OPC Registration For Tech Startups: A Complete Guide

In India, OPC (One Person Company) has emerged as a preferred choice among entrepreneurs, especially when incorporating technology-based start-ups owing to their ease of compliance, limited liability, and other characteristics. The distinct structure of OPC allows an individual (one person) to register a company, a feature available only for sole proprietorships.

The amended Company Act 2013 introduced the concept of OPC in India. Prior to this, a single person could only opt for a sole proprietorship or had to go for a private limited or public company that required a minimum of two and three directors respectively. Unlike OPC, proprietorships are not separate legal entities, have unlimited liability, and the business ceases to exist in case of incapacity or death of the owner.

The emergence of OPC in India was backed by the idea that an individual who is developing entrepreneurial ideas and planning to incorporate a business venture is not required to do so through an association of persons. Thus, the law recognized the ability of a single person to form an economic entity through OPC.

Let’s take a brief look at the OPC Registration Process, and how OPC (One Person Company) in India has proliferated the business landscape and proved to be beneficial when compared to other form of company structure.

What is a One-Person Company under the Company Act 2013?

According to the Company Act (CA) 2013, OPC (One Person Company) is a company constituted by a single national person. The business structure combines the features of both a company and sole proprietorship, providing the sole owner complete control over their business operations and safeguarding owner’s personal assets from business liabilities and debt.

An OPC cannot engage in activities such as insurance, banking, or investments and does not receive the right to convert into a Section 8 company (incorporated for charitable activities) under the Company Act 2013.

Such companies are mandated to appoint a nominee during the OPC Registration Process. The provision safeguards the company from shutting down in case of the death/ disability of the sole member and enables the nominated individual to manage the business affairs till the date of transmission of shares to the legal heir of the deceased member.

Key Characteristics of OPC Under the Company Law

How OPC Registration is Revolutionizing Small Business Ownership? One Person Company has become a popular choice among small businesses due to their minimal paperwork, the requirement of just a single member to form a company with a separate legal entity, and fewer compliances. As per the laws that govern companies incorporated in India, OPCs inculcate the following key characteristics:

• Limited Liability Protection: The legal status of limited liability protects the assets and personal wealth of owners in case the company falls into a financial crisis, legal dispute, or goes bankrupt. In OPC, the sole member does not become personally liable to repay the company’s debts and other financial obligations. They are only liable to the extent of their shareholding in the company.
• Separate Legal Entity: Under the Company Act 2013, this feature enables companies to act as distinct legal persons from their shareholders, obtain their own identity, and its rights and obligations remain independent of its members. Through this, a company can buy, sell, and own property under its name, enter into contracts, and sue or get sued.
• Management: To establish an OPC, a minimum of one director and one member is needed. The responsibilities of members and directors are usually fulfilled by the same individual. However, an OPC can appoint a maximum of 15 directors.
• Perpetual Succession: In the context of company law, perpetual succession depicts that a company continues to exist even when its directors, owners, or members change due to death, incapacity, bankruptcy, or other circumstances.

Why One-Person Company is Ideal for Tech Start-ups?

OPC is considered a perfect company choice for start-up entrepreneurs especially for those who are planning to establish their venture in the technological domain. These companies are beneficial as compared to their counterparts due to the following reasons:

• Fewer Compliances: The Companies Act 2013 offers certain exemptions to OPC in case of compliances. For instance, OPCs are not mandated to prepare CFS (Cast Flow Statement) unlike the private limited or public companies. Moreover, such companies are also exempt from holding Annual General Meeting (AGM) as they have only one member. In addition, books of accounts of OPCs need not to be signed by the Company Secretary.
• Easy Access to Funds: Generally, OPCs are self-funded, however, they can also approach banks and financial institutions to obtain loans. The company can also access funds from angel investors or venture capitalists who are willing to fund promising business ventures like tech start-ups.
• Separate Legal Status: In an OPC, the liabilities of owners remain limited to the amount invested in the company which helps in safeguarding the personal assets of owners in times of distress. In addition, the distinct legal identity and simplified business structure make them an ideal choice to venture into the technological business space.
• Easy to Manage: Within an OPC, generally, a single person manages the entire company’s affairs. This streamlines and speeds up the decision-making process, enables quicker resolutions, and reduces possibilities of internal conflict which ensures ease of management within a tech start-up.
• Seamless Incorporation Process: To incorporate OPC, the member is required to file fewer documents and details with the ROC (Registrar of Companies). In addition, these companies are not required to maintain a minimum paid-up capital and operate with fewer regulatory compliances.

How Technological Advancements Are Shaping OPC Management? The use of AI, analytics, automation of repetitive tasks, use of blockchain and other advanced technological tools has benefited small enterprises and start-ups. It has done so by increasing operational efficiency, better advertising and marketing, and allowing better access to resources.

What is the Eligibility Criteria to Incorporate OPC?

