one person company cannot be converted into a Section 8 company with charitable objects. It also cannot carry out non-banking financial investment activities and investment in securities of a body corporate.
- Ownership and management- There is no clear distinction between the member and director. This can lead to unethical business practices.
Other things to be kept in mind while registering
- There is only one member.
- You should appoint a nominee before incorporation in form INC-3.
- The name of the one person company should be as per Companies (Incorporation) Rules, 2013
- The minimum authorized capital is ₹ 1 lakhs.
- DSC of the proposed director.
- Proof of the registered office of the one person company.
Conclusion
After reading this article, we hope you have got the answers to your queries about one person company like the registration process, benefits, difficulties and much more.
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