We posted about proposal of one person company in India some time ago. Its now a reality.
Companies Act, 1956 is now replaced with the new Companies Act, 2013. The Companies Act, 2013 has introduced the concept of ‘One Person Company‘ in India. The concept is already prevalent in many foreign countries and now finally introduced in India.
What is One Person Company?
As per the Companies Act 2013, One Person Company is defined as a Company which has only one person as a member and a single shareholder holds 100 percent shareholding.
Who can form a One Person Company?
As per Company Incorporation Rules, only a natural person who is a resident of India and also a citizen of India can form a one person company. It means that NRI’s or Foreign citizens and legal entities such as companies and societies can’t form a one person company.
Also no person shall be eligible to incorporate more than a One Person Company.
What is the concept of ‘Nominee’ for One Person Company?
The person forming one person company has to nominate a nominee to take place of the single member in case of death, disability, bankruptcy etc. This provision is to ensure perpetuity and continuity to the life of the Company.
The nominee also needs to be a resident of India and also a citizen of India. Also no person can be appointed as a nominee in more than a One Person Company.
Relaxations given to One Person Company.
- No requirement to hold annual or extra ordinary general meetings.
- Provisions relating to minimum board meeting and minimum quorum shall not apply to One Person Company. In case of more than one director, it shall conduct at least one board meeting in each half year and time gap between two meetings should be minimum 90 days.
- One person Company have been relaxed from preparing Cash Flow Statements.
- Financial Statements needs to be signed by the director and Annual returns by the Company Secretary, else by the director.
How to Incorporate One Person Company?
Below is the step-by-step procedure for incorporation of One Person Company:
- The Director needs to get a DIN(Director Identification Number) and a DSC(Digital Signature Certificate).
- Apply for the name of the company in FORM NO. INC.1
- Get the consent of the nominee in the Form No INC.3.
- File the consent along with the final incorporation forms with the Memorandum and Articles and other required documents in the Form No INC.2
- Get the final incorporation certificate from the register of companies.
One small rule is that like every private limited company has the suffix Pvt. Ltd., every One Person Company should have to mention the words “One Person Company” in brackets below the name of such company, wherever its name is printed, affixed or engraved.
Conversion of One Person Company to Private Limited Company
Where the paid up share capital of an One Person Company exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, it shall cease to be entitled to continue as a One Person Company and converted into private limited company after making the necessary changes in the memorandum of association and articles of association and shall comply with all the requirements of a private limited company.
Conversion of Private Limited Company to One Person Company
A private limited company which does not have a paid up capital of more than Rs. 50 lakhs or where the average annual turnover for the past 3 years is less than Rs. 2 Crores can convert itself into a One Person Company by passing a special resolution in the general meeting.
Taxation of One Person Company
Nothing has been specified so far regarding the taxation of one person company. However, it has been presumed that it will be taxed equivalent to private limited company.
The concept of One Person Company has opened up an organised gateway for sole proprietors and entrepreneurs who can now take advantage of both proprietorship and company form of business, which means that now they don’t required a co-founder and the liability of their business is limited to company and not the person.