As per the Companies Act of 2013, an OPC is an entity that can have only one person as its member. The members of a company are recognized as the shareholders of the company or subscribers to its Memorandum of Association (MoA). Therefore an OPC is a company with only one shareholder as its member. People form an OPC usually when a business has just one founder or promoter.
Holding a company is different from owning a sole proprietorship. Usually, companies are robust in nature. A person cannot flexibly manage a company as he would be able to in the case of a sole proprietorship. This is because a company has shareholders and directors who make the decisions. Therefore to bring together certain benefits of companies, and sole-proprietorship firms, the concept of One Person Company (OPC) was introduced by the Companies Act, 2013
OPC in India
OPCs are a relatively new concept in India that provides a suitable option for entrepreneurs who want to start a business with limited liability and need more resources to involve others in the company. The concept of OPC was introduced in India in 2013 to provide an opportunity for small entrepreneurs and business owners who want to start a company with limited liability but need more resources to involve other people in the company. OPCs are suitable for those who want to start a business independently and do not want to take the risk of unlimited liability that comes with a sole proprietorship.
- OPCs have several advantages, such as limited liability protection for the member, legal recognition as a separate entity from the member, and the ability to raise funds through equity or debt financing.
- OPCs have lower compliance requirements than other companies, making them a popular choice for small business owners.
Can a person be a member of more than one OPC?
The Companies Act 2013, which governs the formation and functioning of companies in India, clearly states that only a natural person who is an Indian citizen and a resident of India shall be eligible to incorporate an OPC. Section 3(2) of the Act also states that a person cannot incorporate more than one OPC or become a nominee of more than one such company. This means that a person can only be a member of one OPC at a time. Therefore, a person cannot be a member of more than one OPC simultaneously, as it is not legally permissible under the Companies Act 2013
This restriction prevents the misuse of the OPC structure, as having multiple OPCs with the same member can lead to confusion and potential fraud. By limiting the number of OPCs, the Companies Act ensures that the OPC structure is used for its intended purpose, which is to provide a suitable option for small business owners who want to start a business with limited liability and do not have the resources to involve other people in the company.
As per the rules of the Companies Act, 2013, an individual can only be an owner of an OPC at a time. In other words, you cannot hold multiple OPC ownership. If in case an OPC owner becomes a member of another OPC by virtue of becoming a nominee in that OPC, he or she will have one hundred and Eighty days to withdraw their ownership from either of the OPCs.
Consequences of Violating the Rule
If a person becomes a member of more than one OPC, they are required to:
- Choose which OPC they want to retain membership in.
- Resign from the other OPC(s) within 180 days.
- Non-compliance may result in penalties under the Companies Act.
FAQs
Can an OPC convert into a private limited company?
Yes, an OPC can convert into a private limited company if it meets certain conditions, such as crossing the threshold turnover of ₹2 crores or having paid-up capital exceeding ₹50 lakhs.
Can a nominee withdraw their consent from an OPC?
Yes, a nominee can withdraw consent by providing a notice to the company, and a new nominee must be appointed.
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