One Person Company Registration

What does starting a business mean to you? For many, it is a moment of hope and dreams. Sounds a bit overwhelming, Right? Well, why wouldn't it be, especially now when the waves of entrepreneurship are all around the country. So, what’s the first step that you would take as an entrepreneur to establish your business? Registering it as a legal entity would be the best and that requires you to select the right business structure for it as per the scope of operations. In recent years, One Person Company, which is also known as OPC, has gained significant attraction from hundreds and thousands of entrepreneurs in India as a popular form of business structure. In fact, One Person Company (OPC) is now only second to the Private Limited Company when it comes to the most preferred legal structures for businesses. And the reason behind this is simple - ‘Benefits.’ With One Person Company Registration, a business entity not only gets an opportunity to work as a separate and legal entity but also the advantages such as limited liability just like a private limited company, and the authority to start and manage an entire business single-handedly like Sole Proprietorship. 

One Person Company (OPC) 

What does OPC mean? Let’s start with a basic definition - One Person Company, or we should say, OPC registration is nothing but the formulation of a company with only a single person as a member, which is unlikely as the traditional company requires at least two members. In OPC, its owner acts as the most powerful authority. So, what was the need behind its introduction? The government of India made significant changes with the introduction of the Companies Act 2013 and the motive was to ease the process of doing business in the country and improve corporate governance. With these changes came the concept of One Person Company, conceptualized by the Ministry of Corporate Affairs to fill the gaps for entrepreneurs between a proprietorship and a private company set-up.

Earlier, there were no provisions for an individual to start his own company, except the option of Sole Proprietorship, which is not a distinct legal business entity, hence the person (sole proprietor) handling it is responsible for any credit facility available. Not just that, the absence of legal status as an incorporated entity also made financing and business credit harder to procure. But with OPC, the Indian government has presented a hybrid form of a sole proprietorship and a private limited company, offering the benefits of both.

One Person Company (OPC) is not a recent concept as countries from all over the world, including the United Kingdom, the USA, China, UAE, and many more already recognized it legally way before India did. To have a better understanding of the concept of One Person Company registration, let’s take a look at its key features - 

• Capital Requirement

The requirement of the capital depends on the needs of a business and when it comes to One Person Company, it can be incorporated with a minimum authorized capital of INR 1 lakh. There is no minimum paid-up capital requirement to start it. This means, even with the registered capital contribution of INR 2, you can apply for One Person Company registration and incorporate it under the Ministry of Corporate Affairs to start doing business activities. 

• Perpetual Succession

As per the Companies Act 2013, One Person Company has perpetual succession, which means despite the death of its only member, its existence will continue as the nominee will run it. 

• Limited Liability

There is no denying that setbacks can happen anytime in a business and at such times, the selection of One Person Company as the business structure proves to be working in the favor of the entrepreneurs. The “Limited Liability” feature is the reason we’re saying this, which means the liability to repay any loan or credit facility availed by the One Person Company, is only limited to the OPC, not to the member. This means that the personal assets of the member or promoter are not at risk, in case the OPC incurs any loss or liabilities.

• Separate Legal Existence

Unlike Sole Proprietorship, One Person Company is a legal business entity distinguished from its owner. This means the company has its own assets and liabilities and the member operating it can't be held liable for the department of any of its debts. 

• Nominee

Nothing is certain, especially after the recent covid pandemic and to ensure the continuance of One Person Company in the event of death or incapacity of its owner, mention of a nominee’s name in the Memorandum of Association is a must requirement. But before doing this, the prior consent of that nominee is also mandatory. While registering an OPC with the Ministry of Corporate Affairs, the owner is required to submit the written consent of the nominee, alongside the company’s MOA and AOA. 

• Minimum One Director

One Person Company requires only one member as per the Companies Act 2013 and that individual member can act as its first director until the lawful appointment of other directors, which can go as high as fifteen in number.

