One Person Company- A Business Enabling

Move

Abstract

The Companies Act, 2013 evolved a new concept of ‘One Person Company’ (hereinafter referred to as OPC)
in India. Etymologically, its origin is not from the Indian legal system rather it was already in existence in
United States, United Kingdom and several other European countries since a very long time. This article
seeks to analyse the concept of OPC in India which is quite similar to the sole proprietary form of business. It
deals with the meaning of OPC, historical evolution of OPC, its’ incorporation along with various provisions
relating to OPC. The merits and demerits of OPC have been looked upon, giving basic knowledge about OPC
and identifying the need of such a revolutionary concept in the Indian Market.

Keywords- One Person Company (OPC); Companies Act, 2013; Incorporation of OPC, Filling of forms

1. An Overview of One Person Company

[1.1] Meaning and Definition of OPC

The Section 2(62) of the Companies Act, 20131 (“the Act”) introduces a new type of entity which is
called a One Person Company (“OPC”). Apart from a public or private limited company, the Act
now enables the formation of this new entity.

As per Section 2(62) of the Act-“One Person Company means a company which has only one
person as a member” ‘One Person Company’ is a one shareholder corporate entity, where legal and
financial liability is limited to the company only. As per Section 3(1) (c) of the Act2, a company may
be formed for any lawful purpose by one person, where the company to be formed is to be One
Person Company that is to say, a private company by subscribing their names or his name to a
memorandum and complying with the requirements of this Act in respect of registration.

[1.2] Genesis and Global development

Historically, United Kingdom is the first country, which paved way to the concept of one-man
company through a precedent set in its famous case Saloman v. Saloman & Co.3 One Person
Company is an encouraged concept in many countries, since it is prevalent in some of the developed
economies of the world like the United States of America and the United Kingdom, and it is also a
preferred way of incorporation of businesses too. Moreover, surveys also reveal that the highest
revenue is generated from such OPC, due to its low operational cost.4 Even, during the economic
crises, such companies fared better than the big companies. However, when we compare our concept
with those under the US and UK laws concerning the difference between a Sole Proprietorship and a
OPC or a One Person LLC, we see that the statutory cost related to a One Person LLC is offset by
the favourable taxation rates. In US, the law allows a One Person LLC to opt for being taxed at the
same rate as that of a Sole Proprietorship firm or an individual. Even in UK, the net tax outgo for a
LLC is much lower than that of an individual.5 These provide a suitable incentive for the promotion
of the concept of OPC. Today, the concept of OPC in India in line with UK, China, USA, Australia,
Singapore, Qatar, Pakistan and several other countries.

[1.3] Origin of the Concept in India

In India, in 2005 the J.J. Irani Expert Committee6 recommended the formation of OPC:

“3.2 Small and Private Companies should be provided greater flexibility and freedom of operation
while enabling compliance at low cost. To unleash the entrepreneurial talent of the people in the
information and technology driven environment, law should recognize One Person Company (OPC).
Such companies should be provided with a simpler legal regime through exemptions.”

The Committee expressed the view that the law should recognize the potential for diversity in the
forms of companies and rather than seeking to regulate specific aspects of each form, seek to provide
for principles that enable economic inter-action for wealth creation on the basis of clear and widely
accepted principles.7

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[1.4] Advantages of OPC

The introduction of OPC in the Companies Act, 2013 is a historic step in the Indian legal system. It
is a move that would encourage incorporation of micro businesses, individual entrepreneurship and
one person start-ups with a simpler legal regime so that the individual entrepreneur is not compelled
to devote considerable time, energy and personal resources on complex legal compliances.8 It offers
a whole new range of alternatives for people who want to launch their own businesses with a
formalised corporate structure.9 It will give the young businessman all benefits of a private limited
company which categorically means they will have access to credits, bank loans, limited liability,
legal protection for business, access to market etc. all in the name of a separate legal entity.10

[1.5] Disadvantages of OPC

However, just like everything else, OPC has its own banes. One of the basic characteristics of a
company, other than an OPC, is the democratic decision-making process undertaken to determine the
policy or decide upon any new strategy for the company or like. In a democratic decision making,
voting powers are exercised by the members of the board but this is not so in the case of an OPC. It
suffers from the departure of this very basic characteristic by virtue of Sections 96(1) and 122 of the
Act, resulting in an autocratic form of organisation without an iota of accountability. The very
concept of a separate legal entity being created for a perpetual succession of the nominee, that is
continuance of the company even after the death or retirement of the sole member can also be
considered as a disadvantage. As to the marketability of a OPC in the Indian scenario, we can say
that the joint stock form of organisation or a registered company enjoys higher credibility as
compared to any other form. Credibility would encompass easier capital availability, market
acceptance and business growth. If we try to see it in a practical way, most financial institutions
would gauge a OPC on the same grounds as that of a proprietorship firm because of its
characteristics, lack of democratic decision-making and accountability and, hence, would be
reluctant to extend any kind of loan or credit facility, more so if it is a newly-formed company
without any past credibility. Further, as to the concept of limited liability we know that one of the
most favoured advantages of the company form of organisation is that the liability of members is
limited. Now, this might pose a serious problem to both sides. On one side, if the limited liability
concept is taken seriously and holds good, it might be dangerous for investors and other
stakeholders, as it would open ways for frivolous and fraudulent activities. In a country like India,
which is already overflowing with tax evaders and fraudulent cases pending in various courts and

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scams, this would just be another means to give way to such unscrupulous people. However, if on the
other side, the concept of limited liability would fail and the court as in many previous cases has
applied the concept of lifting the corporate veil, it would be useless to incorporate a OPC. Now, how
many people would start a business beginning with thinking of their liability that might accrue at the
time of winding up? It is rather absurd to think of it in its very inception, unless otherwise there is a
frivolous motive behind incorporating a company. Further, from a taxation point of view one person
company may not a pill to swallow proprietor since the tax rate is approximately 30% and may result
in the higher incidence of taxation for the Smaller Roll Ventures. There is an imperative need for
separate tax schemes formulated for OPC in accordance with the Income Tax Act, 1961.

