T
he Companies Act, 2013 (Act)introduced several new concepts and one among them was the registration of One Person Company (OPC). The concept has been first recommended by the Expert Committee (Dr. J.J.Irani) in 2005. The said concept is nothing but a copy from United States of America, where several States permit registration of OPC as Limited Liability Company (LLC). Several other countries also followed this concept during mid 2000 and in Singapore it was introduced in 2004 while in China it was introducedin 2005. Registration of OPC also exists in other parts of the world and such countries are United Kingdom, Mauritius, Ireland, and Bahrain. Pakistan too amended its Companies Act to recognise the registration of OPC.
OPC vs. Sole Proprietorship Firm:
The Companies Act, 1956 (the old Act) registered private limited companies with minimum two persons as shareholders. Individual entrepreneurs being unable to register the company with only one person, carried on their business activities as sole proprietor. OPC has an edge over sole proprietorship firmin respect of limited liability with perpetual succession. The concept of OPC is to restrict the liability of a member and unless such an entity is registered, the sole proprietor would not enjoy the limited liability and on registration it gets the status of a separate legal entity.On registration of a company by one person as OPC as against carrying on his business as sole proprietor, such a company gets recognition in the business circle, financial hub and such an individual would be able to run his show in a better and improved manner.
Formation of company by single member:
The root condition for formation of OPC is that it has only one member on the Register of Member. The Act has also put in place a definition clause and “OPC” means a company which has only one natural person as a member. In order to have a perpetual succession, the single person has to identify a nominee, seek his consent to act as nominee and furnish the same at the time of registration. OPC can have a maximum paid up share capital of Rs. 50 lacs with an average annual turnover in a period of immediately preceding three consecutive years not exceeding Rs. 200 lacs. The single person can introduce his capital in one or more tranches but without having a power to renounce his rights. OPC can have a subsidiary but it cannot be a subsidiary to any company.
The objective of OPC is to establish perpetuity and continuity to the life of the company and does not end with the life of the person who is the owner of the company, that’s why every person who forms OPC has to provide a nominee, with his consent, at the time of registration. The golden rule “members may come and go but the company must live on” holds good.
Number of Director(s):
The minimum number of director required in OPC is one. However, OPC can have as much as fifteen directors and it can go beyond such limit after complying with prescribed requirements. The newly introduced concept of resident director is very much applicable to OPC but not the concept of Woman Director and Independent Director. A person who is disqualified for appointment as director cannot act as a director of an OPC. For any appointment of director in OPC, provisions relating to appointment and qualification of directors have to be complied with. The directorships of a person in OPCs would fall within the overall ceiling of number of directorships a person can hold. However, a person can be a member only in one OPC. It is a matter for consideration if a person incorporates an OPC, can he be a nominee of another OPC? If yes, on a given situation, the nominee steps into the fold of member in the second OPC, then such person shall meet the eligibility criteria on being member of only one OPC within a period of 180 days.
Meeting of director(s):
“Board of Directors” or “Board” in relation to a company as defined in the Act, means the collective body of the directors of the company and unless OPC has more than one director, there would be no Board meeting.. A company on its incorporation shall hold its first meeting of directors within a period of thirty days and thereafter, hold a minimum of four meetings in every year. At the same time, the gap between two meetings of directors shall not exceed one hundred and twenty days. OPC (having more than one director) is permitted to have at least one meeting in every half of a calendar year in a manner that the gap between two meetings is not less than ninety days. The interesting issue is that for all other companies, the gap between two consecutive meetings shall not be more than one hundred and twenty days, whereas, in OPC the second meeting can only be held after ninety days from the first meeting. Such a condition may create problems for OPC and more particularly, if OPC wants to induct a director within a period of ninety days from the date of previous meeting.
Minutes Book of Meeting of Board of Directors:
Like every other company, OPC has to maintain the minutes book of meeting of Board of Directors. If the number of directors is more than one in OPC, it shall maintain the Minutes Book like every other company. The minutes of proceedings of each meeting shall be entered in the books maintained forthe purpose along with the date of such entry within thirty days of the conclusion of the meeting.
The minutes book shall be preserved permanently and shall be kept in safe custody. The minutes of proceedings of a meeting of the Board of Directors shall be signed and dated by the Chairman of the said meeting or the Chairman of the next succeeding meeting.
However, in case of OPC having only one director, it shall be sufficient if, the resolution by such single director is entered in the minutes-book required to be maintained and signed and dated by such single director.Such date shall be deemed to be the date of the meeting of the Board of Directors for all the purposes of this Act.
Interestingly, in an OPC, there may be a situation where one director will be there for some time, induction of further director(s) may take place thereby the Board will have more than one director. Again, it may end up with only one director at times. Therefore, the minutes of OPC will have to be maintained by bothsystems of usual company having more than one director as well as entering the resolution by single director as discussed above.
Resident Director:
The member of OPC has to be an Indian citizen and resident of India. If the OPC is having only one director such director has to be resident of India. If an OPC is formed in the calendar year 2014, the Ministry of Corporate Affairs (MCA) has clarified that the criteria for resident director would be sufficient if he is a resident of India for 136 days which is proportionate of nine months to the calendar year of twelve months.However, if a person who is a citizen of India and non-resident returns to India after say 20th August, 2014 would like to forman OPC, then hecannot form an OPC unless he identifies another individual who is resident in India to act as a director.
Disqualification and vacation of director:
The provisions relating to appointment, qualifications, disqualifications and vacation of director(s) are all applicable to an OPC. Where, the member of OPC is also the only director and if he becomes disqualified to act as a director, he has to vacate his office immediately. In such a situation, there needs a clarification whether the nominee will be the director or who will fill the vacancy?
Conclusion:
Board minutes of OPC will have both systems of usual company having more than one director and at times also having only one director and passing a resolution by such a single director. It is to be clarified how a single director becomes disqualified and appoints another director by passing a resolution. The concept of OPC being new to our Country only time and experience will evolve a proper system of maintenance of board minutes by OPC.
Disclaimer: The views expressed in this article are solely the opinion of the author.