Now that we know what One Person Company is and its features, it’s time to take a look at the eligibility criteria for One Person Company Registration 

• One the citizens and residents of India are allowed to incorporate a One Person Company.

Note:- “Residents of India ''means the people who have stayed in the country for a duration of not less than 182 days immediately before one calendar year. 

• Business entities such as a Company or Limited Liability Partnership (LLP) can’t hold the position of the director in an One Person Company. 
• INR 1 lakh is the minimum authorized capital requirement for the One Person Company registration.
• At the time of incorporation of an OPC, a nominee’s name must be mentioned by the member in the Memorandum of Association. 
• One Person Company can’t carry out the Non-Banking Financial investment activities, such as investment in securities of any other body corporate.
• A person with an already incorporated OPC cannot apply for another OPC registration. Similarly, a person is not allowed to be the nominee of more than one OPC.
• The name of a One Person Company must end with (OPC) private limited.

• Limited Liability Protection

The first and foremost benefit of the One Person Company registration is the limited liability protection the owner gets. This is directly indicating that If the company gets into any financial troubles or fails to repay the loan, you don’t have to worry about your personal assets as there is no risk to them and they cannot be seized by creditors or banks.

• Separate Legal Entity

On incorporation with the Ministry of Corporate Affairs, One Person Company gets to be treated as a separable legal entity from its members. In simple terms, the member and the One Person Company are two separate and distinct entities under the eyes of laws. The formed company can have its own name, seal, its assets, and liabilities and it can enter into contracts, sue, and get sued as per them.

• Complete Business Ownership and Control

OPC registration is the best in case you would like to have complete ownership of the business and control of its activities. With OPC registration, the member acts as the supreme authority and gets to take all the business decisions without any interference from other shareholders or directors. 

• Easy to Set Up

Many times people get frustrated when it comes to the incorporation of their companies and the reason behind this is the complicated procedure involved. But that’s not the case with One Person Company registration, which is relatively easier to set up compared to the rest of the business structures. What further better is the requirement of legal compliance is also the least, making it an attractive option for small business owners and startups.

• Bank Loans/Credit Facility

Just think of yourself, between an incorporated company and unincorporated businesses, which would get the loans faster and more easily? Well, the answer of many would surely be the former one and the reality resonates with that. Often businesses that are not incorporated go through a length of difficulties to secure funding or loans to ensure their existence. But One Person Company offers relief to the entrepreneurs from this issue as having a legal status helps them to get loans easily.

• Identification proofs of the director, such as Aadhar Card, PAN Card, Driving License, and Passport. 

Note - If there is more than one director, then identification proofs of all of them.

1. Address Proof of the director, such as a Voter Identification card and passport. Similarly, if there is more than one director, then address proof of all of them.
2. Address Proof of the registered company’s office. (If the office is on rent or lease, then the rent agreement or lease agreement).
3. Utility bill of the registered company’s office, including electricity bill. 
4. Trademark Registration Certificate if there is any. 
5. Bank statement/passbook of the director. If One Person Company has more than one director, then the bank statement/passbook of all of them.

Compliances Required for One Person Company 

• An annual statutory audit of financial statements is to be conducted by a licensed Certifying Authority.

Note - Financial Statements contain all the monetary and finance-related audited accounts of the business with One Person Company registration. Financial statements filing has to be filed using Form AOC-4 with the concerned ROC, on or before 30th October every year.

• Filing of the annual return using Form MG-T 7, signed by the Company Secretary, as per the corporate law. In case the Company Secretary is not present, then the director of the One Person Company can sign it and file it with the Ministry of Corporate Affairs. 

Note- The Annual Return is a comprehensive document that contains information about a company relating to its share capital, indebtedness, directors, shareholders, promoters, changes in directorships, corporate governance disclosures, etc. 