[1.6] Impact of OPC in Indian Entrepreneurship

A research study11 suggested that the growth of OPC in India has a significant impact in the country's
economy and make a special contribution to national development. It shows the trends growth of
OPC in India especially after major reforms in Indian economy such as demonetization of Indian
currencies and implementations of GST Act 2017 in India. The small and medium scale
entrepreneurs in India now adopted an innovative business vehicle for their business. The
government of India, state governments, RBI, Ministry of corporate should revise existing policies
and implement innovative policies for OPC in India in terms of providing financial assistance at
concessional rates, tax holidays, and subsidies for small and medium scale entrepreneurs, monetary
and nonmonetary benefits for investors for attracting Foreign Direct Investment (FDI) in OPC India
by foreign investors in future. If such policies are implemented efficiently, there will be good
Foreign Investments, Joint Ventures, and Mergers etc. In India when the expert committee of Dr. JJ
Irani proposed the concept of an OPC, it aimed for structured organized business alongwith a
significant growth in Indian economy benefiting the country on the Global level.12

2. Incorporation of an OPC

[2.1] Eligibility Criteria

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As per rule 3.1 of the Companies (Incorporation) Rules, 201413 hereinafter referred to as
(“Incorporation rules”), only a natural person who is an Indian citizen can incorporate an OPC or
become a Nominee in the OPC.

As per rule 3.2 of the Incorporation rules, if a person has ever been a member of OPC he cannot
incorporate another One Person Company ever again. Also, a natural person is barred from assuming
the position of Nominee of two OPCs in one occasion.

As per rule 3.3 of the Incorporation rules, if a person is a nominee of two OPCs he has 180 days to
withdraw membership from either of them.

As per rule 3.4 of the Incorporation rules, a minor person is neither eligible to become a member or a
Nominee in an OPC nor can he hold shares with any beneficial interest.

As per rule 3.5 of the Incorporation rules, a One Person Company cannot be incorporated or
converted to a section 8 company of the Companies Act 2013.

As per rule 3.6 of the Incorporation rules, an OPC cannot carry out any non-banking Financial
Investment activities or any investment in securities of anybody corporate.

[2.2] Appointment of Sole member and nominee and their withdrawals

As per rule 4.1 and 4.2 of the Incorporation rules, the member of One Person Company will appoint
the nominee who will take over the company's reigns in the case of subscriber’s death or inability to
enter into a contract and his name should be mentioned in the MOA of the OPC, and such
nomination has to be filed in Form No. INC-2 along with his consent in Form INC-3. The nominee is
allowed withdraw his consent by giving a written notice. However, the member of the company will
then have to nominate another nominee and his consent will have to be taken in Form INC-3 and the
intimation of the same has to be sent to the company within 15 days receiving of this written notice.
Then the company will send the withdrawal of consent and on the nomination of another nominee in
Form INC-4 and Form INC-3 along with the applicable fees within 30 days of receipt of the notice of
withdrawal of consent.

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As per rule 4.5 of the Incorporation Rules, the sole member can change the nominee if he is dead or
incapacitated for any reason from entering into a contract and take the consent on the new nominee
under form INC-3. The company will then have to intimate this change to the ROC in Form INC-4
with Form INC-3 along with the prescribed fees within 30 days of receiving the notice of intimation
of change.

As per rule 4.6 of the Incorporation Rules, if the sole member of the company dies or becomes
incapable of entering into a contract, the nominee will become the new member and he will then
appoint another nominee and his consent will have to be taken in Form INC-3 within 15 days. The
company will then intimate this change to the ROC in Form INC-4 with Form INC-3 along with the
prescribed fees within 30 days of receiving the notice of intimation of change.

[2.3] Process of Incorporation of a company

As per rule 12 of the Incorporation Rules 2014, an application for registration of a company has to be
filed with the Registrar within whose jurisdiction the registered office of the company is proposed to
be situated, in SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) which
is Form INC-32. The following are the steps in the process of incorporation of a company:

[2.3.1] Obtaining Digital Signature Certificate (DSC)

Before incorporation it is mandatory for subscriber and the proposed director to have their digital
signature. The following documents are required for DSC:

Table 1: Documents required for DSC

1. Passport size photo of the applicant

2. Copy of Id and Address Proof
3. 1. Email Id and Phone number
4. 2. Signature of the applicant

[2.3.2] Name Approval Application

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Before reserving the name of the OPC it is advisable to ensure that same name has not been used by
another company, which can be done by going to the MCA website and entering the company name
in “Check Company Name” tab under the “Company Services” tab. This checks whether the
trademark for the proposed name of the company exists or not
.
As per rule 9 of the Incorporation Rules 2014, you need to select new application in INC-32 form,
select the type of company as OPC (private) and enter two names, in consonance with Section 12(3)
of the Act. Next step would be to choose between name reservation or incorporation of the
company. A payment of Rs. 1000 has to be made on choosing name reservation and the
incorporation process will be begin once an approval is granted by the Central Registration Centre
(CRC). Resubmission of this form is allowed within fifteen days for rectification of the defects.

