The Companies Act of 2013 completely rewrote Indian corporate law by introducing several novel ideas that had never used before. The introduction of the One Person Company concept was one such game-changer. As a result, a brand-new method for starting a company emerged that combined the flexibility of a company entity with the protection of limited liability that sole proprietorships and partnerships lacked. Before the new Companies Act was enacted in 2013, a number of other nations had already recognized that persons could form a company. China, Singapore, the United Kingdom, Australia, and the United States were among these.
Private company:
According to Companies Act Section 3(1)(c), a single person may form a company for any legitimate purpose. OPCs also can have descriptions as private companies.
Single-member:
Unlike other private companies, OPCs which can get OPC registration in Chennai can only have one member/shareholder.
Nominee:
The requirement for the sole member of the company to mention a nominee when registering the company is a distinctive feature of OPCs that sets it apart from other types of companies.
No perpetual succession:
Since an OPC only has one member, his death will determine whether the nominee accepts or rejects its membership. Because they operate under the principle of perpetual succession, other companies do not experience this.
At least one director:
OPCs must have at least one member serving as director to get OPC registration in Chennai. They can have no more than fifteen directors.
No minimum amount of paid-up shares:
The Companies Act of 2013 does not specify a minimum amount for OPCs’ paid-up capital. IT can get OPC registration in Chennai.
Extra advantages:
Under the Companies Act, OPCs have access to a number of privileges and exemptions that other types of companies do not.
Formation of One-Person Companies
A solitary person can shape OPC and get OPC registration in Chennai by buying in his name to the notice of affiliation and satisfying different necessities recommended by the Companies Act, 2013. In the event that the original member of the company passes away or becomes unable to enter into contractual relationships, the details of the nominee who will become the company’s sole member must be included in this memorandum.
An application for registration should be submitted to the Registrar of Companies along with this memorandum and the nominee’s consent to his nomination. This nominee has the option of withdrawing his name at any time by submitting the appropriate applications to the Registrar. Later the member can also cancel his/her nomination.
Membership in One-Person Companies
In India, only natural persons who are citizens and residents of India are qualified to establish a one-person company. Nominees of OPCs who had OPC registration in Chennai are subject to the same condition. In addition, such a natural person cannot simultaneously be a member or nominee of more than one OPC.
It is essential to keep in mind that OPC membership is restricted to natural persons only. Companies in which the companies themselves can own shares and be members do not experience this. Additionally, minors are not permitted to be OPC members or nominees under the law.
Conversion of OPCs into Other Companies
The rules that govern the formation of one-person companies specifically restrict the conversion of OPCs into Section 8 companies, which are companies with charitable goals. Additionally, OPCs cannot voluntarily transform into other types of companies until two years have passed since their incorporation.
In accordance with the Companies Act, OPC that had OPC registration in Chennai enjoys the following privileges and exemptions:
- They don’t have to hold general meetings every year.
- Financial statements need not be included in their financial statements.
- Annual returns need not be signed by a company secretary; Directors can do this as well.
- They are exempt from the provisions pertaining to independent directors.
- A director’s office may have additional vacation grounds provided for by their articles.
- There are a number of provisions that do not apply to meetings or quorums.
- They can pay more compensation to chiefs than contrasted different companies.
Impact of the amendment on OPC
When starting a one-person company, the entrepreneur needs to focus on a lot of compliances, like finding funds, finalizing the brand plan, hiring employees, and a lot of other important steps. The whole process can be a lot of work, and it can be difficult. Fortunately, the recent changes and lower compliance requirements make the initial risks of entrepreneurship more bearable.
Now, an entrepreneur can concentrate on company development and marketing concepts. In addition, it has become even more compelling to start a company based on one’s own ideas as covid disrupts companies and eliminates jobs.
The recent changes encourage young, innovative, and new company start-ups because they won’t have limited in terms of paid-up capital or revenue and can always change into another type of company.
Additionally, this amendment may encourage NRIs to establish a company in India with fewer compliance requirements and later convert to a Private Limited Company. This enables entrepreneurs to test the company model, approach angel investors and venture capitalists for funding, and easily convert into a private limited company once they have a product into a development that can be sold.
As a result, OPCs that had OPC registration in Chennai can choose to maintain their current structure or convert if necessary. It is anticipated that the move to encourage OPCs by lowering the residency requirement. And allowing NRIs to establish companies in the form of OPCs.
OPCs in the country will expand venture fund investment opportunities and provide leverage for company establishment in India. Companies seeking funding will have relief to not have to compel themselves to convert. If the threshold limit for OPC conversion into any type of company and a private company is eliminated.
View of Government
In accordance with the government’s goals of self-reliance and ease of doing company, it also gives them the freedom to convert at any time. Additionally, OPCs who had OPC registration in Chennai and their shareholder do not share a legal identity or existence.
As a result, limited liability, in which your liability has a limit to the number of shares held rather than your personal assets, is an additional benefit.
Entrepreneurs would have encouraged to take on the challenge of running a company without worrying about liabilities affecting their personal assets as a result. Additionally, OPCs may facilitate bank credit facility openings.
However, OPCs which had OPC registration in Chennai have no permission to conduct Non-Banking Financial Investments. Or to issue employee stock options.
The fact that a company’s base tax rate is lower than that of a sole proprietorship in smaller companies is one tax disadvantage. However, the advantages far outweigh the risks and disadvantages.
A one-person company is exempt from the strict legal requirements for general meetings, board meetings, quorums, voting, including cash flow statements in financial statements. And the rotation of an auditor, with the exception of certain situations, such as when there are multiple directors.
To have the start, one only needs to register with the ROC. There is no need to sign MOUs, hire auditors, conduct biannual audits, hold board meetings, ensure quorums, or look for partners, among other things.
Startups in India would definitely benefit from this step or amendment, as would solo entrepreneurs who had previously discouraged by India’s mandatory conversion requirements and minimum residency period.
Conclusion
One Person Company, which is another idea in India, as of now sees a major blast. A colossal effect on the economy and improvement of a country is normal. It opens doors to many people and, as a result, will expose everyone too young, innovative minds. As a result, if you want to start your own company, you won’t have to worry about all the complicated and time-consuming procedures.
