One Person Company | Company Law - B Com PDF Download

 Page 1


One Person Company 
Introduction 
A new concept has been introduced in the Company’s Act 2013, about the One 
Person Company (OPC). In a Private Company, a minimum of 2 Directors and 
Members are required whereas in a Public Company, a minimum of 3 Directors and 
a minimum of 7 members. A single person could not incorporate a Company 
previously. 
 
But now as per Section 2(62) of the Company’s Act 2013, a company can be formed 
with just 1 Director and 1 member. It is a form of a company where the compliance 
requirements are lesser than that of a private company. 
 
Definition of One Person Company  
Section 2(62) of Companies Act defines a one-person company as a company that 
has only one person as to its member. 
 
 The Minimum Requirements to Form an OPC 
1. Member – There is a minimum requirement of one member. 
The member should: 
? be a natural number 
? cannot be a minor 
? should be an Indian citizen 
? Should be resident of India 
 
2. Director – There is a minimum requirement of minimum one director and a 
maximum of 15. The member and the director can be the same person or different 
persons. Generally, the director will be paid remuneration and the profit part goes 
to the member. The director will take care of the management of the company. 
 
Page 2


One Person Company 
Introduction 
A new concept has been introduced in the Company’s Act 2013, about the One 
Person Company (OPC). In a Private Company, a minimum of 2 Directors and 
Members are required whereas in a Public Company, a minimum of 3 Directors and 
a minimum of 7 members. A single person could not incorporate a Company 
previously. 
 
But now as per Section 2(62) of the Company’s Act 2013, a company can be formed 
with just 1 Director and 1 member. It is a form of a company where the compliance 
requirements are lesser than that of a private company. 
 
Definition of One Person Company  
Section 2(62) of Companies Act defines a one-person company as a company that 
has only one person as to its member. 
 
 The Minimum Requirements to Form an OPC 
1. Member – There is a minimum requirement of one member. 
The member should: 
? be a natural number 
? cannot be a minor 
? should be an Indian citizen 
? Should be resident of India 
 
2. Director – There is a minimum requirement of minimum one director and a 
maximum of 15. The member and the director can be the same person or different 
persons. Generally, the director will be paid remuneration and the profit part goes 
to the member. The director will take care of the management of the company. 
 
3. Nominee – There is a minimum requirement of one nominee. Written consent of 
the nominee in INC-3 is mandatory. The same is filed with the ROC. The nominee of 
one OPC cannot start his own OPC. A nominee at a later stage may withdraw his 
nomination if he desires so. The nominee should communicate about the intention 
to withdraw his nomination to the member and the member will further intimate 
the same to the Board within 15 days. The Board, in turn, informs the ROC within 30 
days in INC-4. It is very important to note that, the member should appoint a new 
nominee. An OPC cannot function without the presence of the nominee. 
 
Difference between Proprietorship and OPC 
Particulars 
 
Proprietorship One Person Company 
Registration Not Compulsory 
Can be registered under MCA and 
Companies Act 2013 
Legal status of 
entity 
Not considered as a 
separate legal entity 
Separate legal entity 
Members liability Unlimited liability Limited to the extent of share capital 
Minimum number 
of member 
Sole Proprietorship Minimum number of 1 person 
Maximum number 
of members 
Maximum 1 person Maximum 2 person 
Foreign ownership Not allowed 
Allowed if one is the director and 
the other is the nominee. Both the 
director and the nominee cannot be 
foreign citizens 
Transferability Not allowed Allowed to 1 person only 
Survival 
comes to end on death 
or retirement of the 
member 
Existence is independent of 
directors or nominee 
Taxation Taxed as an individual 
Tax rate is 30% on profits plus cess 
and surcharge 
 
Page 3


One Person Company 
Introduction 
A new concept has been introduced in the Company’s Act 2013, about the One 
Person Company (OPC). In a Private Company, a minimum of 2 Directors and 
Members are required whereas in a Public Company, a minimum of 3 Directors and 
a minimum of 7 members. A single person could not incorporate a Company 
previously. 
 
