Presented By: CA Vikash Jain

Transcription

1 Presented By: CA Vikash Jain

2 BACKGROUND The concept of OPC is new in India but it is a very successful form of business in US, UK and several European countries since long back. The concept of OPC was first recommended by the expert committee of Dr. JJ Irani on 31st May The revolutionary New concept of 'One Person Company' (OPC) Introduced by the Companies Act, 2013.

3 INTRODUCTION OPC in India sounds interesting and may serve as new form of doing business for those who look forward to start their own ventures with a structure of organized business. OPC will give the young businessman all benefits of a private limited company which categorically means they will have access to credits, bank loans, Limited liability, legal protection for business, access to market etc all in the name of a separate legal entity. The OPC can not carry business of Non Banking Financial Investment activity including investment in security of any body corporate.

4 FEATURES The Paid-up capital should not be exceeding 50 Lacs Avg. Turnover of company should not be exceeding 2 Crore of last 3 years 3. There should be One Share Holder & One Nominee 4. OPC must have minimum one Director (May have more) 5. It should be noted that the word One Person Company shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.

5 Definition - PAID UP CAPITAL As per section 2(64) of Companies Act,2013 paid up share capital is define as follows. Paid up share capital or share capital paid up means such aggregate amount of money credited as paid up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called: PAID UP SHARE CAPITAL = PAID CAPITAL (EQUITY SHARES + PREFERENCE SHARES) PAID UP CAPITAL DOES NOT INCLUDE ANY RESERVES I.E. GENERAL RESERVE, SHARE PREMIUM ETC.

6 Definition-TURNOVER As per section 2(91) of the Companies Act,2013 turnover is defined as follows: Turnover means the aggregate value of the realization of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during the financial year; Interpretation : The word realization of amount from the sales etc means Gross Turnover, which includes value of goods or/ and Services and taxes thereon. TURN OVER = NET SALES + TAXES AS APPLICABLE

7 CONCEPT ONE SHARE HOLDER ONE DIRECTOR (May have more) NOMINEE

8 ONE SHAREHOLDER Only a natural person who is a resident of India and also a citizen of India can form a one person company No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest. It means that other legal entities like companies or societies or other corporate entities cannot form a one person company. It also means that Non resident Indians or Foreign citizens can not form a One person company. It simply means an individual cannot have two different one person companies in his name.

9 ONE DIRECTOR One Person Company may have minimum only one director. However, as per the Act, the total number of directors shall not be more than 15. As per the Companies Act, if nothing is mentioned in the incorporation document, it would be assumed the sole shareholder shall also be the sole director in the one person company and which shall be practically the case in most One Person Companies incorporated.

10 ONE NOMINEE The One Person Company has to nominate a Nominee with his written consent who, in the event of death or inability to contract of the owner of the One Person Company, shall come forward and take over the reins of the one person company. Requirements of being a resident Indian and citizen of India also apply to the nominee. Further if the person so nominated becomes the member of such a One Person Company and is already a member of another One Person Company, at the same time, by virtue of rules has to decide within 6 months which one person company he has to continue.

11 ONE NOMINEE The member can change the nominee at any point of time. On the death of the sole member, the nominee shall be the person recognized by the company as having title to all the shares of the member. Such nominee shall be entitled to the same dividends and other rights and liabilities to which such sole member of the company was entitled or liable. On becoming member, such nominee shall nominate any other person with the prior written consent of such person who, shall in the event of the death of the member, become the member of the company

12 INCORPORATION - PROCESS 1. Shareholder shall get DIN as well as Digital Signature Certificate. 2. Apply for Name of The Company Should get Consent of Nominee in Form INC.3. The person shall file consent along with required forms and MOA and AOA and other related documents. 5. Shall receive Final Incorporation Certificate from ROC

13 DUE DATE OF FILING DOCUMENTS Sr No. Nature of Forms Form No. Due Date of Filing 1. Application for reservation of Name INC.1 Not Applicable 2. Application for Incorporation INC.2 60 Days 3. Nominee- Consent Form INC.3 15 Days 4. Change in Member/ Nominee INC.4 30 Days 5. Intimation of Exceeding Threshold i.e. Ceased to be OPC 6. OPC Application for Conversion INC.5 INC.6 60 Days Not Applicable 7. Filing of Special Resolution MGT Days 8. Application for DIN DIR 3 Not Applicable 9. Verification of DIN DIR 4 Not Applicable

14 COMPLAINCES OF OPC Provisions for General Meeting: The provisions relating to Board Meeting, AGM, EGM and Notice Convening General Meeting are not applicable to OPC. Minutes Book: It is Mandatory to maintain minutes book of OPC. The resolution by such director is entered in the minutes book required to be maintained under Section 118. The date is of resolution shall be the date of meeting of the Board of Directors. It is not mandatory to record the minutes for contracts entered in to ordinary course of business.

15 COMPLIANCES OF OPC Information to ROC : The should inform about every contract entered and recorded in the minutes book by the company. The information should be provided within a period 15 days from the date of approval of BOD. Financial statements to be filed within 180 days of closure of FY Company Secretary (CS): It is not mandatory for appointing Company Secretary in OPC Companies. The annual return of OPC companies can be signed by Director Cash Flow: It is not mandatory to prepare Cash Flow Statement for OPC.

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17 RELATED PARTY TRANSACTIONS Where One Person Company enters into a contract with the sole owner of the company who is also the director of the company, the terms of the contract are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract. Further, the company shall inform the Registrar about every contract within a period of fifteen days of the date of approval by the Board. This clause shall be very much in vogue since the business of the One Person Company may use many assets of the owner and may pay compensation for that. Examples may be rent paid for using property or machinery or Furniture owned by the Owner. It may pay interest on loans taken from the owner. It may pay salaries to the Owner. All these contracts are covered under this section.

