Introduction
One Person Company (OPC) is defined under Section 2(62) of the Companies Act, 2013 (hereinafter CA,2013) as- “One Person Company means a company which has only one person as a member”. As per Section 3(1)(c) of CA, 2013 it is a company which is formed for any lawful purpose by one person. It is a private company. Proviso to Section 3 requires OPC to have two individuals, one as a subscriber and the other as a nominee who shall in the event of subscriber’s death or incapacity to contract become member of the company.
Relevant Provisions Related to Incorporating an OPC
- OPC can only be incorporated by an individual who is a natural person, Indian citizen, and resident in India (Resident in India refers to a person who has stayed in India for a minimum of 120 (changed in Union Budget 2022-23 from earlier 180 days) days in the immediately preceding financial year).
- Further, there is a restriction on OPC as they cannot carry out Non-Banking Financial Investment activities including investment in securities of any-body corporate as per Rule 3(6) of the Companies (Incorporation) Rules, 2014.
- To incorporate OPC, it is relevant as per Section 149(1) that the proposed OPC shall have a Board of Directors comprising of minimum 1 director and a maximum of 15 directors.
- Further, the OPC is required as per Section 12(1) to have a place of registered office of the company within 30 days of its incorporation.
- It is also pertinent to decide the authorised and paid-up capital of the proposed OPC.It cannot be more than 50 Lakhs. The applicant/subscriber is also required to obtain a Digital Signature Certificate (DSC). The proposed director shall digitally sign the incorporation form. Further, the proposed OPC is required to engage a professional (an advocate or a chartered accountant or a company secretary in practice) who shall as per Section 7(1)(b) give a signed declaration affirming that all the requirements of the Act and the rules made thereunder related to incorporation of an OPC and related matters have been complied with.
- Then, it is relevant to ascertain a name for the proposed OPC. It has to be in compliance with Sec 4(2) and 4(3) of the Act read with Rule 8 of the Companies (Incorporation) Rules, 2014. The name should be followed by the suffix (OPC Private Limited).
- An application for reservation of name can be filed through E-form SPICe (Simplified Proforma for Incorporating Company Electronically) (INC-32) which is also used for incorporation of a new company and/or application for allotment of DIN (Director’s Identification Number) and/or application for PAN and TAN.
- The procedure to apply for DIN can be referred to at Ministry Of Corporate Affairs – DIN Process (mca.gov.in).
- The said application is filed along with supporting documentation such as details of directors and subscribers, MOA and AOA (Memorandum of Association and Articles of Association), etc.
- Upon successful processing and completion of the e-Form, the company will be registered and allotted CIN (Company Identification Number).
- Also, the proposed directors will be allotted DIN and PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) will be issued to the company on registration.
Step by Step Guide to Incorporate an OPC
Step 1- Reserving a Name for the Company
This stage is governed by Section 4(4) read with Rules 8 and 9 of the Companies (Incorporation) Rules, 2014. An application for reservation of name of the company is made with the Registrar, Central Registration Centre (CRC) through the web service at www.mca.gov.in by using RUN (Reserve Unique Name) along with relevant documents. A fee of Rs. 1,000 is charged.
Relevant points to consider are-
- One can provide for two names and one re-submission through the RUN web service.
- Form INC-32 can also be used to make an application for name availability along with the application for registration of OPC. However, this mode of consolidated application is recommended to be used only when the applicant is certain of name availability.
Step 2- Obtaining the Name Approval Letter
This stage is governed by Section 4(5)(i) read with rule 9 of the Companies (Incorporation) Rules, 2014. After receiving the application, the CRC may either approve or reject the application. Upon approving the name, the reserved name shall remain valid for 20 days from the date of approval.
Step 3- Arrangement of Relevant Documents such as Declaration, MOA, AOA, etc.-
In accordance with the first proviso to Sec 3(1) read with rule 4 of the Companies (Incorporation) Rules, 2014, written consent of the nominee is taken in Form INC-3. This nominee will become the member in case of death of subscriber or his incapacity to contract.
Further, in compliance with Sections 3(1), 4(6), 5(6) and 7(1)(a) read with Rules 11,13 and 38 of the Companies (Incorporation) Rules, 2014, proposed company’s e-MOA (e-Memorandum of Association) and e-AOA (e-Articles of Association) are prepared in Forms INC-33 and INC-34, respectively. It has to be signed by subscriber in the presence of at least one witness. Here, both the subscriber and the witness are required to affix their digital signature to the e-MOA and e-AOA.
