To form a private limited company, you require a minimum number of 2 directors and shareholders. If you are not finding anyone to join you, then better to start your business as a one person company (OPC).
Similar to private limited, in a OPC both director and member can be the same person.
While registering, you should not get certain things wrong as your application for registration may get rejected or delayed. In this article, we have listed top 10 things to remember while registering a One Person Company or OPC in India.
Name of the One Person Company
While applying for name approval, government will not know what kind of company you are going to register as it’s the first step before submitting SPICe form along with documents for registration.
Therefore, if you are planning to register a One Person Company or OPC, then following points need to be remembered while applying for name approval;
- The word (OPC) should be placed in between the company name before the word private limited. For instance, something like, ABC technology (OPC) Private Limited, XYZ web solutions (OPC) Private Limited. Please note, name should end with words “private limited”.
- Name should not be identical with or resemble too nearly to the name of an existing company.
- Name should not be too general
In addition to above three points, all other provisions are to be followed as per companies act 2013.
In this regard, we suggest you to read our earlier article how to choose your company name. While suggesting names to your chartered accountant, cost accountant, CS or advocate, you must keep these things in mind.
Restrictions on OPC
One person company or OPC has certain disadvantages due to which a private limited company is a preferred choice. Here are certain important restrictions:
- OPC can’t have more than 15 directors.
- A One Person Company can’t have more than one investor.
- OPC can’t have more than 50 lakhs paid up capital and 2 crore turnover.
- A One Person Company is not allowed to carry out Non-Banking Financial Investment activities including investment in securities of any body-corporate.
- OPC is not allowed to get converted to a section 8 company.
If you are OK with the limitations of the OPC, then you can register it with the government or else incorporate a private limited company.
Compulsory conversion to Private limited company
As per the provisions of companies act 2013, a OPC has to compulsorily get converted to private limited if following conditions are satisfied:
- Paid up share capital has exceeded to Rs 50 lakhs, and
- Turnover of the company crossed 2 crore during the last financial year.
If both the above conditions satisfied, then One Person Company must get converted to Private Limited. This means you can’t operate it as a OPC.
Restriction to raise fund from investors
The first and foremost criteria of a OPC is that it should have only one member or Shareholder holding 100% of the company shares.
If your want additional funding to expand your business or someone wants to join in by holding a portion of share capital, then it’s not possible as a OPC can’t have more than one member.
To get investors into your one person company, you either have to wait for 2 years or satisfy both conditions (discussed above) to get converted to private limited.
Main Object of your business
Main object of the One Person Company define the type of business activities it will undertake post incorporation.
For instance, if you are planning to form it as a information technology company, then the main object clause of MOA should be drafted in such a way that you can carry all type of business related to information technology.
If a particular type of activity is not mentioned in the main object clause, then the OPC can’t do that business. In case you want to do that business, then certain procedures are to be followed and forms are to be filed to alter the MOA. It takes time and money.
To avoid such type of difficulty, we suggest you to draft it right at the time of registration.
You should make sure that the main object clause of MOA drafted in such a way that it allow you to do almost all businesses in your area of expertise.
Director details in SPICe and AOA
In a OPC either the member can be appointed as a director or any other person selected by the member.
Whoever has been selected as a director, you must mention his/her details in the SPICe form and AOA.
You are also required to attach following documents of the director:
- Scanned copy of the permanent account number or PAN
- Scanned copy of Identity proof – voter ID/DL/Passport
- Scanned copy of address proof – Bank statement/telephone bill/mobile bill/electricity bill not older than 2 months
Based on what you have filled up in the SPICe form, DIN gets issued after approval and the concern person gets appointed as a director of the company.
You can change your director at any time after registration, but we suggest you to choose the right person who can manage the company and fill all the details correctly in order to avoid any future issues.
Registered office address
While filing SPICe form for OPC registration, you will be asked to fill up your office address. It can either be selected as a correspondence or registered office address.
If you select correspondence address, then the form will not be asking for any supporting documents to attach. However, in this case you need to file e-form INC-22 for registered office address within 30 days from the date of incorporation along with lease agreement/house ownership proof, utility bill and NOC from the house owner.
Failure in filing the e-form INC-22, will attract additional fee depending on the days of delay.
In case you want the selected address as registered office at the time of filing SPICe, then above documents are to be attached with the SPICe form and you need not file separate form (INC-22) for registered office.
Therefore, based on your requirement, you should make sure that the address has been correctly filled and registered/correspondence option has been selected based on your choice.
Paid up and authorised share capital
Paid up share capital is the amount that you as a member will be investing into the company.
Authorized share capital is the maximum limit approved by ROC up to which you can raise your paid-up share capital money.
You can raise limits of both paid-up and authorized share capital after registration.
However, we suggest you to make sure that the amount has been correctly entered as you have to deposit money equal to your paid up share capital into the bank account of the OPC after registration.
You should make sure that the amount of paid up capital in SPICe form is exactly matching with the amount you would like to invest.
Nomine is a person who gets appointed as a member of the One Person company in the event of death of the sole member. This means he/she will be 100% owner of the company when the sole member died.
A nominee must be a indian citizen and resident in India. He or she should not be a minor. A person for this purpose, will be considered as resident in India, if that person has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year.
In case of one person company the subscriber at the time of registration needs to mention the name of the other person nominated by him to accept the obligation of member in case of death or incapability of the subscriber.
If you have hired a consultant to draft documents for registration, then make sure that the right name has been placed in the nominee section.
Before applying for registration, you need to make sure that following things are correctly done before filing SPICe:
- Scanned copy of nominee’s PAN, ID, and address proof along with form INC-3 is attached to SPICe. Make sure that all such documents are legible.
- At the end page of Memorandum of association, you shall fill up the name of the nominee and other details.
- Proposed nominee should not be a nominee in any other One person company.
You can change the name of the nominee at any time you want. Any changes to the nominee should not be considered as change to the memorandum of association.
Documents required to form One Person Company
If you have decided to form a OPC, then make sure that following documents are available before processing your application:
- Consent from the nominee in form INC-3.
- Scanned copy of director, member and nominee’s PAN card. It’s a must.
- Residential address proof of nominee, director and member. Either bank statement, electricity bill, telephone or mobile bill not older than 2 months are accepted as residential address proof.
- Director, member and nominee’s proof of identity. Either voter ID, Passport pr Driving License is accepted as ID proof.
- Digital signature certificate of director and member. If director and member is the same person, then one DSC is required.
We suggest you to take help either from a practicing chartered accountant, cost accountant, company secretary or advocate for registration of one person company or OPC. You must keep above documents ready before approaching them.
In addition to above documents, the professional engaged for OPC incorporation, needs to prepare certain other legal documents for filing as an attachment to the SPICe form. Ask them to send you a copy for your review before uploading the same along with SPICe form.