One Person Company (OPC)
OPC is a modified version of sole proprietorship firm. This gives the promoter of the company an invaluable advantage of limited liability & the company can have continuous existence. The incorporation of OPC is done through Ministry of Corporate Affairs. The very good thing is that it has very limited compliance like not even an audited annual returns need to be submitted to MCA. The company can nominate any other person as director without executive powers.
Eligibility Criteria :
The following are the eligible criteria to incorporate the OPC
The rules for incorporation of one person company requires that the sole member of a One Person Company should include the name of a nominee in the Companies MOA, who will undertake the entity after the expiry or incapacity of the former. Moreover, the document must contain the written consent of the nominee, which must also be filed with the Registrar during incorporation along with the MOA and AOA.
Withdrawal of Consent :
The nominee is entitled to withdraw his/her consent, in which case the sole member is required to nominate another member as a legal heir within 15 days of the notice of withdrawal. The nomination of new personnel must be intimated to the Company through a written consent in Form INC-3. The Company, in turn, is required to file the notice of withdrawal of consent along with the intimation of the new nominee with the Registrar in Form INC 4.
Change of Nominee :
The sole member of a ‘One Person Company’ is empowered to change the nominee of the Company for any reason whatsoever, by providing notice in writing to the Company. Again, the new nominee must consent to the nomination in Form INC 3, and the Company must file the notice of change and consent of the nominee with the Registrar along with the applicable fee, within 30 days of receiving the intimation of change.
Nominee Appointment :
If a nominee becomes in-charge of the one person company due to the cessation of the original member’s term owing to the death or incapacity of the latter, the new member must appoint a nominee as a replacement.
If a One Person Company or an officer of such Company is not compliant with the specified regulations, the entity or the officer will incur penalties which could be as high as Rs 10,000. Further, the penalty will be increased by a fine of Rs 1,000 for each day of default.
Incorporation Process :
Obtaining Digital Signature :
Digital Signature certificate must be obtained for the sole promoter and the nominee for processing the incorporation. Application for DSC would require passport size photos of the applicant, identity proof and address proof.
Name Availability :
In parallel to the Digital Signature application, the application for name reservation can be submitted to the MCA. Name approval applications are processed by the MCA in 24-72 hours. The name suggested must conform to the naming standards, and the name of the OPC must end or include the words (OPC).
After obtaining name approval, incorporation application can be filed to the MCA with signed Memorandum of Association (MOA) and Articles of Association (AOA). Further, the identity proof, address proof and residence proof of the member and nominee would be required. In addition to the MOA, AOA, identity proof, address proof, other incorporation documents like affidavits and declaration of the sole promoter must be submitted. Further, the consent of the nominee director must also be attached in Form INC-3.
Procuring OPC PAN
The Next step that comes after the incorporation of a One Person Company is obtaining an OPC PAN. You can apply for PAN online after the incorporation of your company, and receive the PAN Allotment Letter thereafter. Then, you need to get the PAN Allotment Letter signed by the company director, sealed with the company’s rubber stamp. Then you need to send it to the NSDL office through courier. Furthermore, the PAN Card will be allotted to you in about 15 days after your application has been received by the concerned officials.
Commencement of Business
Once the incorporation certificate is obtained, the OPC would initiate the process for bank account opening. Once, the equity capital is infused into the Bank’s current account; the Company can file for the commencement of business with the MCA. Commence of Business certificate must be obtained with 180 days of incorporation to avoid a penalty.
Annual Compliance :
Appointing an Auditor
All companies are required to appoint the first auditor of the company, within 30 days of incorporation. Also, in case of OPC as well, an Auditor must be appointed by the director of the OPC for auditing the financial statements of the company.
Holding Annual General Meeting
One Person Company is exempt from holding an annual general meeting or extraordinary general meetings. The resolution signed by the single Director and entered into the minutes book is sufficient, in lieu of a General / Extraordinary General Meeting.
Maintaining Financial Statements
Every company in India is required to prepare and file financial statements that includes balance sheet, profit and loss account, cash flow statement, statement of changes in equity and explanatory notes. In case of One Person Company, cash flow statement is not required.
Usually, a company is required to file three forms with ROC. MGT 7, which contains details of shareholding structure, change in directorship and details of the transfer of shares during the year if any. Mandatory compliance for OPC includes filing of AOC 4, which contains details and annexure relating to Balance Sheet of the Company, Profit & Loss Account, Compliance Certificate, Registered Office Address, Register of Member, Shares and Debentures details, Debt details and information about the Management of the Company. ADT-1 for OPC is filed for appointment of Auditor in OPC.
Annual return consists of information and documents that include the Balance Sheet of the Company, Profit & Loss Account, OPC Compliance Certificate, Registered Office Address, Register of Member, Shares and Debentures details, Debt details and information about the Management of the Company. The annual return would also disclose the shareholding structure of the Company, changes in Directorship and details of transfers of securities.
The due date for filing of AOC-4 is within 180 days from close of financial year and for MGT-7 is within 60 days from the date of AGM along with list of documents as attachment. The form ADT-1 is filed within 30 days of its incorporation. Furthermore, such annual return has to be signed by the company secretary or where there is no CS, by the director of the company.
Compliance requirements under the Income Tax Act, 1961
One person company need to file their income tax return in Form ITR 6 for the financial year on or earlier than 30th September of the following financial year with the tax department. Additionally, along with the annual tax return filing, every OPC is required to get their accounts audited under income tax act 1961 if turnover exceeds the limit as specified in section 44AB.
In addition to above compliance, a One Person Company may also require complying with TDS regulations, GST regulations, PF and ESI regulations and others based on the requirements. We suggest you to consult your consultant to help you with this matter.