In the Company Act of 2013, a new concept known as the One Person Company was introduced (OPC). A minimum of two directors and two members are necessary in a private company, whereas a minimum of three directors and seven members are required in a public company. Previously, a single person could not form a corporation.

What is One Person Company?

A one-person company (OPC) is a business formed by a single individual. A single person could not form a business prior to the implementation of the Companies Act of 2013. If a person wished to start a business, he or she could only do so as a sole proprietorship because forming a company required a minimum of two directors and members.

A company can be founded with just one director and one member, according to section 2(62) of the Company Act 2013. It is a type of corporation with fewer compliance obligations than a private corporation.

According to the Companies Act of 2013, an individual can start a business with just one member and one director. It is possible for the director and member to be the same individual. As a result, a one-person company means that a single individual, whether a resident or an NRI, can form a business that combines the qualities of a corporation with the advantages of a sole proprietorship.

OPC registration process:

 Step 1: Apply for DSC

The first step is to obtain the suggested Director’s Digital Signature Certificate (DSC), which requires the following documents:

• Address proof
• Photo
• Email ID
• Aadhaar card
• PAN card
• Phone number

Step 2: Apply for DIN

Following the creation of the Digital Signature Certificate (DSC), the next step is to apply for the proposed Director’s Director Identification Number (DIN) in SPICe form, along with the Director’s name and address evidence. Only established businesses are eligible to use Form DIR-3. It means that in the beginning of January 2018, the applicant will not be required to file FormDIR-3 individually. DIN can now be applied within the SPICe form for up to three directors.

Step 3: Application of name approval

The next stage in forming an OPC is to choose a name for the business. The company’s name will be “ABC (OPC) Private Limited”.

In the FormSPICe +32 application, the name can be authorized. In the FormSPICe+32 application, you can only list one preferred name and explain why it’s important to keep it. If the name is denied, a new one can be submitted via a new FormSPICe+32 application.

We will proceed to the following step once the MCA has authorized the name.

Step 4: Documents needed

• The Memorandum of Association (MOA) outlines the company’s goals and objectives as well as the business for which it will be incorporated.
• The Articles of Association (AoA) establishes the company’s operating procedures.
• Since there is only one director and one member, a nominee on behalf of such a person must be nominated so that if he becomes incompetent or dies and is unable to discharge his obligations, the nominee will act in his place. Along with his PAN card and Aadhaar card, his consent in Form INC-3 would be taken.
• Proof of the proposed Company’s registered office, as well as proof of ownership and a letter of authorization from the owner.
• Forms INC-9 and DIR-2 are used to declare and consent to the prospective Director.

Step 5: Filing forms with MCA

All of these documents together with the Directors and professionals DSCs, will be added to the SPICe Form, SPICe-MOA and SPICe-AOA and posted to the MCA site for approval. At the moment of the company’s incorporation, the PAN number and TAN are generated automatically. It is not necessary to submit separate applications for getting a PAN and a TAN.

Step 6: Issue of certificate of incorporation

The registrar of companies (ROC) will issue a certificate of incorporation after verification and we will be able to start our firm.

Advantages of OPC:

•  Easy formation

Incorporation of an OPC is easy as there is minimum number of member and director is one as compared to a private company where minimum requirement of member and director is 2

• Separate legal entity

It has a separate legal entity. As a result, it has the ability to sue or be sued in its own name.

• Access to funds

Compared to a sole proprietorship, banks and financial organisations prefer to lend to businesses.

• Less compliance

Compliance requirements are less stringent for an OPC than they are for a private or public firm.

• No requirement of board or general meeting

There is no necessity for an OPC to hold board meetings if there is only one director. Since there is only one member, it’s exempt from the general meeting.

• Quick decision making

Decision-making and implementation are quick because there is only one member and in most cases, only one director, therefore there is no conflict of interest.

Disadvantages of OPC

•  Suitable for small firms

The OPC structure is only suitable for small businesses. Large scale businesses demand a lot of money which cannot be met by a single person.

• Lack of expertise

Because the strategy is geared for small firms, it suffers from a lack of expertise. Since the company is managed by a single member the managerial experience accessible to a private or public corporation is limited.

• Ownership and management

When a corporation is run by a single member with no one to question them, it can lead to unethical business practises.

Timelines for OPC registration

 The prospective director’s DSC and DIN can be obtained in one day. An OPC’s certificate of incorporation takes 3-5 days to be obtained. The entire incorporation process for an OPC takes about ten days, depending on departmental approval and reply from the proper department.

Summary:

 Only a natural person who is an Indian citizen and also resides in India is qualified to serve an OPC as a member and nominee. The phrase “resident in India” refers to a person who has spent at least one hundred and eighty two days in India during the previous financial year.