One Person Company

Eligibility Criteria

Before you go ahead and engage in OPC registration, it’s crucial to understand the specific eligibility criteria and limitations that govern its formation. The Companies Act sets out clear requirements that must be met to ensure that the individual promoting the OPC is eligible to do so.

• Natural Person and Indian Citizen: Only a natural person who is an Indian citizen can establish an OPC. Legal entities like companies or LLPs cannot create an OPC.
• Resident in India: The promoter must be a resident in India, meaning they should have lived in India for at least 182 days during the previous calendar year.
• Minimum Authorized Capital: The OPC must have a minimum authorized capital of Rs 1 00,000, the amount stated in the company’s capital clause during the registration.
• Nominee Appointment: The promoter must appoint a nominee during the OPC’s incorporation. This nominee would become a member of the OPC in the event of the promoter’s death or incapacity.
• Restrictions on Certain Businesses: Businesses involved in financial activities such as banking, insurance, or investments cannot be established as OPCs.
• Conversion to Private Limited Company: If the OPC’s paid-up share capital exceeds 50 lakhs or its average annual turnover surpasses 2 Crores, it must be converted into a private limited company to comply with the regulatory requirements for larger companies.

It’s worth noting that an individual can establish only one OPC, and an OPC cannot have a minor as its member.

Advantages of One Person Company (OPC)

Advantages of One Person Company (OPC) include the following:

• Legal Status: An OPC obtains a separate legal entity status, safeguarding the individual who founded it from personal liability for company losses.
• Easy Fundraising: Being a private company, OPCs find it easier to raise funds through venture capitalists, angel investors, and banks compared to proprietorship firms.
• Reduced Compliance: OPCs enjoy certain exemptions from compliance requirements under the Companies Act, 2013, simplifying administrative obligations.
• Simple Incorporation: OPCs can be established with just one member and one nominee, with the member also serving as the director. No minimum paid-up capital requirement simplifies the incorporation process.
• Efficient Management: With a single person managing the OPC, decision-making is swift, leading to efficient company management without conflicts or delays.
• Perpetual Succession: OPCs maintain perpetual succession, ensuring the company’s continuity even with only one member.

In conclusion, OPCs offer several advantages, including limited liability, ease of fundraising, reduced compliance, straightforward incorporation and management, and perpetual succession.

Disadvantages of OPC

While OPCs offer advantages, there are also limitations:

• Suitable for Small Businesses: OPCs are primarily suitable for small-scale businesses as they can only have one member. This limits their ability to raise additional capital as the business expands.
• Restriction on Business Activities: OPCs are restricted from engaging in certain activities, such as non-banking financial investments and charitable objectives.
• Ownership and Management: There’s a lack of clear distinction between ownership and management in OPCs, as the sole member can also be the director. This can potentially lead to ethical concerns or conflicts of interest.

Required Documents

Several essential documents must be prepared and submitted to the Registrar of Companies (ROC) as part of the One Person Company registration process:

• SMemorandum of Association (MoA)
• Articles of Association (AoA)
• The nominee’s consent, along with their PAN card and Aadhaar card, must be submitted via Form INC-3.
• Proof of Registered Office
• The proposed director should furnish a declaration in Form INC-9 and their consent in Form DIR-2.
• A declaration by a qualified professional certifying that all necessary legal compliances have been adhered to.