In this article, Debabrata Rakshit pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses step by step guide to incorporate a One Person Company.

As per the Companies Act,1956, a Public Ltd Company requires at least 7 members or shareholders wherein a Pvt Ltd Co requires to have at least 2 members. Hence, a One Person Company was never allowed to be formed in our country earlier. However, under the provisions of the Companies Act 2013, Sec 2(62), One Person Company (OPC) is being allowed to form.

One Person Company means a company which has only one member. It is important to note that Section 3 classifies OPC as a Private Company for all the legal purposes with only one member. All the provisions related to the private company are applicable to an OPC, unless otherwise expressly excluded. In case of OPC, though it is true that the One Person appears to be like sole proprietor his liability to the debtors of the Company is limited to the shareholding of the company and his personal assets are never attached for payment of the company’s liability, which in case of Proprietorship never happens.

Prerequisites of forming an OPC

If we go by the pre-requisites of forming an OPC, we should know that as per Rule 3 of the Companies (Incorporation) Rules 2014, the member of OPC must be a NATURAL PERSON & a resident of India. He or She must not be a Minor and must be an Indian Citizen. A resident of India for the purpose of the provisions governing OPC is a person who has stayed in India for a period of not less than 182 days during the last calendar year.

What does this Natural Person mean? Natural Person means a Human Being not any entity like any Proprietorship or Partnership Firm or a Corporate Body or HUF. A Non Resident Indian or a Foreign Citizen cannot form an OPC in India. OPC should have one Promoter and minimum one Director. Promoter and Director may be the same person. Generally, in most of the cases, the Promoter and the Director happens to be the same person. However, No Individual is eligible to incorporate more than one OPC. This is as per Rule 3 (2) of the Companies ( Incorporation ) Rules,2014.

It is mandatory to select a NOMINEE of the single member of the company. Nominee must give his consent in writing and in case of the only member’s death or incapacity to contract, the Nominee will step in and will become the member of the company. Nominee’s name should also be mentioned in the Memorandum of Association. No person can be the Nominee of more than one OPC. As per Rule 3(2) of the Companies (Incorporation) Rules 2014, no person shall be eligible to become a nominee in more than one OPC.

Persons who are desirous of forming a company must adhere to the step by step procedure as discussed below:—

Step 1

Firstly, they should apply for DIN ie Directors Identification Number and obtain Digital

Step 2

Secondly selection of the name of the proposed company. The Promoter should apply for the name of the company to ROC where the Company is to be incorporated in E Form INC 1 by payment of Rs 1000/- through net banking or Card. The Promoter should sign digitally and upload the form on the MCA 21 Portal. In INC1, the promoter should indicate the capital of the company, Main objectives of the formation of Company, the State where he wishes to incorporate the OPC. The promoter should registered his name within 60 days of allotment of the name of the company, otherwise the name will not be available to him. After the name approval process from ROC is over, the name of the Nominee is to be

Step 3

The Consent of the Nominee is to be obtained in form INC-3. Now the Drafting of Memorandum and Articles of Association should be done. Drafting of Memorandum of Association and Article of Association are generally a step subsequent to the availability of name made by the registrar. It should be noted that the main objects should match with the objects shown in e-Form INC-1 and must reflect in the name of Name should be such that a layman can estimate the objects of company by Name.

These two documents are basically the charter and internal rules and regulations of the company. Therefore, it must be drafted with utmost care and with the advice of the professional. AOA should be followed by the tables F, G, H, I & J as prescribed in SCHEDULE- I to be signed by subscribers.The names of First Director are mandatory to be given in AOA.

MOA should be followed by the tables marked as A, B, C, D & E as prescribed in Schedule- I to be signed by subscribers. There are 5 clauses mainly

  • Name Clause;
  • Registered Office Clause,
  • Object Clause (Furtherance of Object)
  • Liability clause
  • Capital Clause.

Subscribers Clause will have to take into consideration and mention following in handwriting of subscribers

  • Name
  • Fathers name
  • Occupation
  • Resident Address
  • Share subscribed
  • Affix one Passport Size Photograph
  • Signed in given column.

For the purpose of Sub-section (2) of Section 4, an application shall be filed, with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated in FORM NO. INC-2 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 for registration of company.

Nominee Clause

One person who will act as a witness and will sign in the witness column and mention:

I hereby witnessed that subscribers signed in my presence on Date,  at                                  further   I   have  verified  their identity details (Through ID) for their identification satisfy myself of their identification particular as filled in.”

Below this witness must mention Name, Address, Description, Signature.

Subscriber sheet must be mentioned Date & Place at the end. The word subscribers here used is because of the reason that these subscribers will subscribe for the shares in the company at time of incorporation and will invest the minimum capital i.e. Rs.100000/-. They will contribute the amount by way of cash or cheque when the company gets incorporated and shares will be allotted to them followed by the share certificates.

Now it is required to take a Declaration from Professionals Like company secretary/Chartered accountant/ Cost Accountant, giving the declaration that, all the requirements of Companies Act, 2013 and the rules made thereunder relating to registration of the company and matters precedent or incidental thereto have been complied with.

Then, we should take affidavit from Subscribers and First Directors of Company. They will declare on a Non-Judicial Stamp Paper that :

  1. I have not been convicted of any offence in connection with the promotion, formation or management of any company during the preceding five years
  2. I have not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years;
  3. All the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of my knowledge and

Next Step is- Stamping, digitally signing and e-filing of various documents with the Registrar. Latest Photographs and the Specimen Signatures should be duly verified by the Banker or Notary in Form

Section 12(1) and rule 25 of Chapter II-stipulates that Company shall have a place as its registered office in the State stated in the Memorandum on and from the 15th Day of its Incorporation.

The last Step of Pre-Incorporation is after submission of the filled in e- form as given above, ROC will process the Form by checking the particulars and Attachments of e-from. If ROC found everything is as per requirement of Act and the Rules in respect of registration, all the documents and information as given will be duly registered in the Register and ROC will issue Certificate of Incorporation after payment of requisite fees.

Step 4

Last step is Obtaining Certificate of Incorporation. It may be noted that One Person Company need not hold any Annual General Meeting ie AGM in each year. Within 180 days from the closure of the Financial Year, One Person Company should file the copy of the Financial Statements with Registrar of Companies.One Person Company should inform to the Registrar about every contract entered and also should record in the minutes of the meeting within 15days from the date of approval by the BOD (Board of Directors).

The concept of OPC is a good initiative from the Government. But there are some limitations in its functioning. An OPC can have maximum 15 Directors. It may also be noted that if the Paid up Share Capital of the OPC crosses 50 Lakhs or it annual average turnover crosses Rs 2 Crores, then the OPC will cease to function as an OPC. Moreover, OPC cannot attract investment and has to continue in a low scale.

One of the biggest disadvantages of OPC is that an OPC is Taxed at the Corporate Income Tax Rate, at present @ 30 % wherein a Proprietorship Firm is taxed at personal income tax slab which is @ 10 % initially. When an OPC is required to conduct an Audit of Accounts , in case of Proprietorship Firm which is not mandatory. Hence the OPC has not been able to create much steer in the Business community.

Debabrata Rakshit /September,2016 Batch/


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