How Technological Advancements Are Shaping OPC Management?

In the past few years, technology has been a catalyst in the growth of One Person Companies (OPCs). Digital tools and platforms have revolutionized such companies by simplifying their complicated tasks and streamlining project management, communication, and accounting. Technology is playing a pivotal role in cutting down finances and costs, fostering innovation, and promoting data-driven decision-making.

The concept of OPC Company Formation has been mooted by the MCA (Ministry of Corporate Affairs), allowing India to incorporate a single person company with ease and in alignment with the regulatory framework. Unlike sole proprietors (also established by one person), OPCs relish the benefit of perpetual succession through its nominee clause. In simpler terms, OPCs do not cease to exist in case of demise or disability of the original owner as the nominee director takes over the business to continue its operations.

This comprehensive blog sheds light on how technological advancement in OPCs has transformed the way these companies operate, along with deeper insights into OPC formation.

What are One Person Companies Under the Corporate Law?

The idea of One Person Company introduced in the Companies Act 2013 described OPC as a company registered with just a single member. Such a corporate establishment must have a minimum of one member and one director, where a single person is permitted to hold both of these positions.

One Person Companies have been in existence and operational for several decades throughout the globe. For instance, the United Kingdom was the first to pave the way for the seamless establishment of a one-man company. Singapore permitted the establishment of OPC through its amended Companies Act 2004. Similarly, China introduced the OPC framework back in 2005.

In India, OPC was recommended by the Dr. JJ Irani Committee that classified companies on the basis of size (small companies and other companies) and numbers (One Person Companies, Private Companies, and Public Companies). Further, an OPC can be a company limited by shares, limited by guarantee, and unlimited company.

The committee emphasized that ‘it is possible for an individual to operate in the economic domain and form a single person company through simpler regime and exemptions’.

How Technological Advancement Helps One Person Company?

Technology has transformed the way businesses operate and utilize their resources. OPC Company Formation is increasingly integrating technology to level up its strategies, operations, and competitiveness. It has allowed businesses to boost their productivity at minimal costs involved. Automation, machinery, and other technological tools and devices have affected OPCs in the following manner:

• Automate Repetitive Tasks: One person companies often operate on a smaller scale and limit their services to a particular region, employing a minimal workforce and using outdated technology. However, the integration of advanced tech-based tools and services has enabled such companies to streamline and expedite their repetitive tasks such as invoice processing, form filling, data entry, and email campaigns, among others.
• Improved Data Management: The sole owners and shareholders of OPC are now making use of big data and cloud-based tools to analyze market trends, customer behavior, and operational loopholes. Data analytics tools have improved decision-making in day-to-day operations, services, and products.
• Customer Relations Management: Technology has enabled one person companies to improve their relationship with various stakeholders including customers. Companies have been increasingly using high-tech tools to track customer interactions, analyze their preferences, and take note of the feedback necessary to enhance operational efficiency. This has assisted companies to provide tailored services and experiences.
• Enhanced Communication and Collaboration: Online applications, apps allowed one person companies to seamlessly collaborate with their partners, clients, and co-workers. Further, cloud storage has sped up and simplified the sharing of information among various key stakeholders and boosted business productivity.

Can OPC Registration Help Boost Business Credibility? Registering a business as One Person Company provides it with a legal business structure, makes it a distinct legal entity, and fosters trust and credibility among various stakeholders through timely public disclosures.

What are the Characteristics of One Person Company?

