The Companies Act, 2013 for the first time allowed the formation of company by just one person with limited liability, called one person company; such a company is described as a private company under section 3(1)(c). Further section 3(1) along with rule 3 and 4 of the Companies (Incorporation) Rules, 2014, provides certain provisions specifically applicable in case of One Person Company listed below;
Who can form one person company?
Only a natural person, other than minor; who is an Indian citizen and whether resident in India or otherwise shall be eligible to incorporate a One Person Company.
Resident in India means a person who has stayed in India for a period of not less than one hundred and twenty days during the immediately preceding financial year.
Indicate Name & Consent Nominee
The memorandum of One Person Company shall also indicate the name of the natural person, other than minor; who is an Indian citizen, whether resident in India or otherwise (as nominee), along with his prior written consent in the Form No. INC-3, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company.
Note: This provision is to ensure perpetual succession of legal existence of OPC.
OPC can’t be incorporated or converted into a company under section 8 of the Act. Further, OPC can’t carry out Non-Banking Financial Investment activities including investment in securities of any body-corporates.
Example – Ms. Madhu formed an OPC wherein Mr. Sudan is nominee as his name is specified in MOA along with his consent. Ms. Madhu declared insolvent, pending discharge of insolvency, she becomes incompetent to contract, hence, Mr. Sudan becomes the member of such OPC.
The name of such nominated person in Form No. INC-32 (SPICe) along with 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.
Note: A natural person shall not be member of more than a One Person Company at any point of time and the said person shall not be a nominee of more than a One Person Company.
Where a natural person, being member in One Person Company in accordance with this rule becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the above specified criteria (can be member of only one OPC) within a period of one hundred and eighty days.
Withdraw of Consent by Nominee
Such other person (nominee) may withdraw his consent by giving a notice in writing to such sole member and to the One Person Company
In this case, the sole member shall nominate another person as nominee within fifteen days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person so nominated in Form No. INC-3.
Replacing Nominee with another one
The member may change the name of the person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person (new nominee) after obtaining the prior consent of such another person in Form No. INC-3.
Member can do so by intimation in writing to the company.
This is not specified, either in Act or rules whether intimation shall be prior to making change or can be made afterward, but if we consider reasonable construction the intimation shall be ‘Prior Intimation’.
Any such change in the name of the person shall not be deemed to be an alteration of the memorandum.
Example – Rajesh has formed a ‘One Person Company (OPC), wherein his wife Roopali is named as nominee. For the last two years, his wife Roopali is suffering from terminal illness and due to this hard fact he wants to change her as nominee. He has a trusted and experienced friend Ramnivas who could be made nominee or his (Rajesh) son Rakshak who is of seventeen years of age. In the instant case, Rajesh can appoint his friend Ramnivas as nominee in his OPC and not Rakshak because Rakshak is a minor.
When Nominee become Member
Where the sole member ceases to be the member and nominee become new member, then such new member shall nominate within fifteen days of becoming member, a person (new nominee) who shall in the event of his death or his incapacity to contract become the member of such company.
Notice of change to Registrar
In all the three case of change discussed above (Withdraw of Consent by Nominee, Replacing Nominee with another one and When Nominee become Member) the company within thirty days of receipt of notice of withdrawal of consent by nominee, intimation of change of nominee from member, or cessation; shall file the notice with the Registrar of such withdrawal of consent, change or cessation respectively and intimate the name of such another person (new nominee) in Form No. INC-4 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 along with the prior written consent of such another person so nominated in Form No. INC-3.
Relaxations available to an OPC include:
♦ Not required to prepare a cash-flow statement with effect of section 2(40).
♦ The annual return to furnished under section 92 can be signed by the Director and not necessarily a Company Secretary, even abridged annual return may be prescribed.
♦ Further, following the similar line, section 134 provides it would suffice if one director signs the audited financial statements and abridged form of director report may be prescribed.
♦ Holding annual general meeting as required under section 96 is not necessary in case of OPC. Moreover, certain specific provisions related to general meetings and extraordinary general meetings, specified under sections 100 to 111 not applicable to OPC.
♦ Even relaxation is also there in convening board meetings section 173 requires an OPC to hold only one meeting of the Board of Directors in each half of a calendar year.
♦ Vide section 137, the OPC are allowed to file financial statements within six months from the close of the financial year as against 30 days.
