Can OPC Registration Help Boost Business Credibility?

The amended Company Act 2013 has introduced several rules and provisions that earlier did not exist within the corporate laws of India. One such breakthrough provision was the introduction of One Person Company in the corporate world. This new business form amalgamated the features of sole proprietor and a company, offering benefits like perpetual succession and limited liability.

An OPC (One Person Company) is formed and owned by a single person under the Companies Act 2013. Members in a company, a term used interchangeably with shareholders, typically refers to those individuals whose names appear in the register of members. In the case of a One Person Company (OPC), both member and shareholder are the same person who has subscribed to the company’s Memorandum of Association (MOA).

This comprehensive blog outlines every essential aspect of OPC Registration Online, providing detailed information on how such companies enhance the credibility of business.

What is One Person Company as per the Companies Act?

According to Section 2 (62) of the Company Act 2013, a One Person Company (OPC) is a company that has only one individual as its member. The Memorandum of Association (MOA) of these companies must indicate the name of the person (nominee) who will become the company’s member in case of death or incapacity of the sole subscriber. The nominee is required to submit consent in written form with the ROC (Registrar of Companies) at the time of incorporation specifying that he/she does not object to becoming a nominee and fulfilling the mandated criteria.

The law mandate that every private limited company except OPC to have a minimum paid up share capital as prescribed from time to time. An OPC is exempted from submitting Cash Flow Statement in its financial statement filed at the end of financial year. Further, these companies are mandated to mention in brackets the term ‘OPC’ along with its name wherever it is engraved, printed, or affixed.

OPC Registration for Tech Startups and small enterprises streamlines business operations, provides limited liability, and prescribes fewer compliance requirements. In addition, OPC as a company form is beneficial in a myriad of other ways such as faster incorporation and ease of management.

How Does OPC Boost Credibility within a Business?

Despite having a single owner within a One Person Company (OPC), the company still functions as a distinct legal entity. It means that the company has its own legal identity and is separated from its owners. The company has its own rights and obligations where it can own property, enter into contracts, and get sued under its own name. This along with several other characteristics helps businesses established as One Person Company (OPC) to boost credibility and trust.

• Establish Formal Corporate Structure: A person willing to establish a company can either opt for a sole proprietor or OPC. While both can be set up with just a single person as a member, sole proprietor is not registered under the Companies Act. Whereas, OPCs are recognized as legal entities under the CA 2013 and demonstrate their compliance with all legal requirements before incorporation.
• Foster Trust: Being registered as an OPC instead of sole proprietor offers more professional and legitimate identity to its owner. This is because sole proprietors are unincorporated business which provide no legal distinction between the business and owner. With the help of a consultant OPC Registration Online can be done easily and recognize the business and enhance trust and confidence of clients in the business.
• Access Government Benefits: The government of India provides several benefits to OPCs in the form of subsidies, tax exemptions, and assistance through welfare schemes upon fulfillment of certain criteria. By becoming eligible for these benefits, OPCs demonstrate their credibility and operations that value transparency and growth.
• Considered Reliable and Trustworthy: OPCs are considered as more reliable and stable business form as they fall under the regulatory oversight. The CA 2013 mandate such companies to periodically file returns, financial statements, maintain statutory register, and file income tax returns. This demonstrate compliance of such companies with the stipulated legal requirements and bring transparency in their operations.

What are the Features of One Person Company?

Company types such as private limited companies require a minimum of two directors and public companies need three directors to set up the corporate venture. Whereas, a One Person Company (OPC) is created when the company has only one promoter/ founder to incorporate a business. OPCs are widely preferred by individuals who are planning to set up small businesses or start-ups owing to the numerous advantages they offer throughout the company’s registration and post-registration phase. An OPC is a popular choice for the following reasons:

• Single Person Ownership: The Company Act 2013 allows a single person to set up a company, offering them complete ownership and control over the business operations. It helps in quicker decision-making, eliminate possibilities of conflict that may arise due to multiple people involved in the business, and allow them to pocket all the profits as his/her return on the investment.
• Flexible Management: The incorporation process of an OPC is less complex when compared to other type of companies. Further, OPC permit the sole member to have complete autonomy over their business, eliminating the requirement of conducting meetings or consulting others.
• Limited Liability Protection: Limited liability protection permit OPCs to separate the personal assets of business owners (members or shareholders) from the financial debts and obligations of the company. It also allows these companies to incur debts, enter into contracts, sue or get sued, and form a corporate veil which protect private asset of owners in case the company fails.
• Simplified and Fewer Compliance: One Person Companies are exempted from complying with certain legal provisions such as submission of Cash Flow Statement, holding of Annual General Meeting (AGM), and requirement of Company Secretary to sign the books of accounts of the company.
• Nominee Requirement: Before initiating OPC Registration Online process, the sole member is required to appoint a nominee who must be an Indian citizen and a natural person. The nominee takes over the company’s affairs when the original member dies or become incapacitated. This ensures business continuity unlike in sole proprietor where death or incapacity of owner lead to shut down of the enterprise.
• Lesser Penalties: The Company Act 2013 prescribe lesser penalties for certain company payable in case of any violations or non-compliance. One of such company is the OPC that is subject to penalty not more than one-half of the sum imposed as financial punishment.