The desire of an individual to establish a business venture prompted the government to introduce the OPC framework through its company law. OPC combined the features of a company and sole proprietor, whereby the owner remained a separate legal entity like any registered corporation. One-person companies widely gained momentum and became a preferred choice among small entrepreneurs and start-up owners. Here’s a list of features that allows OPC to stand out and emerge as an optimal business type choice:

• An OPC is incorporated as a private limited company.
• The company must have a minimum of one member and one director.
• Before initiating OPC Company Formation, the entrepreneur is mandated to appoint a nominee who must be an Indian citizen, a natural person, and a resident of India. The term resident of India specifies that the nominee must have stayed in India for a minimum of 182 days in the previous calendar year.
• A person who has incorporated an OPC cannot establish another OPC. Similarly, a nominee cannot be appointed as a nominee in more than one such company.
• An OPC will have to mandatorily convert into a private limited company in case its paid-up capital is more than INR 50 Lakhs or its average annual turnover exceeds INR 2 crores in the previous three consecutive years.
• An OPC cannot be a Section 8 company (a non-profit organization with the primary objective of promoting charity, research, sports, education, social welfare, etc.).
• One Person Companies cannot carry out or undertake investment activities such as lending, investing in securities, etc.
• Such companies can convert into any other type of company upon completing a minimum of 2 years since its inception.
• A private limited company (except section 8 firms) can convert into OPC given that it has a paid-up share capital of INR 50 lakh or less and an annual turnover of INR 2 crore or less.

OPC Registration for Tech Startups, service-based businesses, or any corporate venture is considered ideal as such companies are required to comply with fewer compliances, protect the assets of the owner from company debts and liabilities, and continue to exist even when the sole owner passes away or become incapable to manage the business, among others.

Benefits and Privileges Available to One Person Company

OPCs have become a popular business organization, especially among small entrepreneurs. Such companies require minimal paperwork, form as a separate legal entity from its owners, and provide the flexibility to add more members as the company progresses and scales up its operations.

• Limited Liability: One Person Companies are deemed fit for enterprises whose owners desire for limited liability. It is type of legal structure that protects owners’ and investors’ personal assets and wealth in case the company fails. Thus, creditors can only use the assets of company to cover its losses and cannot make the owner liable to pay the debt through its personal property.
• Fewer Compliances: OPCs are not required to file a Cash Flow Statement in their annual submission of financial documents with the ROC. In addition, it is not required to file an audit report, hold mandatory AGM (Annual General Meeting), and get its annual returns signed by a company secretary.
• Separate Legal Identity: Such companies are a separate legal entity. It means that shareholders and company are two different entities. This allows OPCs to execute contracts, sue or get sued, and own property under its own name.
• Perpetual Succession: The demise of the sole member of OPC does not affect its business continuity, unlike sole proprietors whose existing member’s death or any other contingency causes the business to dissolve and end its operations.
• No Paid-up Capital Requirement: OPCs require minimal capital to commence operations. Similarly, they are not required to maintain a minimum paid-up capital to obtain a Certificate of Incorporation.
• Board Meetings: In case the OPC has just one director, it is not required to hold board meetings but instead mandated to maintain a minutes-book that must include all resolutions details, and be signed and dated by the sole member. Whereas, OPC with more than one director must hold one board meeting in each half of calendar year (1 meeting in 6 months). The gap between the two meetings should not be less than 90 days.

How OPC Registration Affects Import and Export Businesses? OPC registration allows the business head to be the sole decision maker, protect their personal assets from the company’s debts, and help in availing schemes that offer easy financing facilities in export/ import activities.

Conclusion

As per the Company Act section 2(62), an OPC is a company formed by just one person as its member. Such business formation enjoys the complete autonomy offered under sole proprietorships and limited liability and separate legal identity like that of a company. Further, OPCs are subject to fewer compliances in the form of no obligation to submit cash flow statements and no requirement for board meetings in case the company has just one director.

The Company Act 2013 has eased the process of setting up a single person company, eliminating the complexities of traditional corporations and partnerships. For OPC Company Formation, an entrepreneur is required to obtain a Digital Signature Certificate (DSC), a Director Identification Number (DIN), and draft crucial legal documents such as a Memorandum of Association (MOA) and Articles of Association (AOA) for successful registration. Connect with Legal Raasta to understand the complex regulatory landscape of OPC registration and the compliances the company must follow to avoid any fines and penalties.