WHAT IS IT
One Person Company (OPC) is a recent concept introduced under the Companies Act, 2013. A OPC provides a systematic legal framework for an entrepreneur who wishes to launch a venture on his own. A OPC has only one shareholder, who should be a citizen of India and resident in India. This shareholder has to nominate another person to become the shareholder of the OPC in case of death or incapacity of the original shareholder. The nominee should also be a citizen of and resident in India.
A OPC offers all the advantages of a Company, namely (a) limited liability, (b) perpetual existence, and (c) independent legal standing. Accordingly, it also is required to comply with the provisions applicable to a Company such as auding of accounts, filing of annual returns, etcetera. Further, the tax slabs applicable to a Company also apply to a OPC.
In case the paid up share capital of an OPC exceeds Rupees 50 lacs or the annual turnover of the OPC exceeds Rs. 2 crore during a year, the OPC is compulsorily required to convert into a private limited company or a public limited company.
THE FORMATION PROCESS
The formation process for a OPC is straightforward. An application has to be made to the Registrar of Companies for registration of name of the OPC and its incorporation. Along with the application, copies of Articles and Memorandum of Association are to be filed. Details of the shareholder, the nominee shareholder and the Director(s) of the OPC are required to be furnished. If all details are in order, a Certificate of Incorporation is issued by the Registrar, indicating formation of the OPC. The minimum paid up capital of a OPC is Rs. 1 lac.
+ Easy to set up as compared to private limited or public limited companies
+ Limited liability of the shareholder
+ Perpetual succession; business continues despite death or disability of the promoter
+ Better credibility than proprietorships and general partnerships
- Cannot voluntarily convert into a private limited or public limited company for 2 years from incorporation
- Cannot raise funds by issue of equity
- Comparatively unfavourable position in income tax: no benefit of slab rates and MAT applicable
FREQUENTLY ASKED QUESTIONS
Q. Are there any special qualifications for forming a OPC?
A. No. Any Indian citizen residing in India and above the age of 18 years can form an OPC. A person can form only one OPC.
Q. What is the minimum amout of capital required for registering a OPC?
A. OPCs are equivalent to private limited companies. The minimum paid up capital required is Rs. 100,000.
Q. What information and details are to be provided for setting up a OPC?
To set up a OPC, the following information is required to be provided: (a) name of the proposed OPC, (b) details of the shareholder, (c) details of the nominee, (d) details of the Director(s), (e) address of the OPC, and (f) Memorandum and Articles of Association of the OPC.
Q. How much time would it take to set up a OPC?
Realistically, a OPC can be incorporated in about 25 to 30 days. The entire incorporation is processed online.
Q. What are the costs involved in forming a OPC?
Incorporating a OPC involves paying government fees and stamp duties. In addition, professional fees for preparation of the Memorandum and Articles of Association and for certifying documents are applicable.
Q. Can I convert my OPC to a Private Limited or Public Limited Company?
Yes. However, no such conversion is possible for the first 2 years of existence of the OPC.
OPC present an advanced form of business entity for a single promoter. However, at the moment, the drawbacks of an OPC seem to overwhem the advantages. In many cases, entrepreneurs prefer Private Limited Companies to OPCs, the main reason being ease of raising further capital through issue of equity and the flexibility to offer ESOP. In our view, it is advisable for entrepreneurs to consider a Private Limited Company instead of a OPC for basing their venture.
ONE PERSON COMPANY (OPC)