• A mandatory appointment of an auditor by the director of One Person Company.
• At least one meeting of the Board of Directors in each half of a calendar year and the least gap between them must be 90 days. 
• Each and every director of One Person Company (OPC) is under a legal obligation to disclose his interest in other entities in the first Board meeting of every financial year. Any changes made to the disclosures should also be presented at every first board meeting of the company.
• Annual filing of Income Tax Returns is mandatory for businesses with One Person Company registration and that is to be done before every 30th of September. In case its annual turnover crosses INR 1 crore, then a tax audit is also required. 
• As per the Companies Act 2013, every One Person Company must maintain a Statutory Register (Can be in a physical or digital form).

Note - A Statutory register contains records related to a company’s directors, shareholders, and meetings held.

• ESI (Employees’ State Insurance) return filing is mandatory for One Person Company with ESI registration.
• PF returns, if any.

One Person Company Compliance Exemptions

Another reason many entrepreneurs opt for One Person Company registration is the exemptions it offers them from usually mandatory compliance. The followings are some of the major One Person Company Compliance exemptions - 

• No Mandatory Annual General Meeting - Unlike Private Limited Company, One Person Company (OPC) is not under legal obligations to hold an annual general meeting as per the Companies Act 2013.  
• The financial statements of the Open Person Company are not required to contain Cash Flow statements.
• No prior notice of the Board meeting is required for One Person Company (OPC).
• There is no requirement for a quorum for OPC board meetings.
• No requirement for voting in the OPC board meetings. 

Conversion of One Person Company into a Private Limited Company

So, what would happen with the expansion of One Person Company (OPC)’s business operations? Well, if an OPC exceeds annual sales turnover by Rs.2.00 crores or the paid-up capital exceeds Rs.50 lakhs, then it becomes mandatory for it to get converted into a Private Limited Company.

• Step 1:- Obtain DSC (Digital Signature Certificate)

For One Person Company registration, the very first task is to obtain a Digital Signature Certificate (DSC) issued by a licensed certifying authority. It’s crucial to apply for a Digital Signature of the designated partner before applying for the incorporation of OPC. 

• Step 2:- Obtain Director Identification Number (DIN)

The next task is to apply for DIN, which stands for Director Identification Number, for each director of One Person Company. You can apply for DIN by filling out Form DIR-3.

Note - As its name suggests, Director Identification Number (DIN) is a unique identifying number allocated to a person who is a director of a corporation or wishes to become one.  

• Step 3:- Approval and Reservation of One Person Company’s Name

The third step is to get approval and reservation for the name to which the One Person Company (OPC) needs to be established. Make use of the RUN (Reserve Unique Name) service of the Ministry of Corporate Affairs to check the availability of the proposed name. If it hasn't been reserved by any entity, fill out the SPICe+ (INC 32) for its reservation. 
 
Note - The proposed name must be as per rule 8 of the Company Registration Act, 2013.

• Step 4:- Draft Memorandum of Association and Article of Association 

Both Memorandum of Association (MoA) and Articles of Association (AOA) documents are essentially required for the One Person Company registration. Therefore, your next step is to draft them. 

Memorandum of Association (MoA) - MoA is the legal document that defines the scope of the business activities to be carried on by a company after its incorporation. You can draft it under Form INC 33.

Articles of Association (AoA) - AoA, also referred to as the ‘Rule Book’, contains the rules and regulations for the business operations of a company, alongside the objectives. You can draft it under Form INC 34.

If required we can file for ESI, EPF, and GST at the same time under the form AGILE of MCA.

• Step 5:- Registration of One Person Company with the Ministry of Corporate Affairs

The next step is to incorporate One Person Company. For that, you need to attach all the required documents with the Form SPICe+ (INC 32) and submit them to the Registrar of Companies of the respective state in which the registered office of One Person Company is situated.

• Step 6:- Issuance of Certificate of Incorporation for One Person Company 

If the Registrar of Companies finds all the submitted documents and information satisfactory, he will issue the Certificate of Incorporation to your One Person Company, alongside the TAN and PAN as they get generated automatically at the time of incorporation.