But now as per Section 2(62) of the Company’s Act 2013, a company can be formed 
with just 1 Director and 1 member. It is a form of a company where the compliance 
requirements are lesser than that of a private company. 
 
Definition of One Person Company  
Section 2(62) of Companies Act defines a one-person company as a company that 
has only one person as to its member. 
 
 The Minimum Requirements to Form an OPC 
1. Member – There is a minimum requirement of one member. 
The member should: 
? be a natural number 
? cannot be a minor 
? should be an Indian citizen 
? Should be resident of India 
 
2. Director – There is a minimum requirement of minimum one director and a 
maximum of 15. The member and the director can be the same person or different 
persons. Generally, the director will be paid remuneration and the profit part goes 
to the member. The director will take care of the management of the company. 
 
3. Nominee – There is a minimum requirement of one nominee. Written consent of 
the nominee in INC-3 is mandatory. The same is filed with the ROC. The nominee of 
one OPC cannot start his own OPC. A nominee at a later stage may withdraw his 
nomination if he desires so. The nominee should communicate about the intention 
to withdraw his nomination to the member and the member will further intimate 
the same to the Board within 15 days. The Board, in turn, informs the ROC within 30 
days in INC-4. It is very important to note that, the member should appoint a new 
nominee. An OPC cannot function without the presence of the nominee. 
 
Difference between Proprietorship and OPC 
Particulars 
 
Proprietorship One Person Company 
Registration Not Compulsory 
Can be registered under MCA and 
Companies Act 2013 
Legal status of 
entity 
Not considered as a 
separate legal entity 
Separate legal entity 
Members liability Unlimited liability Limited to the extent of share capital 
Minimum number 
of member 
Sole Proprietorship Minimum number of 1 person 
Maximum number 
of members 
Maximum 1 person Maximum 2 person 
Foreign ownership Not allowed 
Allowed if one is the director and 
the other is the nominee. Both the 
director and the nominee cannot be 
foreign citizens 
Transferability Not allowed Allowed to 1 person only 
Survival 
comes to end on death 
or retirement of the 
member 
Existence is independent of 
directors or nominee 
Taxation Taxed as an individual 
Tax rate is 30% on profits plus cess 
and surcharge 
 
 
Important Points: 
1. We can only incorporate only one OPC. The law does not permit the 
incorporation of more than one OPC by the same owner. This is the same 
case with regards to the nominee of an OPC also. A nominee of an OPC 
cannot be a nominee of another OPC. 
2. A minor cannot become a nominee or can hold shares of a beneficial interest 
in an OPC. 
3. An OPC cannot enjoy the status of an OPC after achieving the ceiling limit as 
prescribed by the Companies Act, 2013. The rules state that where the paid-
up capital of a PC exceeds Rs. 50 lakhs and its average annual turnover 
exceed Rs.2 crores. Upon crossing the above-mentioned threshold it should 
be converted to a private or public company. The conversion should take 
place within 6 months. 
4. It cannot voluntarily convert into a private or public company unless it has 
completed two years from the date of incorporation except in point (3). 
5. Many of us feel that the cost of registration is cheaper than that of the 
private company. But in practice, that is not the case. The cost of registration 
depends upon the authorized capital. 
6. OPC shall not carry out non-banking financial investment activities. 
7. OPC cannot be converted or incorporated into a section 8 Company. 
8. OPC shall not invest into the securities of Body Corporate. 
9. Mandatory Rotation of Auditor after expiry of Maximum term is not 
applicable. 
10.  OPC shall not require to constitute AGM. 
 
Features of a One Person Company 
a. Private company: Section 3(1) (c) of the Companies Act says that a single 
person can form a company for any lawful purpose. It further describes OPCs 
as private companies. 
b. Single-member: OPCs can have only one member or shareholder, unlike other 
private companies. 
Page 4


One Person Company 
Introduction 
A new concept has been introduced in the Company’s Act 2013, about the One 
Person Company (OPC). In a Private Company, a minimum of 2 Directors and 
Members are required whereas in a Public Company, a minimum of 3 Directors and 
a minimum of 7 members. A single person could not incorporate a Company 
previously. 
 
