Rules for Incorporation of One Person Company

The Companies Act 2o13 introduced a new form of business entity called the One Person Company in India and rules for incorporation of a One Person Company has been defined in the Draft Rules under Companies Act 2013. In this blog, we look at the rules laid out for the incorporation of a one-person company.

Who can incorporate a One Person Company?

As per the draft rules under Companies Act 2013, only a natural person who is an Indian citizen and a resident in India is eligible to incorporate a One Person Company or be a nominee for the sole member of a One Person Company. A "resident in India" means a person who has stayed in India for more than 182 days during the immediately preceding financial year. Also, a person cannot incorporate more than five One Person Company.

Nominee in a One Person Company

A person incorporating a One Person Company (original owner) should nominate a person, who would become the member of that One Person Company in the event of the original owner's death or his incapacity to contract. The name of the person nominated should be mentioned in the memorandum of One Person Company, and written consent should also be obtained from the person nominated.

Automatic conversion of OPC into Private Limited or Limited Company

As per the draft rules under Companies Act 2013, if the paid-up share capital of a One Person Company exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, it should be converted into a Private Limited or Limited Company. The conversion to a private limited or limited company must take place within six months of the date on which paid-up share capital increased beyond fifty lakh rupees or the last day of the relevant period during which its average annual turnover exceeds two crore rupees or the close of the financial year during which its balance sheet total exceeds one crore rupees.

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Frequently Asked Questions

Common questions about One Person Company Incorporation Services India.

An individual who is an Indian citizen and a resident in India, having stayed in India for more than 182 days during the immediately preceding financial year, is eligible to incorporate a One Person Company. However, a person cannot incorporate more than five One Person Companies.

A "resident in India" refers to a person who has stayed in India for more than 182 days during the immediately preceding financial year. This is an essential criterion for an individual to be eligible to incorporate a One Person Company.

Yes, it is mandatory for the person incorporating a One Person Company (original owner) to nominate an individual who would become the member of the company in the event of the original owner's death or incapacity to contract. The nominee's name and consent must be mentioned in the memorandum of the One Person Company.

If the paid-up share capital of a One Person Company exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, it must be converted into a Private Limited or Limited Company within six months from the date of such occurrence.

Yes, an individual cannot incorporate more than five One Person Companies.

No, the draft rules under the Companies Act 2013 state that only a natural person who is an Indian citizen and a resident in India is eligible to incorporate a One Person Company.

The conversion to a Private Limited or Limited Company must take place within six months from the date on which paid-up share capital increased beyond fifty lakh rupees, or the last day of the relevant period during which its average annual turnover exceeds two crore rupees, or the close of the financial year during which its balance sheet total exceeds one crore rupees.

The article does not provide specific information about changing the nominee in a One Person Company. However, it is likely that there would be provisions and procedures for changing the nominee, subject to compliance with the applicable rules and regulations.

The article mentions that a One Person Company must be converted into a Private Limited or Limited Company if the prescribed limits for paid-up share capital or average annual turnover are exceeded. It does not explicitly state whether a One Person Company can be converted into a Public Limited Company.

The article does not mention any minimum capital requirement for incorporating a One Person Company. It only states the limit of fifty lakh rupees paid-up share capital, beyond which the company must be converted into a Private Limited or Limited Company.