Furthermore, in compliance with Section 7(1)(c) read with rule 15 of the Companies (Incorporation) Rules, 2014, a declaration is required to be obtained from the subscriber to the MOA and from persons named as first directors, if any. The declaration is sought in the AOA in Form INC-9 that-
- He is not convicted of any offence in connection with the promotion, formation, or management of any company.
- That he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under the Act or any previous company law during the preceding 5 years.
- That all the documents filed with CRC for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief.
Also, the MCA Circular No. 11/2013 dated 29.05.2013 provided to obtain declaration-cum-affidavit from the subscriber/first directors that the company or its directors shall not accept any deposits other than in compliance with the applicable provisions of the Companies Act, 2013, RBI Act, 1934 and SEBI Act, 1992 and rules/ directions/regulations made thereunder. (Important: – the said declaration is not provided for in the Act, but the CRC is asking for it).
Then, in furtherance to sections 7 and 153 an application for allotment of DIN for directors will be made in Form INC- 32 (SPICe).
Further, as per Section 7(1)(d), in the application for registration of OPC, either a temporary address for correspondence can be provided till the time the registered office of the company is established or a registered office address. Then, provide for requisite documents to be filed with Form INC-32 (SPICe) for verification of registered office.
Additionally, it is required to obtain the particulars of the persons mentioned in the AOA as the first directors of the company along with their consent to act as directors of the company in Form DIR-2to conform to Section 7(1)(f) and (g) and 152(5) read with rule 8 of the Companies (Appointment and Qualifications of Directors) Rules, 2014.
Step 4- Filing the Application for Incorporation
Application for registration of the company is filed with the CRC in Form INC-32 (SPICe) along with the e-MOA (Form INC 33) and e-AOA (Form INC 34) and other requisite documents and fees. This step is governed by Sections 3 and 7 read with Rules 4,10,12,14,15 and 38 of the Companies (Incorporation) Rules, 2014.
Upon examining the applications, in accordance to Section 7 read with Rule 38(9)(a) of the Companies (Incorporation) Rules, 2014, if the CRC deems fit, it may call for further information or if it finds the application or document to be defective or incomplete in any manner, he shall inform the applicant to remove the defect and re-submit the e-form within 15 days from the date of such intimation given by CRC.
Further, per Section 7 read with rule 38(9)(b) of the Companies (Incorporation) Rules, 2014, if even after resubmission of the document, CRC finds that the document is defective or incomplete in any manner then he shall give another opportunity of 15 days to remove the defects or deficiencies. (Important to note- the total period for re-submission of documents shall not exceed 30 days).
Step 5- After Filing Application for Incorporation-
When the CRC is satisfied, it shall issue the Certificate of Incorporation (COI) in Form INC-11, allot DIN (if applied for) and PAN and TAN of the company in compliance with Section 7 read with Rules 18 and 38(10) of the Companies (Incorporation) Rules, 2014.
Step 6- Post Compliance-
As per section 12 read with Rules 25 and 27 of the Companies (Incorporation) Rules, 2014, if during the incorporation of the company, address of the registered office is not finalized then a notice of situation of registered office has to be filed with ROC within 30 days of incorporation in Form INC-22 along with the requisite documents and fees.
Thereafter, a declaration must be filed in form INC-20A within 180 days of the date of incorporation with ROC in compliance with Section 10A read with rule 23A of the Companies (Incorporation) Rules, 2014 to the effect that-
1) every subscriber to MOA has paid the value of the shares agreed to be taken by him on the date of making of such declaration and
2) verification of registered office is filed with ROC. (Important note: the content of Form INC-20A shall be verified by a company secretary or a chartered accountant or a cost accountant, in practice.
Step 7- After Receipt of Certificate of Incorporation
Upon receiving the certificate of incorporation, the first meeting of the board shall be held within thirty days from date of incorporation as per Section 173 of the 2013 Act wherein the following matters are to be dealt with-
- Adoption of MOA and AOA as approved by ROC.
- Adoption of common seal.
- Opening of bank accounts.
- Form no. INC-22 with regard to verification of address of registered office.
- Authorization to certain persons for e-filing of returns with the ROC.
