One person company- New Concept introduced in Companies Act, 2013

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New Concept introduced in Companies Act, 2013
- A Way to promote entrepreneurship

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One person company- New Concept introduced in Companies Act, 2013

  1. 1. New Concept introduced in Companies Act, 2013 One Person Company Way to promote entrepreneurship
  2. 2. In this article, we will be focusing on the features of One Person Company (OPC) or One Man Company. This is a new concept introduced in the Companies Act 2013 (“Act”) and is set to promote entrepreneurship.  Minimum member Who is One Person? 1 Member. One Person will be a natural person, Indian citizen and resident in India. (vi) It will be the obligation of Company to intimate ROC, about any change in the name of such other person. Some aspects covered under Draft Rules: Minimum Number of Directors Who can act as a nominee? 1 Director. Minimum Paid-up Capital 1 lakh rupees Nominee for One Person shall also be a natural person, Indian citizen and resident in India Incorporation of OPC Note: Resident in India will mean a person who has stayed in India for a period of not less than 182 days during the immediately preceding one financial year.  How many OPC can be formed by One Person?         One Person, who is intending to be the member, can subscribe to Memorandum of Association (MOA) of the Company. The type of Company will be Private Company and can form either company limited by shares or limited by guarantee or unlimited company. All the provisions applicable on private companies are applicable on OPC, unless otherwise expressly exempted. Nomination: (i) MOA shall clearly specify the name of that other person, who will become the member of the Company, in the event of the subscriber’s death or his incapacity to contract. (ii)Prior written consent is required to be taken of such other member and should be filed with the Registrar of Companies (ROC), at the time of incorporation, along with its memorandum and articles. (iii) Such other person is free to withdraw his consent. (iv) One Person may also change the name of such other person by giving notice. (v) It will be the duty of One Person to intimate the company about the change, if any, in the name of the other person nominated by him by indicating in MOA or otherwise. (vi) Any change in the name of such other person shall not be deemed to be an alteration of MOA. No person can incorporate more than five One Person Companies. What happens, when the Nominee withdraws his consent?   The sole member should nominate name of another person as nominee within 15 days on the receipt of notice of withdrawal and send an intimation of such nomination in writing to Company, along with the written consent of such other person. The Company should within 30 days of receipt of the notice of withdrawal of consent file with Registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member, along with the written consent of such another person so nominated. What happens, when the sole member wants to change the name of nominee?  Sole member may change the name of nominee by intimating in writing to the company for any reason and nominate another person after
  3. 3.  obtaining the prior consent of such another person. The company shall on receipt of such intimation file with ROC, a notice of such change along with the written consent of the new nominee, within 30 days of receipt of intimation of the change. Style of writing Name of Company ‘‘(One Person Company)’’ is required to be mentioned in brackets below the name of such company name, wherever its name is printed, affixed or engraved. Financial Statements What happens, when the sole member ceases to be the member, in case of death or incapacity to contract?   The nominee shall become the One Member and nominate another nominee within 15 days of becoming the member. Company shall intimate ROC notice of such cessation along with written consent of new nominee, within 30 days of change. What is the penalty of contravention of Rules? Punishable with fine which may extend to Rs. 5000/and with a further fine which may extend to Rs. 500/for every day after the first during which such contravention continues.    Directors Report For OPC, Directors Report would only mean a report having explanation to remarks (if any) in the Auditors Report. Board Meetings:  What are the circumstances in which OPC automatically ceases to OPC?  OPC shall cease to be OPC when either the paid up share capital exceeds Rs. 50 lakhs or its average annual turnover during the relevant period exceeds Rs. 2 crores and within 6 months of such date, it shall either convert OPC into Private Company with 2 members and 2 directors or Public Company with 3 directors and 7 members. Note: Relevant Period means period of immediately preceding three consecutive financial years. How can OPC willingly convert into Private of Public Company? It can do so by increasing its directors and members and paid-up capital to that of Private/Public Company and by following the procedure of conversion in section 18 of the Act. Financial statements of OPC may not include the Cash Flow Statement. It may only include Balance Sheet, Profit & Loss and any explanatory note, as a part of the same. To be signed by only one director. Copy of financial statements to be filed, within 180 days from the closure of the financial year:  At least 1 meeting of Board in each half of a calendar year and the gap between 2 meetings should not be less than 90 days. However, no Board Meeting required, if there is only one director. If there is any business which is required to be transacted in a Board meeting and OPC has only 1 director, then it will be sufficient if the resolution by such director is entered in the minutes-book and is signed and dated by such director and such date shall be taken as the date of Board meeting. Annual General Meeting (AGM) There is no requirement of holding AGM, however any business which is required to be transacted at an AGM or other general meeting, by means of an ordinary or special resolution, shall be taken as passed by OPC, if the resolution is communicated by the member to the company and entered in the minutes-book and signed and dated by the member and such date shall be deemed to be the date of the meeting.
  4. 4. Annual Return Annual return is required to be prepared by OPC and be signed by the Company Secretary (CS) of Company and when there is no CS, by any director of Company. However, it is not clear, whether the same is required to be filed with ROC, as the timeline of filing return is connected to the date of holding AGM, however, we know that OPC is not required to hold AGM. Hence, it is an open question. Clauses of Companies Act, 2013 not applicable on OPC: Clause 98: Power of Tribunal to call meetings of members, Clause 100: Calling of extraordinary general meeting, Clause 101: Notice of Meeting, Clause 102: Statement to be annexed to notice, Clause 103: Quorum for meetings, Clause 104: Chairman of meetings, Clause 105: Proxies, Clause 106: Restriction on voting rights, Clause 107: Voting by show of hands, Clause 108: Voting through Electronic means, Clause 109: Demand for poll, Clause 110: Postal Ballot, Clause 111: Circulation of members’ resolution. Contract by One Person Company    If OPC limited by shares or by guarantee enters into a contract with the sole member, who is also the director of the company, then it should be ensured that the terms of contract are contained in a memorandum or are recorded in the minutes of the first meeting of Board, held next after entering into contract. However, it should not apply to contracts entered into, in the ordinary course of its business. Company shall inform ROC of such a contract and shall record the approval of the Board in the minutes, within a period of 15 days of the Board meeting.

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