The concept of One Person Company (OPC) was made legal in India by way of the Companies Act, 2013, and it was a revolutionary change in the Indian corporate landscape.
OPC is recognised as a separate legal person, whereby one person can own, manage, and operate a company and also derive the benefit of limited liability, perpetual succession, and separate legal personality. This business form was created to assist entrepreneurs and small business operators who want to be independent while fulfilling the obligations of a formal company structure.
The statute recognises OPCs as a viable and flexible business model by allowing sole-person ownership with simplified compliance and regulation, thereby facilitating individual entrepreneurship and the growth of India’s startup and MSME economy.
What is a One Person Company?
A One Person Company (OPC) is a unique form of business that has been created under the Companies Act of 2013 with an eye towards promoting entrepreneurship and giving sole proprietors a corporate identity. The form enables one person to form and run a private limited company without any requirement for multiple directors or promoters, thus bridging the gap between private limited company forms and sole proprietorship entities.
Defined under Section 2(62) of the Companies Act, 2013, an OPC is described as a firm with only one member, who can also be the sole director of the company. It offers limited liability and a separate legal entity but eases regulatory functions and best suits small firms, professionals, and entrepreneurs.
Major Characteristics of the OPC:
- Sole shareholder and director: A single person can hold both positions.
- On incorporation, a nominee has to be appointed to take over when the member dies or becomes incapacitated.
- The members’ liability is limited to their contribution of capital.
- The OPC is an independent legal entity from its owner.
- Minimum paid-up capital is not necessary.
Earlier, OPCs were subject to restrictions like paid-up capital and turnover ceilings, but current reforms have removed these barriers to encourage growth.
Overall, the OPC combines the benefits of a corporate structure with the convenience of sole ownership, making it the preferred choice among solo entrepreneurs in India.
Who is a Nominee in an OPC?
In a One Person Company (OPC), a nominee is one who is appointed by the single member to assume ownership and control of the business in the event of the member dying, being incapacitated, or being unable to enter into contracts. Under Section 3(1)(c) of the Companies Act of 2013, it is mandatory for OPCs to have a nominee, which is a feature that is exclusive to OPCs.
The single member of an OPC shall, at the time of its incorporation, appoint a nominee with prior written consent, which shall be filed with the Registrar of Companies (ROC) in Form INC-3. During the lifetime or working period of the member, the nominee has no rights, duties, or liabilities in the company. In case of the member’s incompetence or death, the nominee can either accept or reject the position of sole member.
This nomination guarantees the continuity of the company by protecting the interests of stakeholders as well as corporate stability in case of unexpected situations.
Eligibility Criteria for Nominee in OPC
A nominee of an OPC plays a crucial role in promoting business continuity in times of unexpected events. To ensure that the nominee is legally and practically capable of taking over, the Companies Act, 2013 has stringent eligibility standards. The nominee must give written consent and be an efficient Indian resident with no conflicting position in another OPC. Adherence to these requirements is critical for ensuring the business continuity and legal integrity of the OPC framework.
1. Natural person: The nominee has to be a natural person. Nominating artificial persons like corporations, limited liability partnerships, trusts, or other legal bodies is not acceptable.
2. Indian citizenship: The nominee has to be an Indian citizen. Foreigners, even if they stay in India, cannot nominate themselves in an OPC.
3. Must be resident in India: As per Rule 3 of the Companies (Incorporation) Rules, 2014, a person who has resided in India for at least 120 days in the last fiscal year is considered to be a resident of India (this condition was reduced from 182 days to 120 days by the Companies (Incorporation) Second Amendment Rules, 2021).
4. Not Be a Member or Nominee in Another OPC: A member can never be the nominee or member of another OPC simultaneously. Such a person should give up the existing nomination before being nominated for another OPC.
5. Should Give Prior Written Consent: The new nominee must provide a written undertaking to act as a nominee in Form INC-3. It should contain:
- Declaration of eligibility,
- Personal details and identification,
- Signature and date of consent.
