Presentation

on
ONE PERSON
COMPANY
by






Padma Kapse
3
rd
May 2014
CONCEPT *
Was first recommended by Dr. JJ Irani
Committee in the year 2005
Introduced in Company Bill 2012
Provisions relating to OPC first time
formulated in Companies Act, 2013
New in India but is successful form of business
in other parts of the world like the US, China,
Singapore and several European countries since
a very long time


CONCEPT (Contd..)
Section 2(62) of Companies Act, 2013 defines
OPC as 'One Person Company means a company
which has only one member
Effective from 1
st
April 2014 ( vide MCA
notification dated 26
th
March 2014)


MAJOR CONTRADICTION IN CONCEPT
Company by definition or in logical sense
denotes coming together of more than one person
OPC by its nature is contradictory to the above
It is one person who himself is the director, and
sole promoter and sole member.
In a sense it is a process of incorporating oneself.
FORMATION OF OPC
The incorporation process for OPC is similar to
process for registering any other company.**
OPC needs to be registered as Pvt Ltd Co., only
with following variations :
- One promoter and one member
- Appointment of Nominee
OPC can be formed as a company Limited by
shares or Limited by Guarantee or Unlimited
Company.

FORMATION OF OPC (Contd..)
Process starts with providing following
information:
- Legal Identity by giving Name to the OPC
under which the business activities will be
carried on
-Nature of the activities of OPC
- Nominee Details

FORMATION OF OPC (Contd..)
The words One Person Company should be included
in & mentioned below the name of the company,
wherever the name is affixed, used or engraved. (Sec
12(3))
OPC can not be incorporated or converted into a
company under section 8 (Not for Profit of the Act.
Similarly a company under section 8 (Not for Profit
Companies) of the Act cannot be converted into OPC.
OPC can not carry out Non-Banking Financial
Investment activities including investment in securities
of a body corporate.


FEATURES OF OPC
Section 3 classifies OPC as private limited
company for all legal purposes
Provisions related to pvt ltd co are applicable to
an OPC, unless otherwise expressly excluded
Has Perpetual Existence, unless dissolved.
Business of the OPC will not come to an end on
the death or incapacity of the Member of OPC
In such event the membership as well as all
liabilities of OPC vests in Nominee

MEMBER AND NOMINEE
Only Natural Person being Indian National and
resident in India can form OPC*
One person can form only one OPC (Initial
suggestion was five)
The member of OPC has to nominate a Nominee
with Nominees written consent
The Nominee details need to be filed with RoC
Nominee must be Natural person being Indian
National and resident in India*

MEMBER AND NOMINEE (Contd..)
Nominee becomes the member of the OPC in
case of death or any other incapacity of Member
to contract.
Member can change the Nominee at any time,
by giving notice to RoC in prescribed manner
Similarly, Nominee can withdraw his consent to
be Nominee of OPC at any time
Any such changes in Nominee needs to be noted
in the minutes of OPC and to be informed to
RoC in prescribed manner

MEMBER AND NOMINEE (Contd..)
But such change is notdeemed to be an alteration
to the Memorandum.
Nominee becomes member of the OPC in case of
death of member and he is already member of
other OPC*
No person shall be eligible to incorporate more
than one OPC or become nominee in more than
one such company.
No minor can become member or nominee of
OPC or can hold share with beneficial interest.

RATIONALE FOR CREATION OF OPC
To create an organizational model for an
individual for starting a business venture.
To provide young entrepreneurs and
professionals benefits of the pvt ltd company
To overcome the hurdle of needing second
person to form company (member) or manage it
(director) which at times dilutes the control and
focus.

RATIONALE FOR .(Contd..)
To opt for corporate structure without loosing
any control or freedom
To mitigate potential risk attached to any
business venture
To reduce the exposure of his personal assets to
any un-favourable business conditions.
To pursue ones entrepreneurial ambitions

SHARE CAPITAL

Minimum Paid Up Capital of Rs. 1,00,000
Restriction on right to Transfer the shares
Cannot invite public to subscribe for the
subscription.
Maximum paid up capital can be Rs. 50 Lacs


OPC Vs. SOLE PROPRIETORSHIP

Entity
- OPC Separate Legal Entity from its Member
- Sole Proprietorship does not have legal status
separate from its owner
Limited Liability
- Limited to the unpaid subscription money.
- Unlimited liability

OPC Vs. PROPRIETORSHIP(Contd)
Succession
- To the Nominee designated by the Member
- By Will or Inheritance
Compliances
- All normal compliances under Company Law
- No specific governing body
Tax Brackets
- As per provisions applicable to Pvt Ltd Co.
- As applicable to Individual.