As per Section 4(5) of the Act read with rule 9A of the Incorporation Rules 2014, extension of name
can be provided upto: (I) forty days from the date of approval under rule 9, on payment of fees of
rupees of one thousand rupees made before the expiry of twenty days from the date of approval
under rule 9; (II) sixty days from the date of approval under rule 9 on payment of fees of rupees two
thousand made before the expiry of forty days referred to in clause (a) above; (III) sixty days from
the date of approval under rule 9 on payment of fees of rupees three thousand made before the expiry
of twenty days from the date of approval under rule 9: Provided that the Registrar shall have the
power to cancel the reserved name in accordance with subsection (5) of section 4 of the Act. Further,
if it is found that name was applied by furnishing wrong or incorrect information then in the non-
incorporated company the reserved name shall be cancelled and the person making application shall
be liable to a penalty which may extend to one lakh rupees.

As per Section 16 of the Act read with rule 8 of the Incorporation rules 2014, if the name of the
company as per the opinion of the Central Government too nearly resembles the name or the
trademark then the company will have 15 days to change its name and file a notice of the same to the
Registrar of the Companies along with the order if the Central Government. Further, if a company
makes default in complying with any provision of Section 16, the company shall be punishable with
fine of one thousand rupees for every day during which the default continues and every officer who
is in default shall be punishable with fine which shall not be less than five thousand rupees but which
may extend to one lakh rupees.

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[2.3.3] Documents required

As per rule 38 of the Incorporation Rules 2014, an application for incorporation of a company has to
be made in INC-32 has along with e-Memorandum of Association (e-MOA) in Form No. INC-33
and e-Articles of Association (e-AOA) in Form No. INC-34. The details in the table below needs to
be entered with respect to Part B of INC-32 form which is to be signed by any first Director and a
practicing professional making declaration regarding compliance of the provisions of the Act.
Further, INC 20A has to be filed in compliance with section 10A of the Act read with 23A of the
Incorporation rules within 180 days of incorporation of business.

Table 2: Details to be entered with respect to Part-B of INC-32

1.1. Whether Articles of Association is entrenched

2.2. Capital structure of the company
3.3. Details of number of members
4.4. Correspondence / Registered address
5.5. Whether the address for correspondence is the address of registered office of the company
6.6. Name of the office of the Registrar of Companies in which the proposed company is to be
registered
7.7. Number of first Subscriber(s) to MOA and Directors of the company
8.8. Number of individual first Subscriber(s) cum Director(s)
9.9. Particulars of individual first Subscriber(s) cum Directors
10.
10. Nomination and details of first Subscriber(s) cum Directors
11.
11. Details with respect to payment of stamp duty
12.
12. Additional details with respect to PAN and TAN

Further, the following documents are required for incorporation of a company along with the INC-32
form. DSC has to be affixed in all forms.

Table 3: Attachments of Form INC-32

1.1. Identity proof of Directors and Shareholder PAN Card for Indian Nationals (Mandatory)
2.2. Proof of Identity (Voter ID/Passport/Driving License) (any one)
3. 2 Passport size photos
4.3. Address proof of Directors and Shareholder Bank statement/Electricity/Telephone/Mobile

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 bill) (not older than two months) (any one)
5.4. Proof of Registered office Conveyance/ Lease deed/Rent Agreement etc. along with rent
receipts (any one)
6.5. Copy of the utility bills (Telephone/Gas/Electricity bill) (not older than two months) (any
one)
7.6. NOC from Landlord
8.7. DSC form (physically signed)
9.8. DIR-2 (wherever applicable)
10.
9. e- MOA/ INC-33 (to be signed by the subscriber and the Practicing professional)
11. e-AOA / INC-34 to be signed by the subscriber and the Practicing professional.
12. Form AGILE PRO S / INC-35 (to be signed by any First Director)
13. Interest of first director(s) in other entities
14. Consent of nominee
15. Form INC-9 (to be signed by Subscribers and First Director)

[2.3.4] Issue of Certificate of Incorporation

As per rule 18 of the Incorporation Rules 2013, the Certificate of Incorporation shall be issued by the
Registrar in Form No. INC-11 and it shall mention permanent account number of the company where
it is issued by the Income-tax Department.

3. Post Incorporation Compliances and Annual filing

[3.1] Board Meetings and Procedure

[3.1.2] Composition of Board

As per Section 149(1)(a) of the Act, every company shall have a minimum of one director in the One
Person Company. A maximum of 15 directors which can be appointed as per Section 149(1)(b) of
the Act. Further, Section 173(1) of the Act provides that every company shall hold the first meeting
of the Board of Directors within thirty days of the date of its incorporation. At least one meeting of

9
the Board of Directors is to be conducted in each half of a calendar year and the gap between the two
meetings should not be less than ninety days.

As per Section 184(1) of the Act, every director of the Company shall disclose his/her interest in all
the Companies by giving a notice to the Board of Directors of the Company – (I) at the first Board
meeting in which he/she participates as a Director (II) at the first Board meeting of every financial
year or (III) whenever there is any change in the disclosures already made, then at the first Board
meeting held after such change. Disclosure of such interest by the Director shall be made in Form
MBP-1 under rule 9(1) of the Companies (Meeting of Boards and its powers) Rules, 2014 which
shall be kept at the registered office of the Company in the safe custody of the Company Secretary or
any other person authorized by the Board of the company. The same shall be preserved for a period
of eight years from the end of the financial year to which it relates. If any of the Directors of the
company contravenes this provision, he shall be liable to a penalty of one lakh rupees (Rs.1,00,000/-)

[3.1.2] Quorum of the Board meeting

As per Section 173(5) of the Act, the requirement as to quorum mentioned in Section 174 of the Act
is not applicable to One Person Company in which there is only one director on its Board of
Directors.

[3.1.3] Passing of Board Resolution

The resolution will be passed as per Section 122(4) of the Act which will be signed and dated by the
director and the same has to be entered in the minutes-book as required to be maintained under
Section 118 of the Act and the date will be the date of the Board meeting.

