One Person Company (OPC)

As per the Companies Act, 2013, One Person Company (OPC) means the Company in which there is only one person as a member of the company along with one nominee. A company can be formed as Company limited by shares, Company limited by guarantee and Unlimited Liability Company. A company so formed shall be a Private Limited Company having only one director, shall add words “ONE PERSON COMPANY” in its name. 

 

  • THRESHOLD LIMITS FOR FORMING ONE PERSON COMPANY (OPC): 

Under Old Scenario

A person desirous of forming One Person Company has to adhere to certain threshold limits which are enumerated as follows: 

  1. Paid- Up share capital of Rs. 50 Crores, or
  2. Average Turnover of Rs. 2 Crores

during the three consecutive previous financial years. 


Under New Scenario

Under Companies (Incorporation) Second Amendment Rules, 2021 dated 1st February, 2021 applicable w.e.f 1st April, 2021, the thresholds for forming One Person Company are done away with. That means the thresholds are completely removed.

 

  • CONDITIONS FOR FORMING ONE PERSON COMPANY: 

Under Old Scenario:

Only natural person can form One Person Company.

  1. A person Resident in India
  2. An Indian Citizen

Further, the no of days for calculating the status of person Resident in India shall be One Hundred and Eighty Two Days (182 days).

 

Under New scenario:

Under Companies (Incorporation) Second Amendment Rules, 2021 dated 1st February, 2021 applicable w.e.f 1st April, 2021, following are the conditions:

  1.  Only natural Person can form One Person Company.
  2. A person Resident in India or Otherwise.

Further, the no of days for calculating residential status are reduced from One Hundred and Eighty Two days (182 days) to One Hundred and Twenty days (120 days).  

 

  • CONVERSION OF ONE PERSON COMPANY

Under Old Scenario:

A One Person Company can convert itself into Private Limited Company or a Public Limited Company in two ways:

  1. Voluntary Conversion
  2. Mandatory Conversion

 

VOLUNTARY CONVERSION:

An OPC can convert itself into Private Limited Company or Public Limited Company voluntarily (without paid-up capital and turnover conditions) only after expiry of 2 years from the date of its incorporation.

 

MANDATORY CONVERSION:

If

  1. Paid Up share Capital of OPC exceeds Rs. 50 Lakhs, or
  2. Average Turnover during the three consecutive Previous Financial years exceeds Rs. 2 Crores

Then the OPC shall,

Within a period of 6 months of the above event shall convert itself into Private Limited Company or Public Company, after meeting the requirements of the respective companies.

Further, the company has to file FORM INC-5 with the ROC within a period of 60 days, intimating the ROC, that now it has ceased to be a One Person Company.

Under New Scenario:

Since the introduction of Companies (Incorporation) Second Amendment Rules, 2021, has removed the threshold limits for forming a One Person Company, now there is no mandatory conversion of OPC into Pvt Ltd Company or Public Limited Company, upon breaching of threshold limits. Now, the Ministry has introduced a new Form INC-6 for conversion of OPC and has completely done away with filing of Form INC-5.


Conclusion

With the introduction of Companies (Incorporation) Second Amendment Rules, 2021, the Ministry has introduced various changes in the formation of One Person Company. Earlier only a Resident Indian can form an OPC but now even the foreigners are eligible for forming an OPC in India (proposal under consideration). Further, the no of days for calculating Residential Status of Indian citizen has been reduced from 182 days to 120 days.

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