6. Should Not Be a Minor: A minor (an individual below 18 years of age) is not eligible to be nominated in an OPC. This ensures the nominee is legally competent to enter into contracts and conduct business matters.
7. Should Not Be of Unsound Mind or Insolvent: A person who has been declared of unsound mind by a competent court or an undischarged insolvent cannot be the nominee. This requirement ensures the nominee can undertake legal and financial obligations.
Reasons for Change in Nominee in an OPC
These circumstances can cause the sole member to formally start the nominee change process by filing Form INC-4 with the Registrar of Companies.
- Withdrawal of Consent – The existing nominee can withdraw his/her consent if he/she no longer wants to act in that capacity.
- Incapacity or Death of Nominee – The nominee might become mentally or physically incapacitated or die.
- Non-Eligibility – The nominee can no longer meet the eligibility criteria, e.g., residing in India or becoming a member of another One Person Company (OPC).
- Change in Relationship or Trust – The member could lose trust in the nominee or undergo a shift in relationship (e.g., due to personal conflict).
- Nominee Relocation Overseas – If the nominee relocates abroad, he or she will no longer be treated as a “resident in India.”
- Member’s Choice – A member might prefer to choose an alternative person for personal or strategic considerations.
- Firm Reorganisation – Changes in the structure of the firm or succession plan may require the appointment of a new nominee.
- Legal or Compliance Issues – The nominee’s participation in legal proceedings or criminal offenses.
How to Change the Nominee in an OPC?
A One Person Company (OPC) is a separate type of company formed under the Companies Act of 2013, enabling one person to own and operate a business. As per legal requirements, the sole member of an OPC has to appoint a nominee who will take control of the company in case of the member’s death or incapacitation. However, there can be circumstances under which the member wishes to change the nomination. This change involves a number of legal formalities and filings with the Registrar of Companies (ROC).
1. Get Consent from the New Nominee
The first step is to get the written consent of the new nominee through Form INC-3. It includes a declaration stating that the nominee agrees to their nomination, understands their rights and obligations, and is legally competent.
2. Inform the Current Nominee (optional)
While not required by the Act, it is recommended to notify the current nominee of removal or replacement as a corporate governance good practice. This induces transparency and reduces the risk of disputes.
3. Modify Memorandum of Association (MOA)
The name of the nominee is entered in the Memorandum of Association (MOA) of OPC. If the nominee needs to be changed, it requires an alteration in the MOA. For approving the alteration and updating the details of the nominee in the MOA, the member needs to vote in favor of a board resolution.
4. Make and File Necessary Forms with ROC
The OPC has to submit the following forms to the Registrar of Companies (ROC) within 30 days of the change:
Form INC-4: It is the form of notification to the ROC of the change of nominee. It is to be digitally signed by the sole member and attested by a practicing professional (CA/CS/CMA).
Documents to be submitted:
- Board Resolution approving the alteration.
- Form INC-3: Consent of the new nominee.
- Proof of the new nominee’s identity and address. Proof of altered MOA (if any).
5. ROC Check and Approval
After receiving Form INC-4 with all documents as per the requirement, ROC will check and verify the application. In case everything is correct, the ROC will notify the change and update the nominee information in their records.
Modification of the nominee in a One Person Company is an organised legal procedure that provides continuity to the business in the event of any untoward incident. Compliance in time is not only indicative of good governance but also makes sure that the OPC complies with all the provisions specified under the Companies Act, 2013. An authorised professional is recommended to deal with documentation and filings carefully.
Conclusion
In a One Person Company (OPC), the nominee serves an important function of ensuring business continuity in case of the death or disability of the member. It is a legal necessity under the Companies Act, 2013 and has to be done with appropriate consent and documentation. Name changes of the nominee can be necessitated by personal, legal, or eligibility factors. While the process is simple, it needs to be done with the relevant paperwork and adherence to rules. On-time nomination or modifications keep the OPC legally compliant, transparent, and ready to ensure an effortless handover in the case of unforeseen situations.
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