[3.1.4] Board Report of the One Person Company

The Board report is a report that contains explanations or comments by the Board on every
qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
Section 134 of the Act read with Rule 8A of the Companies (Accounts) Rules, 2014, prescribes the
matters to be included in Board's Report for OPC. The same has to be prepared based on the stand
alone financial statement of the company, which shall be in abridged form and contain the following:

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Table 4: Contents of Board Report

1.1. Number of meetings of the Board

2.2. Directors’ Responsibility Statement as referred to in sub-section (5) of Section 134
3. Details in respect of frauds reported by auditors under sub-section (12) of Section 143 other
than those which are reportable to the Central Government
4. Explanations or comments by the Board on every qualification, reservation or adverse remark
or disclaimer made by the auditor in his report
5. The state of the Company’s affairs
6. The financial summary or highlights
7. Material changes from the date of closure of the financial year in the nature of business and
their effect on the financial position of the company
8.3. The details of directors who were appointed or have resigned during the year

9. The particulars of contracts or arrangements with related parties referred to in sub-section (1)
of section 188 in the Form AOC-2
10. The details or significant and material orders passed by the regulators
11.
4. Courts or Tribunals impacting the going concern status and company’s operations in future

As per Section 134(6) of the Act, the Board report and all the annexures shall be signed by the
director of the OPC. As per Section 134(7) of the Act, the signed copy of every financial statement,
including consolidated financial statement, if any, should be issued, circulated or published along
with a copy of - (a) any notes annexed to or forming part of such financial statement; (b) the
auditor’s report; and (c) the Board’s report. Further, as per Section 134(8) of the Act, if a company
contravenes the provisions of this section, the company shall be punishable with fine which shall not
be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer
of the company who is in default shall be punishable with imprisonment for a term which may
extend to three years or with fine which shall not be less than fifty thousand rupees but which may
extend to five lakh rupees, or with both.
[3.2] Financial Statements of an OPC

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As per Section 134(1) of the Act, the financial statement shall be approved by the Board of Directors
before they are signed on behalf of the Board by the director, for submission to the auditor for his
report thereon. Section 134(2) provides that the auditor’s report shall be attached to every financial
statement. The due date for filing AOC 4 is within 180 days from the end of the financial year i.e.
30th October of the following financial year.

Section 137 (1) of the Act read with Rule 12 of Companies Accounts rules, 2014 provides particulars
of the Annual financial reports of OPC.

Table 5: Particulars of the Annual financial statements

1. Balance Sheet
2. Profit, and Loss Account
3. Auditor’s Report, and the Consolidated Financial Statement
4. Form AOC-4

[3.3] Appointment of an Auditor

As per Section 139(1) of the Act, every OPC shall appoint a Charted Accountant as within 30 days
of incorporation. Rule 4 of the Companies (Audit and Auditors) Rules, 2014 provides that a notice of
such appointment shall be filed with the Registrar in Form ADT-1 within 15 days of the meeting in
which the auditor is appointed.

[3.4] Maintenance of Registers

[3.4.1] Register of Members of a Company

As per Section 88(1)(a) of the Act, read with Rule 3 (1) of The Companies (Management and
Administration) Rules 2014, every company having a Share Capital shall from the date of its
registration and maintain records of its members in Form No – MGT -1. However, rule 3(2) read
with rule 3 (1) of The Companies (Management and Administration) Rules 2014, provides that if
company is does not have Share Capital, then they are not required to maintain records as per Form

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MGT-1. But such a company is required to maintain a register which consists of details mentioned in
the table below.

Table 6: Contents of Register of Members of a Company not having Share capital

1. Name of member, address, E- Mail id, PAN Number or CIN No, Father/ Mother Name,
Occupation, Status, Nationality and in case member is a minor, name of Guardian and date
of birth of the member, name and address of Nominee.
2. Date of becoming member
3. 1. Amount of guarantee (if any)
4. Any other interest (if any)
5. 2. Date of cessation
6. Instructions given by member with regard to sending of notices etc

[3.4.2] Register of Debenture holders and other security holders

As per Section 88(1) (b) and (c) of Act, read with rule 4 of The Companies (Management and
Administration) Rules 2014, every company which issues or allots debentures or any other security
shall maintain their records in Form MGT-2.

[3.4.3] Procedure to maintain the Register

Rule 5 of The Companies (Management and Administration) Rules 2014, specifies the procedure to
maintain the register as required by Section 88. It provides that the register shall be maintained at
registered office of the company unless a special resolution is passed to maintain the same at other
place and the entries shall be made in registers within 7 days after the Board of Directors or when
committee approves the allotment or transfer of shares, debentures or other securities. Further, if any
correction/ modification is made in register then it must be supported with remarks in the register and
change in register must be done by authorized persons only.

If the Company and its authorized person are not maintaining registers as required by law, then the
company and every officer of the company who is in default shall be punishable with fine which
shall not be less than Rs.50,000/- but which may extend to Rs.3,00,000/- and where the failure is a

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continuing one, with a further fine which may extend to Rs.1,000/- for Every day, after the first
during the failure continues.

[3.5] Filing of Annual Returns

The Annual Return of One Person Company shall be signed by the Company Secretary or where
there is no company secretary, by the director of the company. Rule 11, sub-rule 1 of the Companies
(Management and Administration) Rule, 2014, provides that the Small Company and One Person
Company shall file Annual Return in new e-form MGT-7A.

As per Section 92(4) every company has to file with the Registrar a copy of the annual return, within
sixty days from the date on which the annual general meeting is held or where no annual general
meeting is held in any year within sixty days from the date on which the annual general meeting
should have been held. Section 92 (5) provides that if a company fails to file its annual return under
sub-section (4), before the expiry of the period specified under Section 403 of the Act with additional
fees, the company shall be punishable with fine which shall not be less than fifty thousand rupees but
which may extend to five lakhs rupees and every officer of the company who is in default shall be
punishable with imprisonment for a term which may extend to six months or with fine which shall
not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.
Further, as per Section 92 (6), if a Company Secretary in practice certifies the annual return
otherwise than in conformity with the requirements of this section or the rules made thereunder, he
shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend
to five lakh rupees.

