All about One Person Company

A One Person Company (OPC) is best suited for people who wish to be sole entrepreneurs. It is a new concept introduced by Companies Act, 2013 to encourage the objective of ease of doing business by providing a sole person with the opportunity to work with the benefits of a company i.e., an OPC offers limited liability of member and also a separate legal entity status, along with a better standing in the market (increased trust and respect).

1. Definition of OPC: Section 2(62)-

One Person Company means a company which has only one person as a member.

Note: For the purpose of meaning of word “Person” we shall refer Rule 3 of Companies (Incorporation) Rules,2014–

2. Person as per Rule 3 of Companies (Incorporation) Rules,2014–

Such person must satisfy all the following conditions:

• He must be a natural person. In other words, a body corporate cannot incorporate an OPC and be its sole member.

• Such person must be an Indian Citizen, whether or not resident in India.

Explanation:

Difference between Citizen and Resident:

Meaning of Citizen of India: ‘citizen’ tends to specify a person who legally belongs to a country.

Meaning of Resident of India: ‘resident’ is used, generally, for a person who is legally living or working in a particular locality.

Note: A person may be a resident of a country but not be a citizen of that country.

For the purposes of this rule, the term “resident in India” means a person who has stayed in India for a period of minimum one hundred and twenty days during the immediately preceding financial year (not calendar year).

• A natural person shall not be member of more than a One Person Company at any point of time and the said person shall not be a nominee of more than a One Person Company. In other words, an individual can be a member in only one OPC. However, he may act as a nominee in another at the same time.

For instance: Mr X is a member in A(OPC) Private Limited and at the same time he is a nominee for B(OPC) Private Limited.

• Where a natural person, being member in a One Person Company becomes a member in another One Person Company by virtue of his being a nominee in that One Person Company, such person shall comply with above within a period of one hundred and eighty days.

For instance: Mr X is a member in A(OPC) Private Limited and at the same time he is a nominee for B(OPC) Private Limited. Mr Y, is the member of B(OPC) Private Limited. However, on 23.05.2021 Mr Y died. Now, Mr X shall become the member in B(OPC) Private Limited. Mr X will have to choose one OPC wherein he shall continue to remain member and withdraw his membership in another within 180 days.

Procedure:

Step 1: Mr X will act as a new member in B(OPC) Private Limited. B(OPC) Private Limited will flie Form INC-4 wherein it shall give intimation of death of Mr Y and appoint a nominee after obtaining his consent in Form INC-3 within 30 days of such death.

Step 2: Mr X shall within 180 days of his becoming member in B(OPC) Private Limited cease to be a member in either of the OPC and File Form INC-4 in this regard. He shall transfer the membership to another person who may or may not be a nominee of the OPC.

Note: The new member appointed may or may not be the nominee. Where nominee is appointed as the member of OPC such nominee shall appoint another nominee within 15 days of his appointment after obtaining his written consent in Form INC-3.

3. Restrictions on an OPC:

• One Person Company shall not carry out Non-Banking Financial Investment activities including investment in securities of any body corporates.

In other words, an OPC cannot be a member in any body corporate.

Explanation: Body corporate as per Section 2(11) means: “body corporate” or “corporation” includes a company incorporated outside India, but does not include—

(i) a co-operative society registered under any law relating to co-operative societies; and

(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf;

• One Person Company shall not be incorporated or converted into a company under section 8 of the Act. However, such company can convert itself into a public or private company at any time.

• No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest.

In other words, no minor can incorporate an OPC or become nominee or act as a beneficial owner for a registered owner.

4. Nomination by the Subscriber (at the time of Incorporation) or Member (after incorporation) of One Person Company:

• The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person in Form INC-3, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
• The name of the person nominated shall be mentioned in the memorandum of One Person Company and such nomination in Form No.INC-32 (SPICe+) along with consent of such nominee obtained in Form No.INC-3 and fee as provided in the Companies (Registration offices and fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the company along with its memorandum [eMOA (INC33)] and articles [eAOA (INC-34)].

5. Role of Nominee:

• Where the sole member of One Person Company ceases to be the member in the event of death or incapacity to contract, his nominee shall become the member of such One Person Company.
• Such new member shall nominate within fifteen days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company.
• Company shall file with the Registrar an intimation of such cessation and nomination in Form No INC.4 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 within thirty days of the change in membership and with the prior written consent of the person so nominated in Form No.INC.3.

6. FAQS:

Q.1 Can an OPC transfer 100% of its holdings to a person other than nominee?

Ans: Yes, it can. Considering the objective of OPC i.e., ease of doing business a benefit has been provided to OPC to transfer control of the business.

Q.2 Can an OPC be a member of a trust?

Ans: No, as a trust is a body corporate as per Section 2(11) of Companies Act,2013 and an OPC cannot invest in securities of a body corporate, it cannot be a member of a Trust.

Q.3 Can the person nominated withdraw his consent?

Ans: The person nominated by the subscriber or member of a One Person Company may, withdraw his consent by giving a notice in writing to such sole member and to the One Person Company.

Procedure to be followed in case of withdrawal:

Step 1: Sole member shall nominate another person as nominee within fifteen days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person so nominated in Form No.INC.3.

Step 2: The company shall within thirty days of receipt of the notice of withdrawal of consent file with the Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No INC.4 along with fee as provided in the Companies (Registration offices and fees) Rules, 2014 and the written consent of such another person so nominated in Form No.INC.3.

Q.4 Can the nominee once appointed be changed?

Ans: The subscriber or member of a One Person Company may, by intimation in writing to the company, change the name of the person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the prior consent of such another person in Form No INC.3.

Procedure to be followed:

Company shall, on the receipt of such intimation, file with the Registrar, a notice of such change in Form No INC.4 along with fee as provided in the Companies (Registration offices and fees) Rules, 2014 and with the written consent of the new nominee in Form No.INC.3 within thirty days of receipt of intimation of the change.