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Rules for Incorporation of One Person Company

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”┬ámeans 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┬ámentioned 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.

To incorporate a One Person Company, visit IndiaFilings.com

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