Wednesday, February 24, 2016

One Person Company - A Good combination of Limited Liability & Monopoly in Management

One Person Company (hereinafter called as OPC) is a form of business, introduced by companies act, 2013 was first recommended by the expert committee of Dr. JJ Irani in 2005, enabling sole proprietors to enter into corporate world. It is like forming a company with the soul of proprietorship and privileges of a Private Limited Company, OPC is a hybrid form of business consisting features of a sole proprietorship and a Private Limited Company. with concessional obligations. OPC has only one shareholder/member that give him power to run the business of the company solely on his decision, i.e., OPC gives MONOPOLY IN MANAGEMENT.
Important Concepts behind OPC
One Shareholder/Member: This is the main concept behind OPC, that only a natural person who is resident in India and citizen of India can form an OPC.
Nominee: This is also one of the very important concepts behind OPC. In case of death or inability to contract of the sole member of OPC, the nominee appointed will take over the management of OPC. Only natural person who is the citizen of India and a resident in India (i.e. here resident in India means a person who has stayed in India for a period not less than 182 days during the immediately preceding one calendar year) shall be a nominee for the sole member of OPC.
The name of the person nominated shall be mentioned in the memorandum of OPC and such nomination is require to be filled with the ROC in Form no.  INC 2 along with consent of such nominee in form no. INC 3 at the time of incorporation along with its memorandum and articles. Change in the name of the nominee can be done by the company on the event of death, incapacity etc. of the nominee in Form no. INC 4.
The nominee should be appointed at the time of incorporation of OPC with his prior written consent, the nominee cannot be appointed as nominee or member of more than one OPC at the same time and if appointed, he has to choose in which OPC he wishes to continue within a period of 6 months.
Compliances: OPC has been given vast relaxation from legal compliances which are very less than compliance to be done by a Private or Public Co.
OPC can only be incorporated as a Private Ltd Co. It can have only one person as its shareholder/member. Minimum paid up share capital required is Rs. 1,00,000. If the AOA do not contain the name of the first director, member of the OPC will be deemed to be the first director till the time director(s) is duly appointed.
The subscriber to the MOA of an OPC shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or incapacity to contract, become the member of that OPC. Only one director is sufficient to sign the Financial Statement/Director’s Report.
A person shall not be eligible to incorporate more than one OPC or become nominee in more than one such company. A minor cannot become a member or nominee of the OPC or can hold share with beneficial interest. OPC can be incorporated for charitable purpose.

Privileges of OPC
1.      It enjoys the status of being a separate legal entity from its member.
2.      Having the limited liability shrinks the liability of the member to the extent of unpaid amount of shares held by him.
3.      It evolves lesser legal obligations along with lots of exemptions has been provided to OPC in the law.
4.      OPC does not require holding Annual General Meeting.
5.      OPC does not require filling cash flow statement with financial statements.
6.      Compulsory rotation of Auditor after expiry of maximum term is not applicable.
7.      OPC can have maximum number of 15 Directors. This can help in better decision making.
Prohibitions on the formation of OPC
1.      It is mandatory to file financial statements including balance sheet, profit and loss account by OPC.
2.      OPC needs to pay tax at the rate of 30% which is quite high.
3.      Where the paid up share capital of an OPC exceeds 50 lakh rupees or its average annual turnover exceeds during the relevant periods exceeds 2 crore rupees, than it ceases to be entitled as OPC and has to be mandatory convert into private or public company within six month from the date of such increase (here relevant periods means the period of immediately preceding three consecutive financial years).
4.      The sole member of OPC cannot become member in more than one such co.
5.      OPC cannot carry out Non Banking Financial activities and cannot make investment in securities of anybody corporate.
6.      Minor cannot become a member or nominee of any OPC, not even can hold shares with beneficial interest.

Compiled by:Mohd. Sharjeel Awaisi ( Company Secretary, CA Finalist )