[3.6] Filing of Income tax returns

As per Section 139(1) of Income Tax Act 1961, every company in India required to file income tax.
Form ITR 6 has to be filed with the Income tax department for the financial year on or before
30th September of the following financial year. For the purpose of Annual tax return filing,
every OPC is requisite to get their accounts audited under income tax act 1961 if turnover surpasses
the limit as specified in section 44AB. The applicable tax rate to the OPC would be 25% plus cess
and surcharge as applicable.

Table 7: Surplus charges

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 Where its total turnover is less than 400 crores 25%
Where it opted for Section 115BA 25%
Where it opted for Section 115BAA 22%
Where it opted for Section 115BAB 15%

The amount of income-tax computed shall, be increased by a surcharge,- (a) in case company having
a total income exceeding one crore rupees, but not exceeding ten crore rupees, at the rate of seven
per cent of such income-tax; and (b) in case company having a total income exceeding ten crore
rupees, at the rate of twelve per cent of such income-tax; However, the rate of surcharge in case of a
company opting for taxability under Section 115BAA or Section 115BAB shall be 10% irrespective
of amount of total income. Provided that in the case of every company having a total income
exceeding one crore rupees but not exceeding ten crore rupees, the total amount payable as income-
tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total
income of one crore rupees by more than the amount of income that exceeds one crore rupees and
that in the case of every company having a total income exceeding ten crore rupees, the total amount
payable as income-tax and surcharge on such income shall not exceed the total amount payable as
income-tax and surcharge on a total income of ten crore rupees by more than the amount of income
that exceeds ten crore rupees.

4. Conversions

[4.1] Conversion of One Person Company into a private company or a public company

In case the paid up share capital of an OPC exceeds fifty lakh rupees or its average annual turnover
of immediately preceding three consecutive financial years exceeds two crore rupees, then the OPC
has to mandatorily convert itself into private or public company. The company has to file an
application in e-Form No. INC-6 for its conversion into Private or Public Company, along with fees
as provided in the Companies (Registration offices and fees) Rules, 2014.

Table 8: Attachments of INC-6

1. Altered MOA and AOA

2. Copy of Resolution

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 3. List of proposed members and its directors along with consent
4. List of Creditors
5. Latest audited balance sheet and profit and loss account

[4.1.1] Altering the Memorandum of Association and Articles of Association

As per Section 18 of the Act read with rule 6 of the Incorporation rules 2014, OPC can be converted
to a Private company or a Public company by increasing its members to 2 and 7 respectively altering
the memorandum of association and articles of association by passing a resolution. This resolution
has to be communicated by the member to the company and entered in the minutes-book required to
be maintained under Section 118 and signed and dated by the member as per Section 122(3) of the
Act. However, Rule 3(5) of the Companies (Incorporation) Rules, 2014 categorically provides that
One Person Company cannot be incorporated or converted into a company under Section 8 of the
Act.

[4.1.2] Filing of Form-MGT 14

MGT-14 form has to be filed with the prescribed fees within 30 days of passing the resolution in
consonance with Section 117 of the Act because of altering the MOA and AOA of the Company.

Table 9: Attachments of MGT-14

1.1. Altered AOA along with stamp duty challan

2.2. Altered MOA Board Resolution
3.3. Special Resolution
4. EGM notice with explanatory statement

[4.2] Conversion of Private Company into OPC

The Application for the conversion of Private Company into OPC should be filed to the RoC in Form
INC-6.

Table 10: Attachments of INC-6 for the conversion of Private Company into OPC

16
 1. Altered AOA along with Stamp duty challan
2. Altered MOA
3. Copy of the duly attested latest financial statement
4. Copy of board resolution authorizing giving of notice
5. Copy of minutes
6. List of Creditors and list of Members
7. Copy of NOC of every Creditors with the application for Conversion
8. Consent of the nominee in Form INC-3
9. Copy of PAN card of the nominee and member
10. Proof of identity of the nominee and member
11. Residential proof of the nominee and member

Notice for conducting the Board Meeting has to be sent to all the members at least 7 days prior to the
date of the Board Meeting along with a notice containing the agenda of Board Meeting.

[4.2.1] Agenda of Board Meeting

The agenda of the board meeting is to – (1) Obtain approval from the Directors for the Conversion
(2) Fix the date, place, time, and day of the Extraordinary General Meeting (EGM) (3) Obtain
approval of notice for EGM along with the agenda and Explanatory Statement (4) To authorize any
of the Directors or Company Secretary to issue the approved notice of the EGM.

[4.2.2] Issue notice of Extraordinary General Meeting (EGM)

Notice for calling (EGM) should be sent to all the members, directors and auditors of the Company
at least 21 days before the date of the EGM.

[4.2.3] NOC from Creditors

Before passing the Special Resolution in the EGM, the Company should get a No Objection
Certificate (NOC) in writing from the existing shareholders and creditors. Copy of no objection letter
of secured creditors is required.