Further, it is to be noted that the OPC has to conduct two meetings of the Board in a calendar year and one meeting should be held in each half of the year. It also has to ensure that gap between two meetings is not less than 90 days as per Section 173(5).
Also, provision relating to quorum is not applicable to OPC if it has only one director as per Section 173.
Estimated timeline
Incorporation of a One Person Company (OPC) will take between 6 days to 73 days.
- It will take between 1 day to 3 days for the reservation of name through RUN portal.
- Then, application for incorporation of a company will take between 2 days to 20 days.
- Further, approval of application and issuance of COI by ROC, PAN and TAN will take between 2 days to 20 days.
- Notice of situation of registered office will take another 1 day to 30 days.
Documents required
- PAN Card of shareholder, nominee, and Directors
- Identity poof – Aadhar card and Voter ID/Passport/ Driving License of shareholder, Nominee and Directors
- Director’s Address Proof- Latest telephone bill / Electricity bill/ bank account statement of shareholder, nominee, and Directors
- Latest passport size photograph of shareholder, nominee, and directors
- Business Address Proof- Latest electricity bill/ telephone bill of the registered office address
- NOC (no objection certificate) from owner of the registered office
- Rent agreement if any of the registered office.
Frequently Asked Questions
1. What are the Benefit of adopting OPC?
OPC is a new creation of category of companies under Companies Act, 2013. It is primarily intended to encourage entrepreneurship in the country and aid formation of small and marginal business firms by giving them status of a corporate body.
2. What is the threshold limit of an OPC to mandatorily get converted into a public or private company?
As per Rule 6 of the Companies (Incorporation) Amendment Rules, 2015, it should not exceed Rs 50 Lakh or its average turnover in the relevant period should not exceed Rs. 2 crores. Or it will have to convert itself into either a public or private company within 6 months of breach of the rule.
3. What are Limitations of OPC?
- No person shall be eligible to incorporate more than 1 OPC or become nominee in more than 1 OPC.
- Minor cannot be a member or nominee in an OPC.
- Minor cannot hold shares with beneficial interest.
- An OPC cannot be incorporated or converted into a Section 8 company of the Act.
- An OPC cannot carry out non-banking financial investment activities including investment in securities of anybody corporate.
- OPC is not barred from investing in shares and securities of other companies, but it cannot invest in securities of any body corporate.
- FDI is not yet allowed.
4. Can a person be member of two OPC at the same time?
Yes, a person can become member of 2 OPCs at a time by virtue of being a nominee to one of the OPC. But he must comply with the requirement of being a member to only 1 OPC in 180 days by withdrawing membership from either of the OPC.
5. What is liability of the OPC subscriber?
OPC have a separate legal entity. The liability of subscriber is limited.
6. What are benefits of forming an OPC?
Certain exemptions are given such as:–
- Exempted from making cash flow statement as per Section 2(40) of the Company Act, 2013.
- It is exempted from complying with rotation of auditors under Section 139(2) of CA, 2013
- It is exempted from holding the Annual General Meeting (AGM)
- One director can sign the financial statement and board’s report
- OPC is not required to file any audit report on internal financial controls
7. What is difference between OPC and Sole proprietorship?
| OPC | Sole proprietorship |
| Company has a separate legal entity | No difference between the business and proprietor |
| Liability of shareholder/director is limited | Unlimited liability of sole proprietor |
| Income tax rate applicable of private limited company | Tax applicable as per the slab rate |
| Auditing of books is statutorily required | Auditing of book depends upon amount of turnover |
OPC related provisions and amendments in Union Budget 2021-22.
- Has reduced compliances to further promote the entrepreneurial talent in the country.
- This is to give boost to the economy deeply damaged by the covid-19 pandemic.
- Government has reduced the residency limit for an Indian citizen to set up and OPC from earlier 182 days to now 120 days.
- Further, it has also allowed Non-Resident Indians (NRIs) to incorporate OPCs in India.
- Conversion of OPC in private limited or public limited is made easier.
- The requirement for conversion of OPC to private or public limited company is made easier as the restriction of 2 years waiting period has been removed. Now OPC can be converted to private or public limited anytime.
- The threshold of having a paid-up share capital of Rs. 50L or less and average annual turnover during the relevant period Rs. 2 crore or more is also not required for OPC to convert itself into another company under the Act.
- Check the relevant amendments by clicking here.