Dubai is an important business center that has become an attractive hub for overseas investors....
For a very long time, an individual entrepreneur involved in trade could operate only as a Sole Proprietor. Such structure was beneficial so as to maintain an individual’s control over the activities and was cost-effective yet the biggest drawback was the unlimited liability that fell upon one single person. An individual was thus held personally liable for the debts and loans availed for the purpose of installing and expanding the business.
Unlike a company, the proprietor was considered to be the same as the business and thus personal assets are not distinguished from business assets for any purpose. This adds to the risks involved in the trade.
To provide some alternative to the situation, a concept of One Person Company formation was introduced in the Companies Act, 2013. Section 2(62) defines One Person Company as ‘a company which has only one person as a member’. The definition has clarity in itself and has brought numerous benefits to a group of capable individuals, desirous of starting a venture without extending his personal assets for the debts if the company. It has the features of both Company and Sole proprietorship combined for the maximum benefit of the individual. An OPC registration can be done with just 1 Director and 1 member.
Only a natural person who is a citizen of India citizen and a resident shall be eligible to act as a member. The term “resident in India” implies a person who has stayed in India for a period of not less than 182 days during the period immediately preceding the financial year.
Like any other private limited company , in an OPC ( one person company formation) also, the ‘one person’ holding the securities of the company nominates a person, in whom the securities shall vest in event of the death of present holder or if he becomes incapable to contract. The nominee’s consent to such is also required to be submitted in the prescribed form. Such Name may also be changed and duly informed to the Registrar and updated in the Memorandum of Association.
Following listed are the requirements which are mandatory for One Person Company registration –
The rules for the incorporation of One Person Company needs that the sole owner of a One Person Company must include the name of his nominee in the Companies Memorandum of Association, who will undertake the affairs of the concerned company after the expiry or the incapacity of the former owner. Moreover, the documents required must also contain the written consent of the concerned nominee, which should also be filed with the Registrar of Companies during the incorporation together with the Memorandum of Association and Articles of Association.
The nominee has the power to withdraw his or her consent, in which case the concerned sole member is again needed to nominate another member as the legal heir within a period of 15 days of the notice of the withdrawal. The nomination of the new personnel must be duly intimated to the concerned Company by way of written consent in the Form INC-3. The Company, in turn, is needed to file the notice of said withdrawal of consent together with the intimation of the new nominee with the Registrar of Companies in the Form INC- 4.
The sole owner of a ‘One Person Company’ is authorized to change the name of the nominee appointed for the Company for any reason whatsoever, just by providing a notice in writing to the concerned Company. Again, the same procedure will followed and the new nominee must mandatorily give consent to the nomination in the Form INC 3, and the concerned Company is required to file the said notice of change and the consent of the nominee appointed with the Registrar of Companies (ROC) together with the applicable fee, within a period of 30 days of receiving the said intimation of change.
If in case a nominee becomes in-charge of the OPC (One Person Company) due to the cessation of the tenure of the original member’s owing either to the death or incapacity of the latter, the concerned new member will now appoint a nominee as his replacement.
If in case anOPC (One Person Company) or an officer concerned with such Company is not compliant with the prescribed rules and regulations, the company or the officer concerned will incur penalties which could reach to an extent of as Rs 10,000. Further, the said penalty will be also be increased by a fine of Rs. 1,000 for each day of default.