But now as per Section 2(62) of the Company’s Act 2013, a company can be formed 
with just 1 Director and 1 member. It is a form of a company where the compliance 
requirements are lesser than that of a private company. 
 
Definition of One Person Company  
Section 2(62) of Companies Act defines a one-person company as a company that 
has only one person as to its member. 
 
 The Minimum Requirements to Form an OPC 
1. Member – There is a minimum requirement of one member. 
The member should: 
? be a natural number 
? cannot be a minor 
? should be an Indian citizen 
? Should be resident of India 
 
2. Director – There is a minimum requirement of minimum one director and a 
maximum of 15. The member and the director can be the same person or different 
persons. Generally, the director will be paid remuneration and the profit part goes 
to the member. The director will take care of the management of the company. 
 
3. Nominee – There is a minimum requirement of one nominee. Written consent of 
the nominee in INC-3 is mandatory. The same is filed with the ROC. The nominee of 
one OPC cannot start his own OPC. A nominee at a later stage may withdraw his 
nomination if he desires so. The nominee should communicate about the intention 
to withdraw his nomination to the member and the member will further intimate 
the same to the Board within 15 days. The Board, in turn, informs the ROC within 30 
days in INC-4. It is very important to note that, the member should appoint a new 
nominee. An OPC cannot function without the presence of the nominee. 
 
Difference between Proprietorship and OPC 
Particulars 
 
Proprietorship One Person Company 
Registration Not Compulsory 
Can be registered under MCA and 
Companies Act 2013 
Legal status of 
entity 
Not considered as a 
separate legal entity 
Separate legal entity 
Members liability Unlimited liability Limited to the extent of share capital 
Minimum number 
of member 
Sole Proprietorship Minimum number of 1 person 
Maximum number 
of members 
Maximum 1 person Maximum 2 person 
Foreign ownership Not allowed 
Allowed if one is the director and 
the other is the nominee. Both the 
director and the nominee cannot be 
foreign citizens 
Transferability Not allowed Allowed to 1 person only 
Survival 
comes to end on death 
or retirement of the 
member 
Existence is independent of 
directors or nominee 
Taxation Taxed as an individual 
Tax rate is 30% on profits plus cess 
and surcharge 
 
 
Important Points: 
1. We can only incorporate only one OPC. The law does not permit the 
incorporation of more than one OPC by the same owner. This is the same 
case with regards to the nominee of an OPC also. A nominee of an OPC 
cannot be a nominee of another OPC. 
2. A minor cannot become a nominee or can hold shares of a beneficial interest 
in an OPC. 
3. An OPC cannot enjoy the status of an OPC after achieving the ceiling limit as 
prescribed by the Companies Act, 2013. The rules state that where the paid-
up capital of a PC exceeds Rs. 50 lakhs and its average annual turnover 
exceed Rs.2 crores. Upon crossing the above-mentioned threshold it should 
be converted to a private or public company. The conversion should take 
place within 6 months. 
4. It cannot voluntarily convert into a private or public company unless it has 
completed two years from the date of incorporation except in point (3). 
5. Many of us feel that the cost of registration is cheaper than that of the 
private company. But in practice, that is not the case. The cost of registration 
depends upon the authorized capital. 
6. OPC shall not carry out non-banking financial investment activities. 
7. OPC cannot be converted or incorporated into a section 8 Company. 
8. OPC shall not invest into the securities of Body Corporate. 
9. Mandatory Rotation of Auditor after expiry of Maximum term is not 
applicable. 
10.  OPC shall not require to constitute AGM. 
 