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19 CONDITIONS Where the paid up share capital of an OPC exceeds Rs 50 Lacs OR Average annual turnover during the relevant period exceeds 2 Crore rupees, it shall cease to be entitled to continue as a OPC

20 TIME LIMIT FOR CONVERSION SUB RULE (1) WITHIN 6 MONTHS FROM The date on which its paid up share capital is increased beyond 50 Lakhs rupees OR The last day of the relevant period during which its average annual turnover exceeds 2 Crore Rupees.

21 COMPLIANCES FOR CONVERSION It is mandatory to alter its Memorandum & Articles by passing a resolution and to give effect to the conversion Intimation to ROC with in 60 days from the date of applicability of Sub rule (1) Mandatory maintain of Minute Book under Section 118. If converted in to Private Company then it needs to have minimum Two directors & Two members If converted in to Public Company than it needs to have at least Seven Member

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23 CONDITIONS Where the paid up share capital of Private Company does not exceed Rs 50 Lacs AND Average annual turnover during the relevant period does not exceed 2 Crore rupees, it shall be entitled to form OPC

24 PROCESS FOR CONVERSION NOC From members and creditors before passing resolution. Passing of Special Resolution for conversion to OPC Filing of Special Resolution in Form No. MGT.14 with ROC within 30 days. The company shall file application in Form No. INC.6 along with required fees and prescribed documents with ROC.

25 DOCUMENTS TO BE FILED Declaration by Directors by way of affidavit. The list of members and creditors. The latest audited balance sheet and profit and loss account. The copy of No Objection Letter of Secured Creditors.

26 ADVANTAGES OF OPC Limited liability Protection to Directors and Shareholder. Legal Status and Social Recognition for business. Complete control of company with the single owner. Help for testing of business model and enable funding. Easy to get Loan from bank. Tax Flexibility and savings. Easy to manage and Freedom of Compliances.

27 OPC A TOOL FOR PLANNING Mitigating Capital Gains Mitigating Wealth Tax Key Man insurance policy Dividend Distribution Tax (DDT) Planning from company to LLP. Mitigating Stamp Duty. Service Tax

28 MITIGATING CAPITAL GAINS A One Person Company Purchased One Capital Asset (meant for sale may be after 1 Year). As per capital gains the Capital Asset is termed as Long Term if it is held for 3 years or 36 months (Sec.2 (42A)of I T Act.) But for Shares to classify as Long Term it is to be held for 12 months (Proviso to Sec 2(42A) of I T Act). So to transfer asset from one person to another, one can transfer shares of OPC to that person after 12 months to classify as Long Term.

29 MITIGATING WEALTH TAX The basic exemption limit for wealth tax purpose is Rs. 30 Lakhs for one entity or individual. The same benefit is available to OPC. So now we can take exemption as OPC as well as an individual. So a person can get benefit of Rs.60 Lakhs. As he can claim the basic exemption of Rs.30 Lakhs both as OPC and Individual.

30 MITIGATING WEALTH TAX Consider the following example : Balance Sheet of Mr. A as on 31 st March,2014 is as follows : Liabilities Amount (Rs in Crore) Assets Amount (Rs in Crore) Capital 5 House Property 1 2 House Property 2 2 Other Property 3 1 Total 5 Total 5

31 MITIGATING WEALTH TAX Computation of Wealth Tax: In wealth Tax one Property is exempt from tax and balance asset more than 30 lakhs is taxable at 1 %. Particulars Amount (Rs) Gross Taxable Wealth 3,00,00,000 (-) Exemption (30,00,000) Net Taxable Wealth 2,70,00,000 Wealth Tax 1% 2,70,000

32 MITIGATING WEALTH TAX Now consider if Mr. A converts or acquire assets through in OPC : Balance Sheet of Mr. A (Individual) (Rs. In crores) Liabilities Amt (Rs) Assets Amt (Rs) Capital 5 Property 1 2 Balance Sheet of A (One Person Company) (Rs. In crores) Liabilities Amt (Rs) Assets Amt (Rs) Capital 0.30 Property 2 2 Investment in OPC 0.30 Loan 2.7 Property 3 1 Loan to OPC 2.7 Total 5 Total 5 Total 3 Total 3

33 MITIGATING WEALTH TAX Computation of Wealth Tax: In wealth Tax one Property is exempt from tax and balance asset more than 30 lakhs is taxable at 1 %. Particulars Amt (Rs. In crore) (Individual) Amt (Rs. In crore) (OPC) Properties (LESS) Debt (LESS) Exemption Net Taxable Wealth Wealth Tax 1% 0 0

34 KEY MAN INSURANCE POLICY As per Income Tax Act an Individual can claim deduction for Insurance Premium in computation of Total Income under Section 80C up to Rs.1 Lakh Only. A company whereas can claim deduction for insurance premium paid for Key man Insurance beyond 1 Lakh (Actual Amount spent) under section 37 of the Income Tax Act. So if a Sole Proprietor converts in to OPC it can avail the benefit of Higher Insurance premium paid by him. However the maturity/ Claim benefit of Section 10(10D) will not be available.

35 DDT PLANNING 1. One Person Company 2.Private Limited Company 3. LLP

36 STAMP DUTY (State Subject) An Individual has to pay Stamp duty on transfer of Capital Asset. But if, Property proposed to be transfer by form One person company then Shareholder can transfer the shares of OPC instead of Transfer of Capital Asset. On transfer of shares there is lower Stamp Duty applicable and hence we can mitigate payment of Stamp Duty.

37 SERVICE TAX For payment of Service Tax threshold limit is Rs.10 Lakhs for per Individual or Entity. Person can Split its income /business (if possible) between Individual & OPC Thus, The basic slab may be enhance to 20 Lacs