Before the amendments made to the Companies Act, an individual could not register a company on a single name. Instead, they needed to register as a proprietorship that still needed a minimum of two directors and two members. So, a single person could not incorporate a company. However, after the Company’s Act 2013, an individual can register themselves as a One Person Company. We explain the One Person Company Registration process.
Advantages of an OPC
● Incorporating a Single Member Company in India
In India, you can now register a company with just one director and one member as per Section 2(62) of the Company’s Act 2013. A One Person Company has its own share of advantages. Since only a single person is registering, gathering compliances are easier and you need not worry about several documentations of multiple individuals.
Moreover, in a One Person Company origination, you need to have one director and one member. But, as per the Company’s Act of 2013, the director and the member can be one and the same person. With an OPC, the individual who has incorporated a company has the features of a company and the benefits of sole proprietorship.
● Legal Status of an OPC
An OPC has the same benefits as a private limited company where the liabilities of the company are limited to the company itself. A member or the director of the company gains immunity in the eyes of law and they are subject to pay only the amount according to their shares in the company. Creditors can take the company to court, but not the member or the director.
● Raising Capital
Since the compliances are limited only to one person in an OPC, raising capital via angel investors, venture capitalist, and other financial institutions is easier. Banks prefer giving loans to an OPC or a proprietorship firm more than partnership firms and thus, it becomes easier to raise capital for an OPC.
● Perpetual Succession
Since the OPC is owned by a single person, it becomes easier to register a nominee. So, in case of demise of the incorporator, the nominee is handed over the succession of the company without much paperwork.
● Minimum Compliances
There are several annular compliances that a private limited company as well as other forms of companies need to regulate. For instance, an OPC is exempt from preparing the cash flow statement. Moreover, the Secretary of any other form of company needs to sign the books of accounts and annual returns. A single director or the member can do the same in an OPC.
Disadvantages of an OPC
In an OPC, only one member is allowed at any given time, so entrepreneurs who have an idea of expansion in the future, they cannot add more shareholders to raise capital in the future. Furthermore, an OPC cannot carry out Non-Banking Financial Investment activities. An OPC cannot convert into a company with charitable objects.
OPC Registration Process
The first process of applying for an OPC is to obtain a Digital Signature Certificate under the name of the owner or director of the One Person Company. You will need the following documents to apply for DSC;
● Address Proof
● Aadhar Card
● PAN Card
● Email ID
● Contact Number
After receiving the DSC, the owner of an OPC must apply for DIN (Director Identification Number). The process involves filling the SPICe form and you will need to submit your documents containing address proof, and name of the director.
3. Approving The Name of an OPC
Once the name of the company is determined, you will need to register it and approve the name of your OPC. Form SPICe+ 32 application is required to be submitted. The owner has to determine the significance of the name in the same form and await approval. In case the name is rejected, the owner has to change the name and submit Form SPICe+ 32 again to the Ministry of Corporate Affairs.
4. Required Documentation
● The owner needs to prepare a Memorandum of Association containing the type of business for which the company is incorporated. Along with the MoA, the owner must file Articles of Association that states the laws on which the company will operate.
● To ensure that the company does not become inoperable, a nominee needs to be registered while incorporating an OPC. You will need to submit the consent form of the nominee along with their PAN and Aadhar Card.
● Furthermore, the owner has to submit the proof of registered office, and the proof of ownership of the premises or in case the office is rented, they will need to submit an NOC from the owner as well as rent agreement.
All of these documents need to be submitted to the Ministry of Corporate Affairs. Once the documents are approved, an OPC obtains TAN and PAN under the name of the company. Once all the documents are approved, the Ministry of Corporate Affairs will issue the certificate of incorporation to the owner.