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

1. New Concept introduced in Companies Act, 2013
One Person
Company
Way to promote entrepreneurship

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.
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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.
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How many OPC can be formed by One Person?
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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?
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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?
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Sole member may change the name of nominee
by intimating in writing to the company for any
reason and nominate another person after

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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?
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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.
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Directors Report
For OPC, Directors Report would only mean a report
having explanation to remarks (if any) in the Auditors
Report.
Board Meetings:
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What are the circumstances in which OPC
automatically ceases to OPC?
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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:
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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. 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
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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.