Before initiating the OPC Registration Process, it is vital to understand who can open an OPC company and what requirements they must fulfill. The following are the key eligibility criteria to incorporate an OPC company in India:

• Indian Citizen: An individual willing to register OPC in India must be an Indian citizen. Non-resident Indians (NRI), foreign nationals, or OCI (Overseas Citizens of India) cardholders cannot establish a One Person Company. The nominee of the OPC is also mandated to be an Indian citizen.
• Natural Person: The individual intending to obtain OPC registration must be a natural person (human being) and not a legal entity such as a trust or corporation.
• Minimum Stay in India: As per the law, OPC’s member and nominee must be an Indian resident. The term ‘Indian Resident’ signifies that the person is necessitated to stay in India for a period not less than 182 days in the immediate previous calendar year.
• Appointment of Nominee: Before incorporating an OPC in India, the sole member is required to appoint/ nominate a person as their nominee which will ensure continuity of operations in case the sole member dies or becomes incapacitated.
• Minimum Authorized Capital: An OPC is required to have a minimum authorized capital (maximum amount of share capital a company is permitted to issue to its shareholder as mentioned under the MOA) of Rs. 1 Lakh. However, there is no minimum requirement for paid-up capital.

By Incorporating Sustainable Practices in OPC Operations, the business can transition to renewable energy, reduce waste creation, and optimize its logistics and transportation which will reduce both costs and emissions.

Step-By-Step Guide to Register OPC in India

To incorporate an OPC company in India for a tech start-up or any other business venture, the applicant has to follow the below-mentioned steps:

• Obtain DSC: To commence the OPC Registration Process, the applicant first has to obtain a DSC (Digital Signature Certificate). DSC is a legally binding and secure electronic signature that has to be obtained by the entrepreneur to submit documents and forms to the MCA portal.
• Apply for DIN: The individual is then required to obtain a DIN (Director Identification Number) from the MCA (Ministry of Corporate Affairs). DIN is a unique 8-digit alphanumeric number issued to individuals who are eligible to become directors within a company.
• Appoint Nominee: The entrepreneur is mandated to nominate a nominee and he/she must give her consent in Form INC-3. The nominee must be an Indian citizen and natural person, and his/her name and other important details must be mentioned in OPC’s MOA.
• Select Suitable Company Name: After appointing the nominee, the individual is required to select a suitable company name that must not resemble closely to the name of the company that already exists, a name that is undesirable, or use words that are not permitted by the government. To check the availability of chosen name, applicant can visit the MCA (Ministry of Corporate Affairs) official website and use its RUN (Reserve Unique Name) services. The company must attach the term ‘OPC’ in its name.
• Prepare Necessary Documents: Upon reserving the name for OPC, the applicant has to prepare the documents necessary to incorporate the company. It includes two important documentations namely MOA (Memorandum of Association) and AOA (Articles of Association). MOA must outline the company’s objectives, scope of operations, and required clauses. Similarly, AOA should provide details on internal regulations, rights and duties of directors, members, and other stakeholders.
• Filing with MCA: All the prepared documents and disclosures have to be attached to the SPICe+ form along with DIN, DSC, and application fee and submitted to the MCA portal for approval.
• Issuance of Certificate of Incorporation: Upon filing the documents and other details to the MCA portal, ROC will carefully examine the application and grant a Certificate of Incorporation if it fulfills all the stipulated criteria and requirements. The certification will solidify the legal existence of the One Person Company and enable it to relish the benefits a company receives in the market ecosystem.

Documents Required to Register OPC in India

When registering an OPC, the following documents are needed to be submitted to the Registrar of Companies (ROC):

• PAN (Permanent Account Number) of the promoter.
• Identity Proof can include a Passport, Aadhar Card, Voter ID card, or driving license of the promoter.
• Documents demonstrating proof of residential address such as utility bills, property tax receipts, or rent agreement.
• Proof of registered office address.
• Rent agreement if the business is being incorporated on rented office premises.
• NOC (No Objection Proof) has to be obtained from the property owner if the office is rented.
• MOA (Memorandum of Association) and AOA (Articles of Association).
• DSC (Digital Signature Certificate)
• DIN (Director Identification Number) of director(s).

In addition, the entrepreneur must submit the following forms and declaration along with the application form:

• Form INC 3 where the nominee provides his/her consent to be appointed as the same.
• Use Form INC 9 to declare the proposed director and DIR 2 to provide consent for their appointment.
• Part A of the SPICe+ Form is used to reserve the company name. Whereas, Part B is used to fill out company details.

Conclusion

One Person Company is run by a single person and is similar to any registered corporation. OPCs are registered as private limited companies and necessitate businesses to attest to the term ‘OPC’ in its name. Such companies are incorporated by only one member and require only a single director and these two positions can be occupied by the same person. In addition, before the OPC Registration Process, the entrepreneur is required to appoint a nominee who must not share beneficial interests.

To register an OPC, the applicant has to obtain a DSC (Digital Signature Certificate), and DIN (Director Identification Number), and submit other important documents to the ROC (Registrar of Companies). The company must have a minimum authorized capital of Rs. 1,00,000. Reach out to Legal Raasta Pvt Ltd to get detailed guidance and support in your OPC registration filing. Enhance the credibility of your OPC business by complying with all the regulatory requirements necessary to legally operate the venture.