17
[4.2.4] Conduct an EGM

The EGM is held for passing Special Resolution under Section-114(2) of the Act for shareholder’s
approval for conversion of Private Company into One Person Company (OPC) and for approval of
the alteration in MOA and AOA. After passing of the special resolution in EGM, a copy of this
special resolution is required to be filed with the ROC through filing of form MGT-14 within 30
days of passing Special Resolution. Further, form MGT-14 has to be filed first because the SRN No.
of form MGT.14 will be used in form INC-6

5. Voluntary liquidation of a One Person Company

As per Section 59(1) of the Insolvency and Bankruptcy code, 2016 (“IBC”), Corporate persons who
desire to liquidate their Company should not have committed any default in terms of repaying debts,
or should be in a position wherein the corporate person is able to repay the legitimate debts. Section
3(12) of IBC provides that default means non-payment of debts when the due date of such payment
has lapsed, and when such payment is not settled by the debtor it is said to have committed default.14

[5.1] Declaration of Solvency

As per Section 59(3) of IBC, the directors of the Company are required to formulate a Declaration of
Solvency in the form of an Affidavit, declaring that the company has no debt and if it has, it will be
able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation and that
it is not being liquidated to defraud any person. The declaration affidavit should be accompanied
with the list of audited financial statements and record of business operations of the corporate person
for the previous two years or for the period since its incorporation, whichever is later along with a
report of the valuation of the assets of the corporate person, if any, prepared by a registered valuer.

[5.1.1] Board meeting

A Board meeting has to be convened in order to get the decision of voluntary liquidation approved
by members of the board. A resolution must be passed under Section 59(3)(c) of IBC and shall

18
contain the terms and conditions of the appointment of the Insolvency professional to act as the
liquidator of the company, including the remuneration due to him. The remuneration to be provided
to the liquidator shall form part of the liquidation cost.

[5.1.2] General Meeting

The must be a general meeting of the Shareholders within 4 weeks of the declaration of solvency to
pass a special resolution requiring the company to be liquidated voluntarily and appointing an
insolvency professional to act as the liquidator. In case the corporate person owes any debt to any
creditor then 2/3rd of the creditors needs to vote in favour of liquidation within 7 days of passing
such a resolution. All of these resolutions have to comply with Regulation 3(3) and Rule 4 of the
Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017
(hereinafter referred as “Regulations”). Regulation 4 provides that a corporate person, from the date
of commencement of liquidation proceedings to its cease shall carry on its business as far as required
for the beneficial winding up of its business and that the corporate person shall continue to exist until
it is dissolved under Section 59(8) of IBC.

[5.1.3] Notice to ROC and IBBI

After the successful approval of the resolution by members and creditors, as the case may be, it is the
duty of the corporate person to intimate the Registrar of Companies ("ROC") and IBBI within seven
working days of such resolution.

[5.2] Commencement of Liquidation and Public Announcement

The official liquidator needs to make a public announcement in Form A of Schedule I of the
Regulations, 2017 before 5 days of his appointment, in which he calls for creditors and stakeholders
to submit their claims before thirty days of the commencement of the liquidation process. According
to Regulation 14(3) of the Regulations, 2017 the announcement should be published in the official
gazette, in one English and one regional language newspaper, or any other location where in the
opinion of the Liquidator, the Corporate Person conducts material business operations, and on the
website, if any of the corporate person.

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[5.2.1] Submission of claims

All the persons who claim to be the creditors or the stakeholders of a corporate person which is to be
liquidated must prove their claims for their respective debts and dues including interest to be paid
within the specified time limit. The claims are mainly divided into 4 types: (1) Claims by
Operational Creditors; (2) Claims by Financial Creditors; (3) Claims by Workman and Employees;
and (4) Claims by other Stakeholders. All of these creditors and stakeholders have to compulsorily
submit the legitimate proof of their claims by virtue of Form B, Form C, Form D and Form F of
Schedule I of the Regulations, 2017 respectively.

The liquidator may call for the requisite evidence or clarifications as he/she deems fit from a
Claimant to substantiate the whole or part of their claims. The liquidator will verify these claims
within 30 days of receipt of the claims. The cost of proving their claims is levied on the claimant. On
the other hand, the cost of verification of the claims made by the claimant is to be incurred by the
liquidator which in turn is to be compensated from the part of the liquidation cost. After final
scrutiny, the liquidator may reject or accept the claims with the proper statement as to why the
particular claims are being rejected or accepted.

[5.2.2] Preparation of list of Stakeholders

The liquidator must prepare a complete list of stakeholders based on the results after the verification
of the claims of the stakeholders and the creditors, on the basis of what all claims and dues are bound
to be settled. As per Regulation 30 of the Regulations, 2017, the liquidator is provided with a time
period of 45 days to submit the final list of stakeholders. Once the final list is being prepared it is
thereon sent for inspection to the board of directors, guarantors, to persons who submitted their
claims, and it is also to be published on the website of the corporate person. Proviso to Regulation
30(2) of the Regulations, 2017 states that where no claim from creditors has been received till the
last date for receipt of claims, the liquidator shall prepare the list of stakeholders within fifteen days
from the last date for receipt of claims.

[5.2.3] Realisation of the Assets of the Corporate Person

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After the list of stakeholders gets the final approval of the parties having an interest in the company
to be liquidated, the liquidator starts with the process of realising the assets of the company. The
liquidator may also initiate a recovery process when there are possibilities of recovering of assets in
the near future.

[5.2.4] Distribution

According to Regulation 35 of the Regulations, 2017 the distribution process begins once all the
assets of the corporate person are realised by the liquidator. The liquidator may take time period of
30 days to distribute the settlement amount from the date of realisation. The cost incurred by the
liquidator shall be added to the total cost of liquidation.

[5.2.5] Completion of Liquidation

As per the provisions of Regulation 38 of the Regulations 2017 read with the said notification dated
5th April 2022, the liquidator of the company must endeavour to complete the liquidation process
within two hundred and seventy days from the liquidation commencement date where the creditors
have approved the resolution under clause (c) of sub-section (3) of section 59 or clause (c) of sub-
regulation (1) of regulation 3, and within ninety days from the liquidation commencement date in all
other cases.

