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One person company

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One person company

One person company

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  • 1. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com ONE PERSON COMPANY A LOOK AT THE RELEVANT LEGAL PROVISIONS UNDER THE COMPANIES ACT, 2013
  • 2. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Introduction • The Sections relating to One Person Company were notified on the 26th March 2013 and the rules with regard to the same have also been notified.
  • 3. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Meaning of One Person Company • As per Section 2 (62) of the Companies Act, 2013 (hereinafter “the Act”), a One Person Company is a Private Company which has only one person as a member. It is to be noted that all the provisions relating to Private Companies would apply to a One Person Company, unless otherwise specifically excluded. The words ‘‘One Person Company’’ must be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved. [Second proviso to Section 12(3)]
  • 4. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Eligibilityto Incorporate a One PersonCompany • Only a natural person who is an Indian Citizen and resident Indian (person who has stayed in India for a period of not less than one hundred and eighty two (182) days during the immediately preceding one calendar year) can incorporate a One Person Company by subscribing his name to the memorandum.
  • 5. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Application for Incorporation • Application for incorporation of a One Person Company shall be made to the registrar within whose jurisdiction the registered office of the company is proposed to be situated, in Form No.INC.2 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 for registration of a company
  • 6. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Appointment of a Nominee • The subscriber to the memorandum shall appoint a nominee and such nominee shall be a natural person, Indian citizen and a resident Indian and the name of such nominee should be included in the memorandum and such nomination in Form No INC.2 along with the consent of such nominee obtained in Form No INC.3 and fee as provided in the Companies (Registration offices and fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the company along with its memorandum and articles.
  • 7. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com • In the event of the subscriber’s death or his incapacity to contract, the nominee mentioned in the memorandum would become the member of the company and such new member shall nominate within fifteen days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company, and the company shall file with the Registrar an intimation of such cessation and nomination in Form No INC.4 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 within thirty days of the change in membership and with the prior written consent of the person so nominated in Form No.INC.3. Proviso to clause (c) of sub section (1) of Section 3 of the Act states that a change in name of the member of a One Person Company shall not be deemed to be an alteration of the memorandum.
  • 8. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Restrictions withregardto One Person Company • No person can incorporate more than one One Person Company (this is a significant departure from the draft rules which allowed a person to incorporate up to five One Person Companies) or become nominee in more than one such company [sub rule (2)]. • Where a member of a One Person Company becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the eligibility criteria specified in sub rule (2) within a period of one hundred and eighty days
  • 9. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com • A minor cannot become a member or a nominee of a One Person Company or hold share with beneficial interest. • One Person Company cannot be incorporated or converted into a company under Section 8 of the Act. • One Person Company cannot carry out Non – Banking Financial Investment activities including investment in securities of any body corporates. • One Person company cannot convert voluntarily into any kind of company unless two years have expired from the date of its incorporation, except threshold limit (paid up share capital) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.
  • 10. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Provisions withregardto Directors andMeetings of Board • One Person Company should have a minimum of one (1) director. [Section 149 (1) (a)]. • One Person Company shall hold at least one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings shall not be less than ninety days [Section 173 (5)]. • One Person Company having only one director is not required to comply with either Section 173 (meetings of board) or 174 (Quorum for meetings of Board). [Proviso to sub - section (5) of section 173].
  • 11. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com • In case of a One Person Company—(i) the resolution required to be passed at the general meetings of the company shall be deemed to have been passed if the resolution is agreed upon by the sole member and communicated to the company and entered in the minutes book maintained under section 118; (ii) such minutes book shall be signed and dated by the member; (iii) the resolution shall become effective from the date of signing such minutes by the sole member.
  • 12. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com • In case of a One Person Company— (i) where the company is having only one director, all the businesses to be transacted at the meeting of the Board shall be entered into minutes book maintained under section 118; (ii) such minutes book shall be signed and dated by the director; (iii) the resolution shall become effective from the date of signing such minutes by the director.
  • 13. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Financial Statement and Board’s Report [Section 134 & 137] • The financial statement of a One Person Company shall be signed by only one director for submission to the auditor for his report thereon. • The report of the Board of Directors to be attached to the financial statement means a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report. • A One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year. [Section 137].
  • 14. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Contractby One Person Company [Section 193] • Where a One Person Company limited by shares or guarantee enters into a contract with the sole member of the company who also happens to be the director of the company, shall ensure that the terms of the contract or offer are contained in the memorandum or are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract, unless the contract is in writing. This requirement, however, will not apply to contracts entered into by the company in the ordinary course of its business • A one person company is required to inform the registrar about every such contract within a period of 15 days of the date of approval by the Board of Directors.
  • 15. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Various Exemptions available to a One Person Company • One Person Company is exempted from holding Annual General meeting.[Section 96(1)] • One Person Company is not required to prepare a cash flow statement as a part of financial statement.[Section 2(40)] • In case a One Person Company does not have a company secretary, the annual return can be signed by the director of the company. [Proviso to Section 92(1)] • Section 122 of the Act states that the provisions of the following sections shall not apply to a One Person Company-
  • 16. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com • Section 98: Power of Tribunal to call meetings of members, etc. • Section 100: Calling of extraordinary general meeting • Section 101: Notice of meeting • Section 102: Statement to be annexed to notice • Section 103: Quorum for meetings • Section 104: Chairman of meetings • Section 105: Proxies • Section 106: Restriction on voting rights • Section 107: Voting by show of hands • Section 108: Voting through electronic means • Section 109: Demand for poll • Section 110: Postal ballot • Section 111: Circulation of members’ resolution.
  • 17. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com MandatoryConversion of One Person Company intoPrivateCompanyor Public Company in certaincases A One Person Company shall convert itself into a private company when either • its paid up capital exceeds Rupees Fifty Lakhs or • its average turnover during the immediately preceding three years exceeds Rupees Two Crores. A One Person Company breaching either of the above thresholds shall within a period of 60 days from such breach give a notice to the Registrar in Form No.INC.5.
  • 18. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Conversionof PrivateCompany intoOne PersonCompany • A Private Company other than a Section 8 company (Not for Profit Company) having paid up share capital of fifty lakhs rupees or less or average annual turnover during the relevant period is two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting.
  • 19. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com Observation andconclusion: • While the benefits of Incorporating a One Person Company (hereinafter “OPC”) seem obvious in that they offer the advantage of limited liability, there are too many restrictions in nature of limiting the number of OPC a person can incorporate to one and the restriction on voluntary conversion into any kind of company before the expiry of two years. • The provisions relating to mandatory conversion of an OPC into a private or public company for exceeding the threshold mentioned in Rule 6 of Companies (Incorporation) Rules, 2014 seems particularly harsh.
  • 20. CHENNAI 3rd Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 2498 4821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 6546 2400 COIMBATORE #1533, Trichy Road, Coimbatore, India – 641018. Tel: +91 - 422 – 6552921 EMAIL info@altacit.com WEBSITE www.altacit.com • An OPC as a business structure doesn’t seem efficient from tax perspective as an OPC would be treated as a company and be subject to a higher rate of tax compared to a Sole Proprietorship. Since an OPC is a company, there would be an incidence of tax (dividend distribution tax) while distribution of dividend. • It would be premature to comment on the success or failure of this new business model just yet, as it is yet to be put to test. It remains to be seen if OPC would become popular business model for entrepreneurs wanting to go it alone.