Features of a One Person Company 
a. Private company: Section 3(1) (c) of the Companies Act says that a single 
person can form a company for any lawful purpose. It further describes OPCs 
as private companies. 
b. Single-member: OPCs can have only one member or shareholder, unlike other 
private companies. 
c. Nominee: A unique feature of OPCs that separates it from other kinds of 
companies is that the sole member of the company has to mention a nominee 
while registering the company. 
d. No perpetual succession: Since there is only one member in an OPC, his death 
will result in the nominee choosing or rejecting to become its sole member. 
This does not happen in other companies as they follow the concept of 
perpetual succession. 
e. Minimum one director: OPCs need to have minimum one person (the 
member) as director. They can have a maximum of 15 directors. 
f. No minimum paid-up share capital: Companies Act, 2013 has not prescribed 
any amount as minimum paid-up capital for OPCs. 
Steps for Incorporation of an One Person 
Company (OPC) 
1. The first step is the directors have to obtain Digital Signature (DSC) and Director 
Index Number (DIN). DIN is mandatory for all directors. To apply DIN the person 
must have a PAN. DIN is applied using e-form DIR-3 downloaded from MCA. The 
DSC obtained should be registered with the MCA portal. 
2. The second step is to reserve a unique name for the OPC through RUN (Reserve 
Unique Name) or SPICe-32. This is done through form no. INC-1. Only after 
receiving the Certificate of Registration from the ROC, the OPC can enter into a 
contract or business in the proposed name. 
3. Consent letter has to be obtained from the nominee in INC-3. The nominee will 
become the member of an OPC when the owner loses his capacity to contract. The 
name of the nominee is to be mentioned. 
4. Now we have to draft the Memorandum of Association (MOA) and Articles of 
Association (AOA). The models for AOA are given in tables F, G, H and J of schedule 
I. If the AOA has entrenchment provisions, it has to be intimated to the Registrar 
through Form INC-2. This is in the case of newly incorporated OPC. The MOA and 
AOA have to be signed. The sign should be attested by a witness. The address and 
occupation of the member who signs are mandatory. INC-33 and INC-34 have to 
be prepared and uploaded. 
Page 5


One Person Company 
Introduction 
A new concept has been introduced in the Company’s Act 2013, about the One 
Person Company (OPC). In a Private Company, a minimum of 2 Directors and 
Members are required whereas in a Public Company, a minimum of 3 Directors and 
a minimum of 7 members. A single person could not incorporate a Company 
previously. 
 
But now as per Section 2(62) of the Company’s Act 2013, a company can be formed 
with just 1 Director and 1 member. It is a form of a company where the compliance 
requirements are lesser than that of a private company. 
 
Definition of One Person Company  
Section 2(62) of Companies Act defines a one-person company as a company that 
has only one person as to its member. 
 
 The Minimum Requirements to Form an OPC 
1. Member – There is a minimum requirement of one member. 
The member should: 
? be a natural number 
? cannot be a minor 
? should be an Indian citizen 
? Should be resident of India 
 
2. Director – There is a minimum requirement of minimum one director and a 
maximum of 15. The member and the director can be the same person or different 
persons. Generally, the director will be paid remuneration and the profit part goes 
to the member. The director will take care of the management of the company. 
 
3. Nominee – There is a minimum requirement of one nominee. Written consent of 
the nominee in INC-3 is mandatory. The same is filed with the ROC. The nominee of 
one OPC cannot start his own OPC. A nominee at a later stage may withdraw his 
nomination if he desires so. The nominee should communicate about the intention 
to withdraw his nomination to the member and the member will further intimate 
the same to the Board within 15 days. The Board, in turn, informs the ROC within 30 
days in INC-4. It is very important to note that, the member should appoint a new 
nominee. An OPC cannot function without the presence of the nominee. 
 
Difference between Proprietorship and OPC 
Particulars 
 
Proprietorship One Person Company 
Registration Not Compulsory 
Can be registered under MCA and 
Companies Act 2013 
Legal status of 
entity 
Not considered as a 
separate legal entity 
Separate legal entity 
Members liability Unlimited liability Limited to the extent of share capital 
Minimum number 
of member 
Sole Proprietorship Minimum number of 1 person 
Maximum number 
of members 
Maximum 1 person Maximum 2 person 
Foreign ownership Not allowed 
Allowed if one is the director and 
the other is the nominee. Both the 
director and the nominee cannot be 
foreign citizens 
Transferability Not allowed Allowed to 1 person only 
Survival 
comes to end on death 
or retirement of the 
member 
Existence is independent of 
directors or nominee 
Taxation Taxed as an individual 
Tax rate is 30% on profits plus cess 
and surcharge 
 