How Technological Advancements Are Shaping OPC Management? By leveraging technological tools and equipment such as cybersecurity, AI, data analytics, automation, and blockchain, OPCs have been able to streamline its operations, increased productivity and efficiency of the business, and allowed the sole owner to manage the enterprise effectively.

What are the Compliances for OPC Post-Registration?

Upon successful OPC Registration Online, the company has to comply with various legal requirements set out by the Company Act. These companies need to remain compliant with the stipulated statutory provisions to uphold their operational integrity and maintain prescribed standards. These compliances are as follows:

• Submission of Financial Statements: One Person Company is required to file a copy of their financial statement along with other financial documents prescribed by the ROC within 180 days from the end of the financial year.
• Meeting of Board of Directors: An OPC is exempted from conducting meeting of the Board of Directors as they only have a single director. However, OPC that has more than one directors (maximum allowed limit up to 15) has to conduct at least one such meeting in each half of a calendar year (6 months). In addition, the gap between the board meetings must not be less than 90 days.
• Appointment of Auditor: As per the Company Act 2013 Section 139, an OPC is mandated to appoint an auditor. The auditor must be a CA (Chartered Accountant) or a CA firm whose majority of the partners should be practicing in India and qualified as CAs. It must be appointed within 30 days of the company’s incorporation using the Form ADT-1.
• Commencement of Operations: Within 180 days of incorporation of OPC, the company is required to file declaration using Form INCA 20A. The form ensures that the company has started its business operations. Failure to comply with this norm will result in penalties that can extend up to Rs. 1 Lakhs.
• KYC Compliance for Directors: The Director(s) associated with the One Person Company (OPC) is/are required to complete their annual KYC (Know Your Customer) process with the Ministry of Corporate Affairs (MCA). For this, Form DIR 3 must be filed by 30th September of the next financial year. It will help MCA maintain an accurate database of directors and increase transparency in corporate governance.
• Disclosure of Interest: By using MBP -1, directors in an OPC is mandated to disclose their interest in other firms and companies, including shareholding at the first board meeting of every financial year.
• Maintenance of Statutory Register: OPCs are legally obligated to maintain records and statutory registers, including register of directors, register of members, minutes of board meetings, etc. These registers must be accurate and updated at particular intervals.
• GST Compliance: One Person Company (OPC) selling goods and services are required to obtain GST registration in case their annual turnover exceeds Rs. 40 lakhs (in case of goods) and Rs. 20 lakhs (for services). Timely filing of GST is essential to avoid any interest charges, fines, and penalties.
• Income Tax Filing: OPCs are mandated to file their ITR (Income tax Returns) annually by 31st July of each year (timeline set for individuals) and September 30th of the same year (for business). Moreover, if annual turnover of OPC exceeds Rs. 1 crore, it becomes mandatory to conduct a tax audit.

OPC V/s Foreign Company: Which Is Better for Entrepreneurs? Foreign companies are not considered an appropriate choice for sole entrepreneurs who wish to establish a business in India. One Person Company (OPC) is preferred as an ideal alternative, offering simplified compliance, separate legal identity, limited liability, and sound legal structure.

Final Thoughts

A single individual can form a One Person Company (OPC) by subscribing to the MOA and fulfilling other legal requirements as stipulated under the Companies Act 2013. The MOA (Memorandum of Association) must include details of a nominee who will replace the original member in case of his/her death or incapacity. Only an Indian citizen who must have stayed in India for a minimum of 182 days in the previous calendar year can obtain a Certificate of Incorporation of OPC.

To initiate OPC Registration Online, the entrepreneur first must obtain a DSC (Digital Signature Certificate) and a DIN (Director Identification Number). Moving forward, it has to reserve a unique company name. For this, the individual can use the RUN (Reserve Unique Name) service available on the Ministry of Corporate Affairs portal. Further, it is necessary to prepare two important documents namely MOA (Memorandum of Association) and AOA (Articles of Association). Finally, the SPICe+ form has to be filed with MCA along with other requested documents and fees. Contact Legal Raasta Private Limited to get your OPC registered by expert professionals cost-effectively and seamlessly.