INCORPORATION OF ONE PERSON COMPANY

[Mr. M. GOVINDARAJAN]

Introduction

The new Companies Act, 2013 introduced a new concept of ‘One Person Company’.  This concept was mooted by Dr. J.J. Irani Committee.  Section 2(62) of the Companies Act, 2013 (‘Act’ for short) defines ‘one person company’ as a company which has only one person as a member.  Section 3 of the Act provides that one person company is a private company.   The memorandum of One Person Company shall indicate the name of the other person, with his prior written consent in the Form INC-3 who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company and the written consent of such person shall also be filed with the Registrar at the time of incorporation of One Person company along with its memorandum and its articles.

Eligibility

Rule 3 of Companies (Incorporation) Rules, 2014 provides that only a natural person who is an Indian Citizen and resident in India shall be eligible to incorporate a one person company.  Only a natural person who is an Indian citizen and resident in India shall be a nominee for the sole member of one person.  The term ‘resident in India’ means a person who has stayed in India for a period not less than 182 days during the immediately preceding one calendar year.

Conditions

The following are the conditions prescribed in Rule 3 to incorporate one person company-

• No person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company;
• Where a natural person, being member in the One Person Company in accordance with this rule becomes a member in another such company by virtue of his being a nominee in that One Person Company, such person shall meet the eligibility criteria specified within a period of 180 days.
• No minor shall become member of nominee of the One Person Company or can hold share with beneficial interest;
• Such company cannot be incorporated or converted into a company under Section 8 of the Act;
• Such company cannot carry out non banking financial investment activities including investment in securities of any body corporate;
• No such company can convert voluntarily into any kind of company unless 2 years have been expired from the date of One Person Company, except threshold limit (paid up share capital) is increased beyond ₹ 50 lakhs or its average annual turnover during the relevant period exceed ₹ 2 crore.

Nominee

The name of the person nominated shall be mentioned in the Memorandum and such nomination in Form No. INC-2 along with the consent of nominee.   The person so nominated may withdraw his consent by giving notice in writing to such sole member and to the One Person Company.  The sole member shall nominate another person as nominee within 15 days of the receipt of the notice of withdrawal and shall send such an intimation of such nomination in writing to the company along with the written consent of such person so nominated in Form INC-3.

The company shall file with the registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated in Form No. INC 4 within 30 days of receipt of the notice along with the fees prescribed.  The subscriber of a One Person Company may change the name of the nominated person at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the prior consent of such another person in Form NO. INC 3.  The company shall on receipt of such intimation file with Registrar, a notice of such change in Form INC 4 along with the fee.

Where the sole member of the company ceases to be the member in the event of death of incapacity to contract  and his nominee becomes the member of such company, such new member shall nominate within 15 days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company and the company shall file with the Registrar an intimation of such cessation and nomination in Form INC4 along with fees within 30 days of the change in membership and with the prior written consent of the person so nominated.

Incorporation procedure

The following procedures are involved in incorporation of One Person Company:

• Digital signature of the director who is proposed to be appointed is to be obtained;
• Also Director Identification Number of the Director is to be obtained;
• Selection of name of the company;
• Preparation of Memorandum and Articles of Association of the company;
• Filing of Memorandum and Articles of Association along with required documents and fees with the Registrar of Companies;
• ROC scrutinizes the documents and grant certificate of incorporation of the company.

Selection of name

Rule 9 of Companies (Incorporation) Rules, 2014 provides that an application for the reservation of a name shall be made in Form INC-1 along with the required fees.   While selecting a name for the company Rule 8 is taken care of.   Rule 8 provides the undesirable names that are to be disregarded in determining whether a proposed name is identical with another.

Entrenchment

Rule 10 provides that where the articles contain the provisions for entrenchment, the company shall give notice to the Registrar of such provisions in Form INC-2 at the time of incorporation of the company the same shall be filed in Form No. MGT-14 within 30 days from the date of entrenchment of the articles along with the required fees.

Articles

The One Person Company may adopt the model articles as prescribed in Table F, G, H and J of Schedule I of the Companies Act, 2013, as applicable to the company.

Filing with ROC

Rule 12 provides that an application for incorporation of One Person Company shall be filed, with the Registrar whose jurisdiction the registered office of the company is proposed to be situated in Form No. INC-2 along with the fee provided in the Companies (Registration offices and fees) Rules, 2014 for registration of a company.

Signing of Memorandum and Articles

Rule 13 provides for signing of Memorandum and Articles.  The memorandum and articles of the company shall be signed by the subscriber to the memorandum, who shall add his names, address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise sign and his name, address, description and occupation, if any and the witness shall state-

“I witness to subscriber who has subscribed and signed in my presence (date and place to be given), further I have verified his or her Identity details for their identification and satisfied myself of his/her identification particulars as filled in.”

Where the subscriber to the memorandum is illiterate, he shall affix his thumb impression or mark which shall be described as such by the person, writing for him, who shall place the name of the subscriber against or below the mark and authenticate it by his own signature and he shall also write against the name of the subscriber, the number of shares taken by him.

Affidavit

Rule 15 provides that the affidavit shall be submitted by the subscriber to the memorandum and the first director named in the Articles in Form No. INC-9.

Declaration

Rule 14 provides that the declaration by an Advocate, a Chartered Accountant, Cost Accountant or Company Secretary in practice in Form No. INC­ shall be submitted.

Certificate of incorporation

Rule 18 provides that the certificate of incorporation shall be issued by Registrar after verifying all the particulars in Form No. INC-11.