In the last article, we talked about Sole Proprietorship – it’s pros, its cons – why to go for it, and why to not.
Now, similar to Sole Proprietorship, in that it only needs one person to kick-start the venture, One Person Company bears distinct dissimilarities with it, in all other ways.
An OPC is a type of incorporated business where you and your business will qualify as two different entities. The concept of OPC is relatively new, as it was introduced in the Companies Act, 2013, as a part of encouraging the budding entrepreneurs of our country to enter the organised business sector.
Name of your Company
You can give any name to your company, but you will also have to mention “One Person Company” in brackets below that name.
Minimum authorised and paid up capital required to set up an OPC is Rs. 1,00,000.
Shareholders / Directors
Unlike a Private Limited Company, an OPC requires only one Shareholder and one Director. You could choose to be both the Shareholder, owning a 100% of the shares of the business, as well as the Director; or you could choose someone else to hold the post of director. It is important to remember that while you have the convenience of appointing someone else as your Director, and even have up to 15 Directors, no one else can have a share in your company. You are the only person who’s eligible to be the sole Shareholder of your firm. So, no other legal entity, like another company, can form a One Person Company. Also, no foreign national can set up an OPC. So, you have to be a Resident and Citizen of India to form an OPC.
One of the other things essential to this form of business, is electing a nominee. This is crucial, for in the event of the death of, or the inability to fulfil a contract by the owner, all the shares, rights, and liabilities get transferred to the nominee of the business. It’s because, unlike a corporate body with more than one shareholders, an OPC doesn’t have the advantage of a perpetual succession of the company. You can change your nominee, as many times you like. The same eligibility criteria of being an Indian citizen will apply to the nominee as well; and in the case he/she does become the sole owner of the company, they will be obligated to appoint a nominee for themselves. Also, just like a person can not own more than one OPC, an OPC can not have more than one Nominee.
In case you have only one Director, you need not have any Board Meetings. But, if you have more than one Directors working for your firm, irrespective of whether you are or you aren’t one of them, you will need to hold one board meeting, every six months, with at least a gap of 90 days between two meetings.
If you want to voluntarily convert your OPC into a Private or Public Company, you can do so only after two years from the date of incorporation. But once your paid up capital touches Rs. 50 lakh, or your Annual Financial Turnover crosses Rs. 2 crore, then it becomes mandatory for you to convert your company to a Private Limited or a Public Limited company.
You will also need to file your Annual Financial Statement, and your Annual Returns with the Registrar of Companies, within 180 days of the closure of the Financial Year. Also, your company’s accounts will get audited just like any other normal company.
Get Director Identification Number
Choosing to set up your business as an OPC would require the Director(s) of the company to first get a DIN or Director Identification Number, which you can apply for online, on the website http://www.mca.gov.in/MCA21/ (also called, MCA21 portal), by filling out e-form DIR-3.
You will need the following documents to attach with the application:
● Your High Resolution Photograph
● Proof of Identity
● Proof of Residence
You will also need to verify, that you did in fact apply to get a DIN allotted to you. For this, you will need to specify:
● Your Name
● Your Father’s Name
● Your Date of Birth
● Your Present Address
● A Text of Declaration
● Your Physical Signature
After this is done, you will need to sign the form, although digitally – also called DSC or Digital Signature Certificate. So, you will upload your digital signature on the same portal. This will be followed by making an e-payment of Rs. 100 (no challan is generated; only online payment is allowed).
In case the details filled by you are found to be duplicate, a Provisional DIN will be generated; otherwise you will have an Approved DIN generated for you.
Any of the details that you think you need to change in your form – you can do so by filling out e-form DIR-6 along with the required document, duly attested.
Apply for the Name of your Company
You will need to submit at least 6 potential names for your company, in the order of your preference for each name, to the Ministry of Corporate Affairs.
So, filling out the e-form INC-1, and filing it with the Registrar of Companies, will then get your company a name, based upon both your priority, as well as the availability of that particular name.
This name will then end with “Private Limited (OPC)”.
Drafting an MoA and AoA
MoA or Memorandum of Association would cover the fundamental objects of your company – more or less like what the Preamble does for the Constitution of India.
The Articles of Association or AoA would enlist all the rules and regulations that would govern your company, and would also serve as a contract between the company and members, specifying all their rights and duties.
You will need to draft both these documents for your company.
Applying for Incorporation of your Company
Also with the required attachments, including MoA and AoA, you will need to file an e-form INC-2 with the Registrar of Companies (RoC). After paying the fees and stamp duty electronically, all your credentials will be checked by the RoC.
On verification and your form being duly approved, a Certificate of Incorporation or CoI will be received by the Director(s) of the company, via an email in .pdf format.
After Sole Proprietorship, One Person Company is one of the easiest ways to start your ecommerce initiative, and even better in some ways, as it allows you to be an Incorporated company, without the need to engage your friends and family members. Also, further as your company grows, you always have the option to convert it to a Public or a Private Company. So, you can start your venture, whenever you think you are ready, and need to be dependent on no one else.