Who Is Allowed to Incorporate an OPC

Who Is Allowed to Incorporate an OPC

Only one individual is allowed to incorporate a One Person Company (OPC). The person must be a natural person. Companies, LLPs, or associations of persons are not permitted to form an OPC under the Companies Act 2013.

The individual must be an Indian citizen and a resident of India. Resident means staying in India for the prescribed period as specified under the law. The person should be at least 18 years of age at the time of incorporation.

One individual cannot incorporate more than one OPC at the same time. Further, a person cannot act as a nominee in more than one OPC. All these eligibility conditions are verified by the authorities at the time of incorporation.

Requirement of Nominee

Appointment of a nominee is compulsory in an OPC. Without appointing a nominee, an OPC cannot be incorporated. The nominee is the person who will take over the company in case the sole member dies or becomes incapable of entering into a contract.

The nominee must also be a natural person who is an Indian citizen and resident of India. The written consent of the nominee is mandatory and is given in the prescribed form as required under the Companies Act.

The details of the nominee are filed with the Registrar of Companies (ROC) at the time of incorporation. The nominee can be changed later by following the prescribed procedure and filing the required forms with the ROC.

Name Approval for OPC

The name of an OPC must end with the words “OPC Private Limited”. This requirement is mandatory under law and applies to every OPC at the time of incorporation.

The proposed name should not be identical or closely similar to the name of any existing company or LLP. It should also not violate the provisions of trademark laws or contain prohibited words.

Name approval is obtained through the MCA portal. Once the name is approved, it remains valid for a limited period. If the name approval expires, a fresh application for name approval has to be filed.

Capital Structure at Incorporation

There is no minimum paid-up capital requirement for incorporating an OPC. The company can be started with a small amount of capital depending on the business requirements.

The capital structure must be mentioned in the Memorandum of Association (MOA). An OPC can issue only equity shares. Issue of preference shares is not permitted under the law.

If the company wishes to increase its capital at a later stage, it can do so by following the prescribed procedure and filing the necessary forms with the ROC.

Documents Required for Incorporation

Certain documents are mandatory for OPC incorporation and are submitted online through the MCA portal. Identity proof and address proof of the member and the nominee are required.

Proof of the registered office must also be submitted. This generally includes a utility bill along with ownership proof or rent agreement of the premises.

In addition, the nominee consent form, declaration by the subscriber, and the Memorandum and Articles of Association are filed. These documents define the business objects and internal rules of the company.

Steps of Incorporation Process

The first step in the incorporation process is obtaining a Digital Signature Certificate (DSC). DSC is required to sign all online forms filed on the MCA portal. Without DSC, the incorporation process cannot be completed.

After obtaining DSC, an application for Director Identification Number (DIN) is made. DIN is a unique number allotted to a director by the Central Government and is mandatory for acting as a director.

Name approval is then applied through SPICe+ Part A, where two proposed names can be submitted. Once the name is approved, SPICe+ Part B is filed with details of capital, registered office, director, and nominee.

At this stage, the MOA and AOA are prepared and filed in electronic form. Along with this, the AGILE-PRO form is submitted to apply for GST, EPFO, ESIC, and a bank account. After scrutiny, the ROC issues the Certificate of Incorporation.

Registered Office of OPC

Every OPC must have a registered office which serves as the official address of the company. The registered office can be residential or commercial in nature, provided valid address proof is available.

If a temporary address is used at the time of incorporation, the permanent address must be filed later. Any change in the registered office address must be informed to the ROC within the prescribed time.

All official communications, notices, and letters are sent to the registered office address. Therefore, it is important that the address remains correct and updated at all times.

Management and Board Requirements

An OPC can have only one director, and the sole member can himself act as the director. The company may appoint additional directors, subject to a maximum limit of fifteen directors.

Where there is only one director, several board meeting compliances are relaxed. In such cases, many procedural requirements relating to board meetings do not apply.

Maintenance of Books of Accounts

An OPC is required to maintain proper books of accounts as per the Companies Act. These books can be maintained either in physical or electronic form.

The books of accounts are generally kept at the registered office of the company. Entries should be made on a regular basis, and back-dated or incorrect entries are not permitted.

Audit Requirement for OPC

Audit is compulsory for an OPC, irrespective of its turnover. A Chartered Accountant must be appointed as the auditor within the prescribed time limit.

The auditor examines the books of accounts and prepares an audit report. Audit ensures correctness of financial records and compliance with legal requirements.

Financial Statements of OPC

At the end of each financial year, financial statements are prepared. These include the Balance Sheet, Profit and Loss Account, and notes to accounts.

A Cash Flow Statement is not mandatory for OPCs. The financial statements are signed by the director, and the audit report is signed by the auditor.

Filing of Financial Statements with ROC

The financial statements of an OPC are filed with the ROC in Form AOC-4. Since OPCs are not required to hold an Annual General Meeting, the due date is different.

Form AOC-4 must be filed within 180 days from the end of the financial year. Delay in filing attracts additional fees and penalties, which increase on a per-day basis.

Filing of Annual Return

The annual return of an OPC is filed in Form MGT-7A. This form contains details of the member, director, and shareholding of the company.

The due date for filing is 60 days from the date of signing the financial statements. AGM is not applicable to OPCs. Non-filing results in additional fees and may lead to further action.

Income Tax Compliance

For income tax purposes, an OPC is treated as a company. It has a separate Permanent Account Number (PAN) and is required to file its income tax return every year.

Tax audit provisions may apply depending on turnover. Advance tax and TDS provisions are also applicable. The personal tax liability of the member is separate from the company.

Event-Based Compliances

Certain compliances arise only when specific events occur. These compliances are not annual in nature but become applicable on the happening of particular events.

Change in nominee, change in director, change in capital structure, and change in registered office require filing of forms with the ROC. Delay in filing attracts penalties.

Conversion of OPC into Other Company

An OPC may be converted into a private company by following the prescribed procedure. This involves alteration of the Memorandum and Articles of Association.

Necessary forms are filed with the ROC. After conversion, the company becomes subject to all compliances applicable to a private company.

Common Compliance Mistakes

Many OPCs fail to comply with statutory timelines, which leads to penalties. Common mistakes include non-filing of annual return, delay in audit, and non-reporting of nominee changes.

Changes in registered office and capital structure are also often ignored. These mistakes create unnecessary legal complications that can be avoided through timely compliance.

Conclusion

The process of incorporating an OPC is simple, but accuracy in documents and filings is very important.  OPC is suitable for small businesses in the initial stage, and conversion becomes necessary as the business grows. Proper understanding of incorporation and compliances helps avoid future legal and financial problems.