[5.2.6] Submission of Final Report

After the completion of the liquidation process, the liquidator must submit the final report of
liquidation to the ROC and to the IBBI. The final report must consist of the duly audited accounts of
the company, a statement demonstrating that all the assets of the company are disposed of, no
pending debts or dues are yet to be paid, and that there are no pending litigation proceedings against
the company.

[5.3] Role of NCLT and Final Order

21
The liquidator must make an application seeking the dissolution of the corporate person to the
adjudicating authority i.e., the NCLT. The NCLT after hearing the party and after proper scrutiny
shall then pass an order that the company shall stand dissolved from the date of the order. The
liquidator then is ought to forward the copy of the order to the ROC and the IBBI. The liquidator
must also preserve the records and documents of the company getting voluntarily dissolved for at
least eight years from the date of passing of orders by NCLT.

[5.4] Striking off the name from the Register

As per Section 248 of the Act, the Registrar has the power to remove the name of a company from
the Register of the Companies. In the circumstances mentioned in the section, a company’s name can
be removed from the Register of Companies without following the elaborate process prescribed for
the winding up of companies.

Section 248(2) Act of lays down the rules that the company needs to comply with for its voluntarily
liquidation. According to the aforementioned section, every Company can file a voluntary
application with the ROC for Striking off their name from the Register of Companies as per the
grounds mentioned under section 248(1) i.e. (a) failure by the company to commence business within
one year of its incorporation (b) failure to make any application for obtaining the status of a dormant
company under Section 455 of the Act, in case the company is not carrying on any business or
operation for a period of two immediately preceding financial years. The application needs to be
filed in Form STK-2 with application fee of Rs. 10,000.

Table 11: Attachments of STK-2

1. An Indemnity Bond duly notarized by every Director of the Company in Form STK-3
2. An affidavit in Form STK-4 by every Director of the Company
3. A statement of accounts showing the current assets and liabilities of the Company not more
than thirty days before the date of application. The statement of accounts must be certified by
a Chartered Accountant in Form STK-8
4. A copy of the special resolution duly certified by each of the Directors of the Company or
consent of seventy-five percent of the members of the Company in terms of paid-up share
capital as on the date of application
5. A statement regarding pending litigations, if any, involving the Company

22
 6. Approval of the authority in case the Company regulated by any other authority or comes
under the regulation of a special Act.

[5.4.1] Holding a Board Meeting

The Directors of the Company are required to hold a Board meeting in which they should pass the
Board Resolution for striking off the name of the Company, however this would be subjected to the
approval of the shareholders, and authorize the filing form STK-2 with the ROC.

[5.4.2] Holding a General Meeting

A General meeting will need to be held by the Members of the Company to obtain the shareholders’
approval for the Company strike-off. Now, this can be done in two ways.
First, it can be done by members putting out a Special Resolution in which the motive to wind up the
Company and strike-off its name off Register of Companies shall be specified along with reasons.
Second, by acquiring the consent of seventy-five percent of members in terms of paid-up share
capital.

[5.4.3] Extinguishment of all the Liabilities

After passing of Board resolution, if there are any pending liabilities with the Company then it will
first extinguish all those liabilities before moving to the next step.

[5.4.4] Approval of Concerned Authorities

If a Company is regulated under a special act then, approval of the regulatory body constituted or
established under that specific Act will also need to be obtained and enclosed with the application.

[5.4.5] Public notice by registrar of companies

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After filing an application for strike off by the Company, the ROC shall publish a public notice in
Form STK-6 inviting objections from the public to the proposed Strike off, if any. The objections, if
any, are to be sent to the respective ROC within thirty days from the date of publication. The notice
has to be published in the MCA website, in the Official Gazette, in a leading English newspaper, and
at least in one vernacular newspaper where the registered office of the Company is situated.

[5.4.6] Intimation to regulatory authorities

The ROC shall simultaneously intimate the concerned regulatory authorities regulating the Company
about the proposed action of removal or striking off the names of such companies and seek
objections if any. The concerned regulatory authorities include the Income-tax authorities, Central
Excise authorities, and Service-tax authorities having jurisdiction over the Company.

[5.4.7] Publication of notice of dissolution

The published notice shall be to the effect that the Company’s name has been struck off the register
of companies and has been dissolved with effect from the date (mentioned therein). The same shall
also be placed on the official website of the MCA (Section 250).

[5.5] Companies illegible for Voluntary liquidation

As per Section 249 of the Act, the following companies are not eligible to make the application for
strike off under Section 248(2) of the Act, if such companies at any time in the previous three
months have – (1) Changed its name or shifted its registered office from one state to another
(2) Made a disposal for value of property or rights held by it, immediately before cesser of trade or
otherwise carrying on of a business, for the purpose of disposal of gain in the normal course of
trading or otherwise carrying on of business (3) Engaged in any other activity except for one which
is mandatory for the purpose of making an application under Section 248(2) of the Act, or deciding
whether to do so or concluding the affairs of the Company or complying with any statutory
requirement (4) Filed an application to the National Company Law Tribunal (“Tribunal”) for the
sanctioning of a compromise or arrangement and the matter has not been finally concluded (5)
Wound up under Chapter XX of this Act or under the provisions of IBC.

24
[5.6] Application for striking off for fraudulent purpose

Section 251 of the Act imposes liability upon the persons in charge of the management of the
company for making an application under sub-section (2) of Section 248 of the Act with the object of
evading the liabilities of the company or with the intention to deceive the creditors or to defraud any
other persons. Accordingly, the person in charge of management shall be jointly and severally liable
to any person or persons who had incurred loss or damage as a result of the company being notified
as dissolved. In addition to that he shall be punishable for fraud in the manner as provided in section
447 of the Act.

