One Person Company (OPC) is a recently introduced concept in India to promote business enterprises that are owned and managed by a single entrepreneur. OPC allows for a single individual to own and manage the business whereas other business entities like Partnership Firm, LLP i.e. Limited Liability Partnership, PLC i.e. Private Limited Company and Public Company require two or more individuals to partner and run a business. Therefore, OPC is a viable option for those looking to start a registered proprietorship firm instead of a PLC. Business can register for OPC or PLC on MCA Portal.
One Person Company v/s Private Limited Company
|Particulars||One Person Company||Private Limited Company|
|Recommended For||Individual Proprietor||Multiple Promoters|
|Minimum Owners||1 Owner & 1 Nominee||2 Shareholders|
|Maximum Owners||1 Owner||200 Shareholders|
|Board of Directors||At least 1 Director||At least 2 Directors|
|Shareholding||100% of shares held by a single person||100% of shares cannot be held by a single person. Minimum of two shareholders required|
|External Investment||Difficult to obtain||Easily Available|
|Compliance Requirements||Annual Return Filing. No Board Meetings if only one director & No General Meetings||Annual Return Filing, Board Meetings & General Meetings|
|NRI or Foreign Nationals||Only Indian Citizens and Indian Nationals are allowed to start||NRIs or Foreign Nationals are also allowed to start and manage|
|Mandatory Conversion||If annual turnover exceeds Rs. 2 crores or paid-up capital exceeds Rs. 50 lakhs, then mandatory conversion into Private Limited Company||No mandatory conversion|
|Procedure||Obtain DSC (Digital Signature Certificate), Obtain DIN (Directors Identification Number), Name Approval, Filing for Incorporation & File Nominee details||Obtain DSC (Digital Signature Certificate), Obtain DIN (Directors’ Identification Number), Name Approval & Filing for Incorporation|
The following are the most outstanding advantages associated with an OPC in India, over the private limited or public limited companies:
-To form an OPC, only one Director is needed.
-The Section 173 which dictates that a limited company should conduct at least four Board meetings every year, is not applicable for OPCs.
-The provisions and regulations given in Section 98 and Sections from 100 to 111, which relate with general meetings, are also not applicable to OPCs.
-An OPC also enjoys relaxations and exceptions from many other legal, governance, ad regulatory compliances.
-The mandatory rotation of auditor after every five-year period, is also not applicable to an OPC.
As per the Companies (Incorporation) Rules, 2014, a One Person Company has to change itself compulsorily into a private limited company or a public limited company, if at any point of time, its paid-up capital exceeds INR 50 Lac OR its average annual turnover of three immediately preceding consecutive financial years becomes more than INR 2 Crore. Under any of these conditions, the OPC is necessarily required to inform the relevant ROC through Form INC-5, within 60 Days of the exceeding threshold limits. Here, it may also be noted that an OPC cannot voluntarily change itself into any type of company, within two years of its incorporation, except under any of these two cases of exceeding the threshold limits.
The concerned OPC is strictly required to follow the rules, provisions, and regulations provided in the Companies Act of 2013 under its Section 18, and in the Rule 7(4) of the Companies (Incorporation) Rules of 2014. Roughly, in addition to meeting the statutory requirements of the desired form of company, the OPC has to make certain necessary changes in its MOA and AOA to suit the targeted type of company. Here it should be noted that, for conversion into a private limited company, the interested OPC is required to have at least two directors and two shareholders. For voluntary or mandatory conversion of an OPC into a private limited company or a public limited company, the Application Form used will be Form INC-6.