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The concept of One Person Company (OPC) is introduced in US and UK. Some other countries copied and introduced the concept during 2003- 2005. In India, it was widely discussed in and around year 2005 by J J Irani Committee. The Companies Act, 2013 (the Act) has boldly introduced the concept of OPC and the relevant draft rules are under active consideration by the Ministry of Corporate Affairs (MCA). The salient feature of OPC is that it has only one person as its member and such person shall be a natural person. Besides, the single person who is a member of OPC shall nominate any other natural person with his consent as his nominee in the event of his death or his incapacity to contract.
Board of Directors:
It is not necessary that the member of OPC has to be the director of OPC. The Act requires that OPC shall have at least one director and therefore, the member can also appoint some other person as a director in his place. OPC can have more than one director but it shall not exceed fifteen.
Articles of Association of OPC has to contain the name of the first director at the time of incorporation. If no provision is made in the articles of association, the individual member shall be deemed to be the first director.
Meeting of Board of Directors:
"Meeting" means coming together of two or more persons, and generally more than one person will be necessary to constitute a meeting. The concept of meeting does not arise in OPC with only one director. If the OPC has more than one director, then at least one board meeting is to be conducted in each half of a calendar year and the gap between two meetings should not be less than ninety days. If an OPC needs to pass a resolution on urgent basis during such gap, it would be inconvenient for the OPC to take a call and function.
Financial Statements:
The Act has also switched over to the concept of financial statements which includes both balance sheet and profit and loss account. It is defined as:-
“Financial statement” in relation to a company, includes—
(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv):
However, the Act exempts OPC from the applicability of cash flow statement.
The concept of OPC is well considered but it needs to be kept outside the purview of compliance as applicable to other companies. The functioning of OPC may be successful in other countries, here in India, the Act requires reconsideration on several issues to bring the formation and functioning of OPCs in a simpler model. It would have been better position, if the Act earmarked a separate chapter for functioning and administration of OPC.
Authentication of financial statements:
Financial statements of OPC are also subject to audit by an auditor. The financial statements have to be approved by the Board and signed by directors before its submission to auditor for his report thereon. Interestingly, the Act spell out that the financial statements have to be signed in the case of an OPC, only by one director, for submission to the auditor. OPC may have more than one director and with the language that only by one director, is it an offence if the financial statements are signed by more than one director. If the intention is that the financial statements may be signed by one director, the language could have been clear such as “at least by one director” or “any one” of the directors, if there is more than one director on the Board of OPC.
Board's Report:
The Act states that the report of the Board of Directors to be attached to the financial statements, in case of OPC, means a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report. Therefore, if the auditors’ report is clean, there is no Board’s report for OPC.
Adoption of financial statements:
The financial statement of OPC is to be adopted by its member. An OPC may have a director who is not a member of the company. In such situation, the financial statement has to be approved and signed by the single director before its submission to auditors. It is unclear, when the member will come to know about the audited financial statements and what is the methodology for adoption by the member of OPC. One can understand that the member can also be a director of OPC. In that case he knows the status of financial statements and accordingly approves and adopts the same. However, questions relating to effective date of approval and authenticity of financial statements been adopted by the single member of OPC are still unanswered.
Annual General Meeting of OPC:
There is no concept of Annual General Meeting for OPC. Besides, provisions relating to general meeting of company as provided in section 98 and sections 100 to 111 of the Act are not applicable to OPC. However, the Act provides for the purposes of ordinary or special resolution, it shall be sufficient if, the resolution is communicated by the member to the company and entered into the minutes book required to be maintained and signed by the member and such date shall be deemed to be the date of the meeting for all the purposes under the Act.
Annual Filing of documents:
- Annual Return:
The annual return particulars and specified format is same for all companies including OPC. However, OPC does not have much particulars to comment in the specified format of annual return. Annual Return of OPC is to be signed by the company secretary, or where there is no company secretary, by the director of the company.
The Act requires that every company shall 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.
There being no annual general meeting for an OPC, it is to be clarified about the last date for filing of annual return of OPC.
- Financial Statements:
The financial statements of a company is to be filed within thirty days from the date of annual general meeting in which the said financial statements have been approved by the members of a company. In the case of OPC, it shall file the same duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year.
As discussed above, there being no clear provision for adoption of financial statements by a member of OPC, where he is not a director. The question arises about the authenticity that the same have been approved by the member of OPC. The return is to be filed by a director and where the member is not a director, there needs a clarity on the approval and adoption of accounts by the single member of OPC.
It is better to be clarified about the cut-off date for the purposes of deemed to be date of meeting of the member.
Conclusion:
The concept of OPC is well considered but it needs to be kept outside the purview of compliance as applicable to other companies. The functioning of OPC may be successful in other countries, here in India, the Act requires reconsideration on several issues to bring the formation and functioning of OPCs in a simpler model. It would have been better position, if the Act earmarked a separate chapter for functioning and administration of OPC.
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