One Person Company (OPC)

• OPCs are not proprietorship concerns and hence, they give a dual entity to the company as well as the individual, guarding the individual against any pitfalls of liabilities. This is the fundamental difference between OPC and sole proprietorship.
• Unlike a private limited or public limited company, OPCs need not bother too much about compliances.
• Businesses currently run under the proprietorship model could get converted into OPCs without any difficulty.
• OPCs require minimal capital to begin with. Being a recognised corporate, it could well raise capital from others like venture capital financial institutions, etc., thus graduating to a private limited company. The earlier two-year restriction on voluntary conversion was removed by the Companies (Incorporation) Amendment Rules, 2021; an OPC can now voluntarily convert into a private or public company at any time, subject to Rule 6(1) of the Companies (Incorporation) Rules, 2014.
• A One Person Company needs to have a minimum of one director. It can have directors up to a maximum of 15, which can also be increased by passing a special resolution as in the case of any other company. But the shareholder should be one.
• One person cannot incorporate more than one OPC or become nominee in more than one OPC.
• OPC is a separate legal entity having perpetual succession and limited liability.
• OPC is exempt from many complicated compliances such as exemption in general meetings, board meetings, quorums, voting, inclusion of cash flow statements in financial statements, and mandatory rotation of an auditor. As regards the cash flow statement, per the Companies (Accounts) Amendment Rules, 2021, an OPC must file its financial statements and is exempt from including a cash flow statement only if it qualifies as a small company; the exemption is therefore not blanket. As regards board meetings, under Rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014, an OPC must hold at least one Board meeting in each half of the calendar year, with a minimum gap of 90 days between the two, regardless of the number of directors. OPC is also exempted from transacting business via postal ballot. Further, the appointment of a company secretary is also not essential for an OPC. The annual return of an OPC can be signed by its director in case of no company secretary.

1. Who can start an OPC?

Only a natural person who is an Indian citizen and resident in India shall be eligible to act as a member and nominee of an OPC. For the above purpose, under Rule 3 of the Companies (Incorporation) Rules, 2014, the term “resident in India” means a person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year (January–December). Therefore, only an Indian citizen who is a resident can form an OPC.

2. A person can be a member of how many OPCs?

A person can be a member of only one OPC.

3. What if a member of an OPC becomes a member of another OPC by virtue of being a nominee in that other OPC?

Where a natural person, being a member of a One Person Company, becomes a member of another OPC by virtue of his being a nominee in that OPC, then such person shall meet the eligibility criteria of being a member in only one OPC within a period of one hundred and eighty days — i.e., he/she shall withdraw his membership from either of the OPCs within one hundred and eighty days.

4. Is there any threshold limit for an OPC to mandatorily get converted into either a private or public company?

Following the revision by the Companies (Incorporation) Amendment Rules, 2021, in case the paid-up share capital of an OPC exceeds Rs. 2 crore or its average annual turnover of immediately preceding three consecutive financial years exceeds Rs. 20 crore, then the OPC has to mandatorily convert itself into a private or a public company. The earlier thresholds of Rs. 50 lakh paid-up capital and Rs. 2 crore turnover no longer apply.

5. How to intimate RoC that the OPC has exceeded the threshold limits and requires conversion into a private or a public company, and what is the time limit for filing form INC-5?

The OPC shall inform RoC in form INC-5 if the threshold limit is exceeded and is required to be converted into a private or a public company. Further, Form INC-5 shall be filed within sixty days of exceeding the revised thresholds (paid-up share capital exceeding Rs. 2 crore or average annual turnover exceeding Rs. 20 crore) per the Companies (Incorporation) Amendment Rules, 2021.

6. Is there any form to be filed for the conversion of an OPC into a private or a public company?

Form INC-6 shall be filed by an OPC for the conversion of an OPC into a private or a public company.

Yes, the private company will also file Form INC-6 for converting itself into an OPC. The paid-up share capital of the private company should not exceed Rs. 50 lakh and should not have an average annual turnover of more than Rs. 2 crore at the time of such conversion into OPC. The company shall have one member and shall appoint one nominee to act as a member in case of death or incapacity of the member at the time of conversion into OPC. Note: these inward-conversion thresholds (Rs. 50 lakh / Rs. 2 crore) remain unchanged and should be read alongside the revised outward-conversion thresholds (Rs. 2 crore / Rs. 20 crore) to avoid confusion.

7. What is the time limit for filing Form INC-6?

Form INC-6 shall be filed within 30 days in case of voluntary conversion and within six months of mandatory conversion. Voluntary conversion is governed by Rule 6(1) of the Companies (Incorporation) Rules, 2014 (as amended in 2021) and is now permitted at any time, the earlier two-year restriction having been removed.