BENEFITS
Brings flexibility to individuals especially to
professionals in managing business more
effectively
Allows them to enjoy the benefits of the
organization form Company
Ease in availing finance
Legal protection being entity separate from the
member as an individual

BENEFITS (Contd..)

The concept of Limited Liability gives protection
to the sole shareholder from losses/liabilities of
the Company being separate legal entity.
Easy Access to market as it gets recognition as
Company

EXEMPTIONS / RELAXATIONS
ll the provisions related to private ltd companies
apply to OPC, with few variations
Minimum No of Directors 1 and Maximum 15
No need to appoint first Directors as sole
member is deemed to be first director
If only 1 director-No need to conduct meeting
More than one Director - Minimum number of
meetings to be held and Interval between two
meetings Sec 173

EXEMPTIONS/RELAXATIONS(Contd..)
Provisions relating to conduct shareholders meetings
(AGM/EGM), issuance of notices for holding such
meetings, etc. Not Applicable.
Signing of Financial Statements
Financial statements of OPC may not include Cash
Flow Statement
Filing a copy of Financial Statements with ROC
Signing of Annual Return Sec 92
Failure -compliance of provisions related to AR

CONVERSION OF OPC INTO PVT LTD CO
Mandatory Conversion - OPC is mandatorily
required to be converted itself into either a
private or public company within 6 months from
the:
- Date of increase of its paid up capital above
Rs. 50 lacs, or
- Last day of the relevant period during which
its average annual turnover exceeds Rs.2 cr

CONVERSION OF OPC ..(Contd..)
Application for conversion has to be made in
Form No. INC.6.
No clarity on process for voluntary conversion of
OPC into any other form like proprietorship or
Pvt Ltd or public ltd company.
However, OPC can not convert itself voluntarily
into any kind of company unless two years has
expired from the date of incorporation of OPC.

CONVERSION OF PVT LTD. INTO OPC
Pvt Ltd Company other than registered under Sec
8 (Not for Profit Companies) can convert itself
into an OPC by passing a special resolution at a
general meeting, provided
- its share capital is less than 50 Lacs
- its average turnover during the relevant period
( avg of last three years) is Rs. 2 crores or less
No objection in writing from members and
creditors is required before passing resolution

CONVERSION OF ..... (Contd..)
A copy of special resolution has to be filed with
Registrar within 30 days
The company shall file an application to the
Registrar along with the following documents:
- Declaration by Directors by Affidavit*
- List of members and creditors
- The latest audited financial statements
-copy of no objection letter of secured creditors

WINDING UP /STRIKING OFF OF NAME
General provisions of Winding up of a company,
Voluntary or otherwise as contained in Chapter XX
of the Companies Act, 2013 apply to OPC also
Power of issuance of order of winding up is
entrusted with National Company Law Board
Section 248 gives power to Roc to remove the name
of any company including OPC from Register of
companies as defunct company.
The sole member of OPC can apply for removal of
name on any ground laid in the section.

CHALLENGES / SHORTCOMINGS
Getting Recognition as an entity separate from
its sole shareholder
Statutory compliances like audits, filing of
various documents and returns etc.
Requirements of maintaining Minimum capital
in certain cases of businesses.
Taxation related issues and complexities No
clarity on these matters as of now. *

CHALLENGES (Contd..)
No specific provisions in Tax laws, specially in
Income Tax. So the taxation burden may be higher
than proprietorship.
At present the applicable tax rates are 30% plus
surcharge @5%, if applicable, plus education cess
@ 3%
Reverse process of converting OPC into
Proprietorship
Whether OPC can become subsidiary of a company

CHALLENGES (Contd..)
Linking of liabilities of member in his personal
capacity to business - banks or financial
institutions will insists on personal guarantee of
director shareholder which will mean unlimited
liability in reality.
In short, beyond the ideals of the concept and
few procedural concessions, it is it is not yet
clear that whether substantial and real benefits
will be available in practice.


To conclude


So let us wait and Watch ..
Mrs. Padma Kapse