Advantages And Exemptions for One person company (OPC)

An OPC is exempted from stringent legal compliances of general meeting, board meetings, quorums, voting inclusion of cash flow statements in financial statements, mandatory rotation of an auditor, except in certain circumstances, such as if there is more than one (1) director, then the Board meeting must be conducted. OPC is also exempted from transacting business via postal ballot. Further, appointment of a company secretary is also not essential for an OPC. The annual return of an OPC can be signed by its director in case no company secretary has been appointed.

Section 185 under the Companies Act, 2013 is the most discussed and researched section. Hence, an emphasis has been stressed to give clarity as to applicability of section 185 to an OPC. Notification No. G.S.R. 465(E) dated June 5, 2015 exempts a private company under section 185, if (i) no body corporate has invested any money in the share capital of an OPC; (ii) if the borrowing of a company from banks and financial institutions is less than twice its paid-up share capital or Rs.50 (Rs.500 million), whichever is less; and (iii) no default in repayment of such borrowings subsiding at the time of making transactions under this section.

The Companies Act, 2013 provides that if the paid-up share capital limit of the OPC exceeds the prescribed limit (currently, Rs.50 lakh (Rupees 5 million)) or turnover exceeds Rs.2 crore (Rs.20 million) in three (3) years preceding consecutive years, then the company shall lose its status as an OPC and shall be required to compulsorily convert to either to a private company or public company.

Continue Reading: Everything you need to know about One Person Company (OPC)