6. Privileges and Exemptions available to One Person Company

The most significant reason for shareholders to incorporate the ‘single-person company’ is certainly
the desire for the limited liability. Businesses currently running under the proprietorship model can
get converted into OPCs and vice versa without any difficulty. Further, the minimum authorized
share capital required for OPC having share capital is Rs. 1,00,000/- making the investment in
starting OPC relatively inexpensive. In addition to the aforementioned privileges, there are also
certain exemptions available to the OPCs under the Companies Act, 2013.15 These are;

1. As per Section 2(40) of the Act, there is no need to prepare a cash-flow statement.
2. As per Section 92 of the Act, the Annual return can be signed by the Director and not necessarily
a Company Secretary.
3. The Central Government may prescribe an abridged annual return for OPC.
4. As per Section 96 of the Act, there is no necessity for an Annual General Meeting (AGM) to be
held
5. Specific provisions related to general meetings and extraordinary general meetings would not
apply (Sections 100 to 111).
6. As per Section 112 of the Act, compliance can be said to have been done if the resolutions are
entered in the minutes’ book of the company.
7. As per Section 134 of the Act, it would suffice if one director signs the audited financial
statements.

25
8. As per Section 137 of the Act, financial statements can be filed within six months from the close
of the financial year as against 30 days.
9. As per Section 173 of the Act, an OPC need to hold only one meeting of the Board of Directors
in each half of a calendar year and the gap between the two meetings should not be less than
ninety days and Section 174 of the Act (Quorum for meetings of board) will not apply.
10. Mandatory rotation of auditor after expiry of maximum term is not applicable to OPCs.

7. Recent Amendments

As a measure to benefit Start-ups & Innovators in the country and in order to bring in more
unincorporated businesses into the organized corporate sector, the incorporation of OPC is being
incentivized by amending the Companies (Incorporation) Rules to allow OPCs to grow and
contribute to the economy.16 Following are some recent amendments17 to the Rules governing OPCs;

1. Previously NRIs were not allowed to incorporate OPCs. Now any natural person, who is an
Indian citizen, whether resident in India or otherwise would be allowed to form an OPC.
2. For being considered as a resident in India, the residency period has been reduced to 120 days
from 182 days for NRIs.
3. The provision that mandating completion of two years from the date of incorporation of OPC for
voluntary conversion has been omitted. Conversion of One Person Company into a Public
company or a Private company shall be permitted anytime. A One Person company may be
converted into a Private or Public Company other than a company registered under section 8 of
the Act, after increasing the minimum number of members and directors to two or minimum of
seven members and three directors as the case may be,
4. Similarly, the limitation of paid up capital & turnover previously applicable for OPCs (paid up
share capital of fifty lakhs rupees and average annual turnover during the relevant period of two
crore rupees) is being done away with so that there are no restrictions on the growth of OPCs in
terms of their paid up capital & turnover.
5. Rationalization of e-forms applicable for OPCs by omitting e-Form No.INC-5 and modification
of e-form INC-6 (application for conversion from OPC to a Private company or a Public
company and also Private company to OPC)

26
8. Conclusion
One Person Company is still a nascent and developing business concept for the Indian Market yet it
has gained an excellent response in the last 9 years. The compliance burden is very less and the
limited liability of the members is an added advantage. It is expected to benefit people who are into
self-employment and promote entrepreneurship. With the advent of OPC as a business model, the
liability on government to fulfill the employment needs of people is reduced to a certain extent.18 It is
a remarkable feature of the Companies Act, 2013 but still lots of limitations are showing in this
concept under the provisions of the Act and there has been criticism in certain quarters against the
formation of such a company as it may give room for evasion of public funds and tax liability by an
individual.19 Such limitations should be corrected to ensure accelerated growth of OPCs and its
contribution to the Indian Economy.

27
1
https://www.mca.gov.in/content/dam/mca/pdf/CompaniesAct2013.pdf
2
Ibid
3
Saloman v. Saloman & Co. [1897] AC22
4
“Sudipta Chakraborty Soumendralaha, “One Person Company in India–an insight into the Conceptual Framework In the
light of Companies Act, 2013” EIJFMR 16 (2015)
5
Dr. Madhu Sudan Dash, “One Person Company: A critical analysis”, 5 IJAR 436 (2015)
6
Dr J.J. Irani (Committee) Report on Company Law, 2005
7
Mansukhlal Hiralal & Company, article on “One Person Company - Evolution Under New Companies Act” 2015
8
Ojha, Dr. K. B. “One Person Company (OPC) under the Companies Act, 2013: A New Business Concept in India” Vol.
2, Bhatner Socio-Legal Journal, 80 (2015)
9
Bhavna P. Patel, “One person Company, recent trend in business” 3 IJRAR 124 (2016)
10
Chatterjee, Sabarnee, “One Person Company and Limited Liability on its Members”, Vol. 3 Company Law Journal 1
(2014)
11
Dr. P Govindan, “A Study on Growth and Impacts of One Person Companies (OPCs) In India- A Innovative Business
Vehicle for Small and Medium Scale Entrepreneurs”, ResearchGate p.14 (2018)
12
Vatsala Singh, article on “One Person Company- A Concept For New Age Business Ownership” (2013)
13
https://www.mca.gov.in/Ministry/pdf/NCARules_Chapter2.pdf
14
Priya Chitlangia, “One Person Company Under Companies Act, 2013”, BnW Journal (2020)
15
ICSI Module “One Person Company”
16
Sriram Srinivasan, “What are One Person Companies and why do we need them?”, The Hindu, Feb 07, 2021
17
MCA notification issued on 01 November 2021
18
Aashna Jain, article on “An Expository Analysis of One Person Company Concept- Is it an arrow shot in dark or it
serving its purpose”, (2014)
19
Ranjan Kumar, Raza “One Person Company’ Under Companies Act, 2013—Journey From ‘Minimum Two
Person’ to ‘Only One Person’: A Critical Reappraisal” 6 GJMRR 3 (2018)