 
Important Points: 
1. We can only incorporate only one OPC. The law does not permit the 
incorporation of more than one OPC by the same owner. This is the same 
case with regards to the nominee of an OPC also. A nominee of an OPC 
cannot be a nominee of another OPC. 
2. A minor cannot become a nominee or can hold shares of a beneficial interest 
in an OPC. 
3. An OPC cannot enjoy the status of an OPC after achieving the ceiling limit as 
prescribed by the Companies Act, 2013. The rules state that where the paid-
up capital of a PC exceeds Rs. 50 lakhs and its average annual turnover 
exceed Rs.2 crores. Upon crossing the above-mentioned threshold it should 
be converted to a private or public company. The conversion should take 
place within 6 months. 
4. It cannot voluntarily convert into a private or public company unless it has 
completed two years from the date of incorporation except in point (3). 
5. Many of us feel that the cost of registration is cheaper than that of the 
private company. But in practice, that is not the case. The cost of registration 
depends upon the authorized capital. 
6. OPC shall not carry out non-banking financial investment activities. 
7. OPC cannot be converted or incorporated into a section 8 Company. 
8. OPC shall not invest into the securities of Body Corporate. 
9. Mandatory Rotation of Auditor after expiry of Maximum term is not 
applicable. 
10.  OPC shall not require to constitute AGM. 
 
Features of a One Person Company 
a. Private company: Section 3(1) (c) of the Companies Act says that a single 
person can form a company for any lawful purpose. It further describes OPCs 
as private companies. 
b. Single-member: OPCs can have only one member or shareholder, unlike other 
private companies. 
c. Nominee: A unique feature of OPCs that separates it from other kinds of 
companies is that the sole member of the company has to mention a nominee 
while registering the company. 
d. No perpetual succession: Since there is only one member in an OPC, his death 
will result in the nominee choosing or rejecting to become its sole member. 
This does not happen in other companies as they follow the concept of 
perpetual succession. 
e. Minimum one director: OPCs need to have minimum one person (the 
member) as director. They can have a maximum of 15 directors. 
f. No minimum paid-up share capital: Companies Act, 2013 has not prescribed 
any amount as minimum paid-up capital for OPCs. 
Steps for Incorporation of an One Person 
Company (OPC) 
1. The first step is the directors have to obtain Digital Signature (DSC) and Director 
Index Number (DIN). DIN is mandatory for all directors. To apply DIN the person 
must have a PAN. DIN is applied using e-form DIR-3 downloaded from MCA. The 
DSC obtained should be registered with the MCA portal. 
2. The second step is to reserve a unique name for the OPC through RUN (Reserve 
Unique Name) or SPICe-32. This is done through form no. INC-1. Only after 
receiving the Certificate of Registration from the ROC, the OPC can enter into a 
contract or business in the proposed name. 
3. Consent letter has to be obtained from the nominee in INC-3. The nominee will 
become the member of an OPC when the owner loses his capacity to contract. The 
name of the nominee is to be mentioned. 
4. Now we have to draft the Memorandum of Association (MOA) and Articles of 
Association (AOA). The models for AOA are given in tables F, G, H and J of schedule 
I. If the AOA has entrenchment provisions, it has to be intimated to the Registrar 
through Form INC-2. This is in the case of newly incorporated OPC. The MOA and 
AOA have to be signed. The sign should be attested by a witness. The address and 
occupation of the member who signs are mandatory. INC-33 and INC-34 have to 
be prepared and uploaded. 
5. The next step is the filing of the application with the Registrar of Companies 
(ROC). The form is INC-2. It is the incorporation form. INC-3 is a part of this. We 
should fill all the details with the required attachments. 
6. The affidavit in Form No. INC-9 
The basic mandatory compliance are 
? a. Atleast one Board Meeting in each half of calendar year and time gap 
between the two Board Meetings should not be less than 90 days. 
? b. Maintenance of proper books of accounts. 
? c. Statutory audit of Financial Statements. 
? d. Filing of business income tax return every year before 30th September . 
? e. Filing of Financial Statements in Form AOC-4 and ROC Annual return in 
Form MGT 7.