Monthly Archives: January 2014

One Person Company (OPC) under New Companies Act, 2013

Under the existing Company Law
framework, a private limited
company is required to have a
minimum of two shareholders and two Directors. But The Companies Act, 2013 passed by the Lok Sabha provides for the concept of a One Person Company (OPC) in India.
This concept, though already
prevalent in the Europe, USA,
China, Singapore and even several countries in the Gulf region, was first recommended in India by an expert committee (Dr. J.J.Irani) in 2005 and was subsequently inserted in the Companies Bill so as to provide an option to persons
operating under the sole
proprietorship model to operate as a company.

One Person Company (OPC) is
defined in Sub- Section 62 of
Section 2 of The Companies Act,
2013, which reads as follows:

‘One Person Company means a
company which has only one
member’

The one basic pre-requisite to
incorporate an OPC is that the only natural-born citizens of India, including small businessmen, entrepreneurs, artisans, weavers or traders among others can take
advantage of the ‘One Person
Company’ (OPC) concept outlined
in the new Companies Act. Non-
resident Indians or individuals who do not reside in India for over 182 days cannot incorporate a OPC, the draft rules to the Companies
Act, 2013 has clarified. Resting the doubts regarding incorporation of OPC by a corporate entity or non-
resident Indians, the draft rules
said only a “natural person” who is an Indian citizen and is resident in India shall be eligible to incorporate an OPC.

The important features of the One Person Company (OPC) –

– One Person Company has only
one person as a member/
shareholder.
– One Person company can be
registered only as a Private
Company.
– One Person Company may be
either a Company limited by share or a Company limited by guarantee or an unlimited Company.
– An OPC limited by shares shall
comply with following requirements:
i. Shall have minimum paid up
capital of INR 1 Lac
ii. Restricts the right to transfer its shares
iii. Prohibits any invitations to
public to subscribe for the
securities of the company
– An OPC is required to give a legal identity by specifying a name under which the activities of the business could be carried on.

The words ‘One Person Company’
should be mentioned below the
name of the company, wherever
the name is affixed, used or
engraved.
– MoA (Memorandum and Articles) to name another person who shall become the member in case of death or incapacity of the subscriber.
– The written consent above shall
be filed with the Registrar at the
time of incorporation of the One
Person Company along with its
MoA.
– The nominee/ other person can
withdraw his consent at any time.
– The member/Shareholder of One Person Company may change the nominee/other person at any time, by giving notice to the other person and intimate the same to Company. Then the Company should intimate the same to the
Registrar.
– In Case of death of Subscriber,
the person so names, shall become member of OPC.
– Member/Shareholder of the One Person Company acts as first
Director, until the Company
appoints Director(s).
– One Person Company can appoint maximum 15 Directors, but minimum should be one Director.

“Board Meetings and Directors –
Section149, 152 & 173 of the Act
One Person Company needs to
have one Director. It can have
maximum of 15 Directors which
can also be increased by passing a special resolution as in case of any other company. For the purposes of holding board meetings, in case of a OPC which has only One Director, it shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed
and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes under Companies Act,
2013.”
– One Person Company need not to hold any AGM (Annual General Meeting) in each year.
“Holding Annual General Meetings
– Section 122 of the Companies
Act, 2013:
Section 122(1) of The Companies
Act, 2013, provides that the
provisions of Section 98, Section
100 to Section111 (both inclusive) are not applicable to One Person Company. Therefore, provisions
relating to General Meetings, Extra Ordinary General Meeting and Notice Convening to General
Meeting are not applicable to One Person Company. However, for fulfilling the purposes of Section 114 of the Companies Act, 2013, where any business is required to be transacted at an Annual General Meeting, or other General Meeting of the company by means of an
ordinary or special resolution, it
shall be sufficient if the resolution is communicated by the member of the company and entered in the minutes book which is required to
be maintained U/s 118 and signed and dated by the member and such date shall be deemed to be the date of meeting under the purposes of Companies Act, 2013.”

– Cash Flow Statement may not
include in the financial statements of One Person Company.
– Within 180 days from the closure of the Financial Year, One Person Company should file the copy of the Financial Statements with Registrar.

“Signatures on Financial Statements

– Section 134 and 137 of the Act:
The OPC shall file with the RoC a
copy of financial statements duly
adopted by its members along with all the documents which are
required to be attached to such
financial statement, within 180
days from the closure of the
financial year along with cash flow statements. The financial statement shall be signed by only one Director and the annual return shall be signed by the company secretary and the Director, and incase if there is no company secretary then only by the Director.”
– One Person Company should
inform to the Registrar about every contract entered and also should record in the minutes of the meeting within 15 days from the date of approval by the Board of Directors.
“Contracts by One Person Company
– Section 193 of the Act:
The new Companies Act, 2013 gives special attention to the contracts which will be entered by One Person Company.

– Signatures on Annual Returns –
Section 92 of the Companies Act,
2013:

“It is provided in Section 92 of The Companies Act, 2013, that the annual returns in the case of One Person Company shall be signed by the company secretary or where there is no company secretary,
then by the Director of the
company.”
– OPC – mandatory conversion to
Private or Public if paid up capital exceeds 50 lakh or Average turnover in 3 preceding years exceeds 2 Crore –To convert within 6 months.
It is noteworthy that it is
mandatory for an OPC to clearly
specify that it is a one person
company for all purposes. Such a
step will ensure that all persons
dealing with the OPC are aware of its corporate status and in turn foster better transparency.
However, one must note that the
tax implications of OPC are much
higher than of sole proprietorship.

The OPC is charged at a base tax
rate of 30% along with other
applicable taxes like minimum
alternative tax (base tax rate
18.5%), dividend distribution tax
(base tax rate 15%) and others.
The concept of OPC indeed looks
promising looking to the features but the success would be correctly judged only after its
implementation.

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Forward Contract & Future Contract

Forward Contract vs Futures
Contract

A forward contract is an agreement between two parties to buy or sell an asset (which can be of any kind) at a pre-agreed future point in time at a pre-agreed price.

A futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. So while the date and price are decided in advance in forward contract, a futures contract is more unpredictable.

They also differ in the forms that a futures contract is standardized while a forward contract is made to the customer’s need.
Standardization and exchange
based trading of futures is the
underlying reason for most of the differences between a forward and future transaction. Even though it may be intuitive that future trades are more constrained than forward trades and should hamper efficient markets, the standardization of the contracts stimulates futures market and enhances liquidity.
In contrast to forward contracts in which a bank or a brokerage is
usually the counterparty to the
contract, there is a buyer and
seller on each side of a futures
trade. The futures exchange selects the contract it will trade.

Food Security Act, 2013

Food Security Act, 2013

The link given below which is a PDF copy of the Food Security Act, 2013

http://indiacode.nic.in/acts-in-pdf/202013.pdf

Reduction of Membership in Company (As per Companies Act, 1956)

As per Section 45 of the Companies Act, 1956 which states the provision of Reduction in Member of the company i.e. private as well as public.

Members Severally Liable for Debts where business carried on with less than Seven in case of Public Company, or in the case of a Private Company, Two Members. If at any time the number of members of a company is reduced, in the case of a public company, below seven, or in the case of a private company, below two, and the company carries on business for more than Six Months while the number is so reduced, every person who is a member of the company during the that time is personally liable for hte debth of the company. The members is not liable to take the advantage of the limited liability. It is a Part of the lifting the Corporate Veil.