This article is written by Ahmed Ziya Siddiqui pursuing a Diploma in M&A, Institutional Finance and Investment Laws. This article has been edited by Ojuswi (Associate Lawsikho).
This article has been published by Sneha Mahawar.
Table of Contents
Introduction
A legal entity that is formed by an individual or a group of individuals to run a business, commercial or industrial is a Company. It can be private or public. A Corporate entity like a Public Company or a Private company Requires two or more people to partner whereas a One Person company only requires one member to manage the business, making it a more viable option for those who are looking for an unregistered proprietorship.
The Companies Act, 2013 had an enormous impact on the Corporate law system in India by introducing new concepts that did not exist previously. One Person Company is one of the new concepts introduced under The Companies act, 2003. It allows an individual to constitute a company i.e. one Director and one Shareholder. In this article, we will discuss the different Compliances required for a One Person company after its incorporation and other regular Compliances and also the difference between a Public company and a One Person Company.
Definition
One Person Companies are explained in Section 2 (62) of the Companies Act, 2013. It states that “One Person Company means a company with only One Person as a member”
Any person of the age of Majority, and a citizen of India, whether he is a resident or not i.e. an NRI, will be Eligible to establish a One Person Company in India.
A single person gains full authority over the company restricting his liability towards their contributions to the enterprise. However, a nominee Director is present but is powerless until the present Director is well and capable of carrying on. If a turnover of 2 crores or more is made by One Person company thrice in a row or gets a paid-up fund of 50 lakh or more, it has to be converted into a Private limited company or Public limited company within 6 months.
Difference between one person company and a public company
The main difference between a One Person company and a public company is the minimum and the maximum number of members in the company. One Person company as the name suggests has only one owner whereas a public company needs to have a minimum of seven members but the maximum can stretch to any number.
In a One Person company 100% of the share capital is held by One Person on the share capital and share profit. In a public company rights of share capital and profits are shared among all the owners as per articles of association and shared owned by One Person.
Transfer of shares is not applicable in a One Person company but in a Public company, shares can be transferred by the owners to any other person in the market.
A One Person company can have a minimum of 1 Director and a maximum of 15 Directors whereas a Public company can have a minimum of 3 Directors and a maximum of 15 Directors.
Name of a One Person company needs to have “OPC” with it, and a Public company uses Limited with its name.
A One Person Company cannot raise funds by issuing shares of the company, but a public company can issue its shares to the public in the Share market which makes it easy for them to raise funds.
Different compliance requirements that need to be followed by one person company in India
The main motive behind introducing this new concept of a One Person Company in the Companies Act, 2013 was to support person enterprises that are small businesses.
Since the introduction of the new Companies Act 2013, the One Person Companies are becoming prominent very fast in India for doing business or providing services by various entrepreneurs and innovative individuals.
Post-incorporation compliances
Corporate stationery
Name
All companies including a One Person Company need to affix or paint the name of the company and address of its registered office outside every Branch where it carries out business.
Rubber Stamp
A company rubber stamp is important as it is required for the execution of various legal documents like bank account opening, Board Resolutions etc. the stamp should carry the name of the company.
Letterhead
Name and registered office address should be printed on all Letterhead, notices, invoices and all other official documents of the company.
It is important that the words “One Person Company” be mentioned with the name of the company everywhere it’s printed, affixed or engraved.
PAN application of one person company
This is the first step after incorporating a One Person Company or any legal Corporate entity. It can be applied online after incorporation to receive a PAN allotment Letter. The letter must be signed by the Company Director, Sealed with the company steam and sent to the NSDL office. Issuing A PAN card will take up to 15 days and a receipt of the hardcopy PAN Application will reach the applicant.
Bank account
Opening A Bank account for an OPC is easier as compared to other Corporate entities. As per RBI KYC norms, these documents require opening a Current account in the name of an OPC.
3.1. Copies of OPC certificates of Incorporation and these should be self-attested.
3.2. Memorandum of Association of OPC.
3.3. Articles of association of OPC.
3.4. Resolution to open a bank account for the company.
3.5. Copy of PAN allotment number.
3.6. Telephone bill.
3.7. Identity proof of the director.
3.8. All these documents should be self-attested and sealed with the company stamp.
Appointing an auditor
All companies including an OPC are required to Appoint the first Auditor, A practising Chartered Accountant within the first 30 days of Incorporation. His role is to Audit the financial statements of the company.
Allotting securities
After incorporation of the company, Share Certificates are issued which give evidence of the ownership of the company. Every certificate is duly signed by the director or any authorized person and sealed with the company stamp.
Regular OPC compliances
Meetings
According to Section 173 of the Companies Act, 2013 Every One Person Company is required to hold at least one board meeting in each half of the calendar year and the minimum gap between these two meetings must be 90 days. In case a company has only one director, there is no mandatory requirement to hold these meetings, the owner can simply pass the resolution and enter in the minutes’ book which is sufficient to satisfy the requirement.
The first meeting of the company is to be held 30 days after the incorporation.
Notice of interest
The Company Director in the first Board Meeting shall disclose his interest in other entities in every financial year. He must notify of his change of interest. Form MBP-1 needs to be filled for such notice.
Financial statements
One Person Companies are required to Prepare and File with the ROC in Prescribed form AOC-4 within 180 days from the closure of the financial year, the following financial statement:
3.1 – Balance sheets
3.2 – Account of Profit and loss
3.3 – Explanatory note forming part of any document a financial statement must be signed by the Director.
Annual return filing
All One Person Companies are required to prepare an Annual return containing particulars at the end of the financial year with the ROC in the prescribed form MGT07 before 30 September every year. It should be signed by the Secretary of the company, in case there is no secretary Director can sign the Document.
Income tax return
Income tax returns are to be filed with the income tax department, in form ITR-6 by a One Person Company. The due date is the 30th business of the assessment year.
Employees state insurance registration
According to the ESI act, 1948 (Employees State insurance Registration.
Act) Every business entity including One Person Company is required to get registered under the ESI act, 1948 if a company has more than 10 employees.
GST return
In case a One Person Company has a GST registration, it must file a GST return and the GST return filing due date varies from state to state, usually, the returns are filed on a monthly basis.
Conclusion
A single person could not establish a company before the enforcement of the Companies act, of 2013. This helped lots of new budding entrepreneurs and individuals to form their business ventures and gave wings to their ideas. Along with aid to the economy of the country, it also boosts the morals of young individuals. Before this sole proprietorship was the only option for an individual if he/she wanted to establish his/her company or business. In a sole proprietorship minimum of 2 directors and 2 members were required to establish a company.
There are several advantages of an OPC such as
- It receives a separate legal entity status
- Easier to go for fundraising through venture capitals, angel investors and incubators etc.
- Less compliance as compared to other types of companies as there are some exemptions given to the OPC under the companies act, 2013.
- Apart from these an OPC is easy to manage, there is perpetual succession and easy incorporation.
An OPC can be converted into a private limited voluntarily by passing a resolution and increasing the number of directors and members to two. A no-objection certificate from the creditors is also required for conversion.
References
- https://www.mycompanywala.com/annual-compliances-for-one-person-company.php
- https://taxguru.in/company-law/annual-compliances-person-company-opc.html
- https://www.indiafilings.com/one-person-company-compliance
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