All you need to know One Person Company Registration
Section 3 of the 2013 Act corresponds to section 12 of the 1956 Act. While section 3 of the 2013 Act provides for formation of a private company and public company as was also provided in the 1956 Act, it additionally now also enables formation of a new entity ‘one person company’ (OPC).
The J.J. Irani Committee, the expert committee constituted by the Ministry of Corporate Affairs to advise the Government on the new Company Law has discussed in detail about the classification of companies in context of the changing economic and business environment locally as well as globally. The Committee in its report provides insight on the need for recognizing a One Person Company within the corporate legal framework. The portion of the report on OPC has been reproduced below for reference:
With increasing use of information technology and computers, emergence of the service sector, it is time that the entrepreneurial capabilities of the people are given an outlet for participation in economic activity. Such economic activity may take place through the creation of an economic person in the form of a company. Yet it would not be reasonable to expect that every entrepreneur who is capable of developing his ideas and participating in the market place should do it through an association of persons. We feel that it is possible for individuals to operate in the economic domain and contribute effectively. To facilitate this, the Committee recommends that the law should recognize the formation of a single person economic entity in the form of One Person Company.
Such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters.
The concept of ‘One Person Company’ may be introduced in the Act with following characteristics:-
a) OPC may be registered as a private Company with one member and may also have at least one director;
b) Adequate safeguards in case of death or disability of the sole person should be provided through appointment of another individual as Nominee Director. On the demise of the original director, the nominee director will manage the affairs of the company till the date of transmission of shares to legal heirs of the demised member.
c) Letters ‘OPC’ to be suffixed with the name of One Person Companies to distinguish it from other companies”.
Scope of section 3 of Companies Act, 2013
A company is a juristic person with separate identity and perpetual succession with the right to own properties in its own name; it is different from the owners who are called as shareholders. Its status as juristic person has to be recognized in law and therefore persons desirous to form a company have to subscribe to a memorandum and register the company with the Registrar of companies. Only when the company is registered, it can attain the status of a juristic entity. Normally the subscribers are called ‘promoters’. The requirements under s. 3 of the 2013 Act for formation of a private and public companies are the same as was under section 12 of the 1956 Act. In so far as a One Person Company is concerned, even though it will be a private company, there can be only one subscriber.
Proviso to section 3 of the Act contains special provisions relating formation of a One Person Company, which is enumerated below:
1. The memorandum of an OPC registration is to mention the name of the person, with his prior consent, who shall become the member of the company in the event of the subscriber’s death or incapacity to contract. The written consent of the person so nominated is to be filed with the Registrar.
2. The person so nominated shall have to the right to withdraw his consent in manner prescribed.
3. A member of the OPC may change the name of the person so nominated at any time after following the prescribed procedure.
4. The member has a duty to intimate to the company about the change in the name of the person so nominated. And the company has a duty to intimate the Registrar of such change.
5. The change in name of the person so nominated shall not be deemed to be an alteration of the memorandum.
Relevant Rules issued under Companies Act, 2013
The sections in Chapter II of the 2013 Act should be read with the Company Incorporation) Rules, 2014. While all 35 rules in the Companies (Incorporation) Rules, 2014 pertain to the incorporation of the company, Rules 3 to 7 pertain to One Person Company. These five rules are reproduced below. The full text of the Companies Incorporation) Rules, 2014 can be found in Appendix 2.
(1) Only a natural person who is an Indian citizen and resident in India.
(a) Shall be eligible to incorporate a One Person Company
(b) Shall be a nominee for the sole member of a One Person Company.
Explanation-For the purposes of this rule, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.
(2) No person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
(3). Where a natural person, being member in One Person Company in accordance with this rule becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the eligibility criteria specified in sub-rule (2) within a period of one hundred and eighty days.
(4)No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest.
(5) Such Company cannot be incorporated or converted into a company under section 8 of the Act.
(6) Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporates.
(7) No such company can convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.
4. Nomination by the subscriber or member of One Person Company. For the purposes of first proviso to sub-section (1) of section 3-
(1) The subscriber to the memorandum of a One Person Company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of that One Person Company.
(2) The name of the person nominated under sub-rule (1) shall be mentioned in the memorandum of One Person Company and such nomination in Form No. INC 2 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 and articles.
(3) 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.
Provided that the 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
(4) The company shall within thirty days of receipt of the notice of withdrawal of consent under sub-rule (3) 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.
(3) 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:
Provided that the company registration 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.
(6) Where the sole member of One Person Company ceases to be the member in the event of death or incapacity to contract and his nominee becomes 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 registration, and the 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.
If One Person Company or any officer of such company contravenes the provisions of these rules, One Person Company or any officer of the One Person Company registration shall be punishable with fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues. For more details about One Person Company Registration, kindly visit our web page and feel free to contact us. We are here to help you… Thanks for reading!!!!