Introduction

Every day MCA is receiving new applications for the registration of companies. When it comes to the question of registering the business entity, maximum entrepreneurs choose either Private Limited companies or the LLPs. These companies require a minimum of two members of registration. But what about the individual who wants to start the business on their own without any other person’s interference? In order to support such entrepreneurs MCA has introduced the concept of One Person Private Limited (OPC) Company under Section 2(62) in the Companies Act 2013.

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An OPC has all the benefits which an individual would have received if he would have registered their entity as a Private Limited Company. These benefits include limited liability; separate legal entity; perpetual succession etc. The OPCs can be registered as small entities even with less capital. This type of business entity acts as a bridge between a Proprietorship Firm and Private Limited companies where an individual can enjoy the advantage of a single owner and the benefits of the company.

Unlike other companies where a minimum of two individuals are required to register the entity, an OPC can be registered with one individual only however one nominee will be needed. These companies are regulated by the Companies Act, 2013 and the Companies Incorporation Rules, 2014 under the Ministry of Corporate Affairs (MCA).

One-Person Private Limited Company-

A One Person Private Limited Company is a business entity that is privately held by one individual with the benefit of limited liability for the directors/members. Same as Private Limited Organisations, OPCs also have a feature where an entity’s shares are prohibited from being publicly traded.

A One Person Private Limited Company is an independent legal structure. While registering the companies as OPC, the owner of the company gets the privilege of having full authority over the company.

The OPCs can be registered as small entities even with less capital. This type of business entity act as a bridge between Proprietorship Firm and Private Limited companies where an individual can enjoy the advantage of a single owner and the benefits of a company like -

Benefits for One-Person Private Limited Compan

• Separate Legal Entity – being a separate legal entity, an OPC can acquire assets on its own name.
• Limited Liability - liability of the company’s shareholders is limited to the amount of unpaid value of the shares owned by them.
• Lessor compliance
• No legal disputes

Features of a One-Person Private Limited Company -

• Limited liability– the liability of each shareholder or member is limited, in case if the company faces any loss, then the personal assets of the shareholders are not at stake.
• Number of Directors- Only 1 person and 1 nominee is required to register the company
• Index of members– no need to maintain an index of its members, unlike the public company.
• Perpetual succession– there will be no impact on the company if the director dies.
• No minimum capital
• It mandatory for all Companies to use the word (OPC) Private Limited in the suffix of its name.
• Just like Private Companies even OPCs cannot borrow any funds from the public.

Eligibility for One-Person Private Limited Company

• Only 1 director is needed
• 1 nominee is required
• The director is required to be an Indian  citizen
• The minimum authorised share capital is INR 1 lakh
• No requirement of minimum paid-up capital

Documents Required for One-Person Private Limited Company

• PAN Card from of Director and the Nominee
• ID proof from the directors (Driving License/ voter ID/Passport)
• Bank statement/ mobile bill of all directors
• Address proof for the company registered office (Rent agreement, Possession letter etc.)
• Electricity Bill of the office building
• Trademark registration Certificate (if any)

Procedure for One-Person Private Limited Compan

Exemptions for OPC/Advantages of OPC

An OPC is exempted from some of the legal compliances like-

• Conducting general meeting
• Conducting board meetings
• No requirements of voting inclusion of cash flow statements in financial statements
• No mandatory rotation of an auditor
• No need for the appointment of a company secretary
• The annual return can be signed by its director, if there is no company secretary appointed

According to Section 185 under the Companies Act, 2013 under Notification No. G.S.R. 465(E) dated June 5, 2015, there are some exemptions to a private company, only if

• There is no investment of any corporate in the share capital of an OPC;  
• If the borrowed amount from any financial institution or bank is not more than INR 50cr or twice the paid-up capital, whichever is less;
• If there no default in repayment of any borrowings

Conversion of One Person Private Limited Company to Private Limited Company –

A private limited Company and One Person Company both the entities have almost similar benefits, then why there is a need for the conversion of One Person Company into a Private Limited Company?

This can be understood in two ways. The conversion can be - voluntary or mandatory.

In the case of voluntary conversion, an individual can do the conversion process any time or for any reason like – if they want to add any director, or want to expand their business if they want to increase their paid-up capital etc.

In case of mandatory conversion, it becomes mandatory to convert an OPC into a private limited company only if the OPC has no more status of a small company or has a turnover of more than INR 2CR for consecutive 3 years.

Prohibitions faced by an OPC

An OPC also faces the prohibition of –

• OPC can’t carry any Non-Banking Financial Investments activities,
• OPCs can’t convert a wholly-owned subsidiary into an OPC
• OPCs can’t issue any Employ Stock Scheme.
• There is a prohibition for the Director as well as on the nominee of OPC – that the individual can’t have more than one OPC or become a nominee in more than one OPC.
• Restrictions are imposed on foreign investors to incorporate an OPC.
• The Income Tax slab is the same as a private company i.e. 30% (plus surcharges) on total income.

Expert’s Advice

Companies registered which are registered as Private Limited are ideal for start-ups and for the growth of the business. One can register as a private limited and can enjoy the benefits of raising funds and limited liability. It is governed by MCA under Company Act, 2013. The procedure of registration is really easy and the registration can be done within 6-7 days. As the filing requires expertise to draft the documents, you can contact Corpseed for the same.