One Person Company (OPC)

OPC in India

Dr. Jamshed. J. Irani in his report on Company Law dated 31st May 2005 introduced the concept of One Person Company in India.

In the report, Dr. Irani recommended that with the ever-increasing use of Information Technology and the emergence of a strong service sector in India it was bound for the government to empower the entrepreneurs who are capable of creating innovative ideas and participating in the marketplace.

Dr. Irani suggested that innovative entrepreneurs must not be made to do through an association of persons and should be able to create a single person economic entity in the form of One Person Company.

Further, such an entity may be provided with a simple regime through exemptions so that a single entrepreneur is not compelled to dissipate his energy and resources on procedural matters.

Hence, the concept of ‘One Person Company’ was introduced in the Companies Bill 2013, with the approval from Lok sabha on 18th December 2012 and in Rajya Sabha on 8tH of August 2013.

Finally, after obtaining the assent of the President of India on 29th of August 2013, it has become the Companies Act, 2013.

Why prefer One Person Company?

Here are some major advantages of One Person Company:

• For incorporating an OPC only one person is required and that is the most predominant feature of an OPC. Hence, we can say that it is a registered form of sole proprietorship. One person is responsible for decision-making, controlling, and managing the affairs.
• As it is a registered form of business entity it enjoys the same privileges as a Private Limited Company. The legality of this type of business form makes it popular among banks and financial institutions
• An OPC can avail various benefits enjoyed by small scale industries like loans are available at a lower interest rate.
• Any remuneration made to the director will be allowed under deduction under Income Tax Law, unlike Proprietorship. Also, the benefits of Presumptive Taxation are available subject to Income Tax Law.
• An entrepreneur can take more risks without stressing over the loss of assets as an OPC has limited liability. This is a sort of encouragement to new, young, and innovative business start-ups.
• All Companies are required to hold annual general meetings in addition to other meetings but One Person Company is exempt from this. The Resolution signed by the Director and entered in the minutes book is sufficient, instead of the annual general meeting.
• Every Company is required to prepare and file statements that include the balance sheets, Profit and loss account, cash flow statement, statement of changes in equity, and explanatory notes. In the case of an OPC, a cash flow statement is not required.

What is the role of a Nominee in an OPC?

Nominee in an OPC is the person designated by the sole promoter of the company to be his successor. In case of death or incapacitation, the Nominee will take over. The nominee must be an Indian Citizen and a resident who is not a minor. While incorporating a One Person Company, a Nominee Consent Form must be filed with the MCA

Withdrawal of Consent: The Nominee can withdraw his/her consent, in this case, the sole member is required to nominate another member as a legal heir within 15 days of the notice of the withdrawal. The Nomination of the new personnel must be intimated to the company through a written consent in Form INC 3. In turn, the Company is required to file the notice of withdrawal of consent along with the intimation of the new nominee with the Registrar in Form INC 4.

Change in Nominee: The Sole member of the One Person Company can change the Nominee by providing notice in writing to the company. The new nominee must consent to the nomination form in INC 3. The Company must file the notice of the change and the consent of the nominee with the registrar with the applicable fee, within 30 days of receiving the intimation of change.

Nominee Appointment: In case if the nominee becomes in charge of the company due to cessation of the original member's term owing to the death or incapacity of the latter, the new member must appoint a new nominee as a replacement

Penalty: If a One Person Company or an officer of any such company is not compliant with the mentioned regulations the entity might incur penalties as high as Rs.10,000. Further, for each day of default, the penalty will be increased by a fine of Rs,1000.