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One Person Company & Private Limited Company under The Companies Act, 2013

One Person Company & Private Limited Company under The Companies Act, 2013. CA Rajkumar S Adukia, B.Com . ( Hons .), FCA, ACS, ACMA, LL.B, Dip.IFR (UK), MBA, DLL& LW, DIPR, Dip in Criminolgy 9820061049/9323061049 Email id: rajkumarradukia@caaa.in. About Companies……………. There are…..

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One Person Company & Private Limited Company under The Companies Act, 2013

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  1. One Person Company & Private Limited Company underThe Companies Act, 2013 CA Rajkumar S Adukia, B.Com. (Hons.), FCA, ACS, ACMA, LL.B, Dip.IFR (UK), MBA, DLL& LW, DIPR, Dip in Criminolgy 9820061049/9323061049 Email id: rajkumarradukia@caaa.in rajkumarradukia@caaa.in

  2. About Companies……………. There are….. • More than 13 lakh Companies in India • More than 100 million companies in the world • 1stCompany formed in 1342 • 1stCompanies Act was Bubble Act, 1720 in UK • 1st Companies Act in India – The Joint Stock Companies Act, 1850 rajkumarradukia@caaa.in

  3. The Legislations governing Companies…. • India • The Companies Act, 2013 – The 8th legislation for Companies in India • With 470 sections under 29 chapters with 7 schedules • UK • The Companies Act 2006 - 1300 sections and 16 schedules • United States • Collection of over 50 different systems of corporate law – main being Delaware General Corporation Law (DGCL) rajkumarradukia@caaa.in

  4. The Companies Act, 2013…looking back • ‘Concept Paper on new Company Law’ was placed on 04th August 2004 • Companies Bill, 2008 was introduced on 23rd October 2008 • Farewell to the 57 years old Companies Act, 1956 • The Companies Act of 2013 incorporated 162 recommendations made by the Standing Committee • Companies Act, 2013 – passed by LS on 18th December, 2012 and RS on8th August, 2013 • President’s Assent – 29th August 2013 • Notified in the Gazette of India - 30th August, 2013 rajkumarradukia@caaa.in

  5. The Companies Act, 2013 Notification of sections under Companies Act, 2013 • 12th September 2013 – 98 sections (effective 12th September 2013 • 27th February 2014 – 1 section (Sec135 – effective 1st April 2014) • 26th March 2014 – 183 sections (effective 1st April 2014) rajkumarradukia@caaa.in

  6. The Companies Rules, 2014 • Rules for 19 chapters including corporate social responsibility rules – have been notified in phases • Certain provisions under chapter XV, XVI, XVIII, XIX, XX, part II chapter XXI, chapter XXVII, chapter XXVIII – yet to be notified rajkumarradukia@caaa.in

  7. What’s new? • First time introduced the concept of One Person Company • Inclusive definition of Financial Statement • E-governance in all company processes • Corporate Social Responsibility • Mandatory Rotation of auditors for listed companies and other prescribed classes of companies • Specific section pertaining to duties of directors • Mode of appointment of Independent Directors and their tenure rajkumarradukia@caaa.in

  8. What’s new? • Mandatory Auditing Standards • Constitution of National Financial Reporting Authority, an independent body to take action against the Auditors in case of professional mis-conduct section 132 • Specific framework for Merger and Acquisitions of companies • Registered Valuers • Mediation and Conciliation Panel • Substantial part of the Companies Act, 2013 will be in the form of rules rajkumarradukia@caaa.in

  9. TYPES OF COMPANY - • On the basis of size: • Small company • Other company • On the basis of number of members: • One person company • Private company • Public company • On the basis of control: • Holding company • Subsidiary company • Associate Company rajkumarradukia@caaa.in

  10. TYPES OF COMPANY - • On the basis of liability • Limited • by Shares • by Guarantee (with or without share capital) • Unlimited • On the basis of manner of access to capital • Listed company • Un-listed company rajkumarradukia@caaa.in

  11. On the basis of nature of business • Companies with charitable objects etc. (Section 8 of the Companies Act, 2013) • Dormant Company (Section 455 of the Companies Act, 2013) • Government Companies (Chapter XXIII of the Companies Act, 2013) • Nidhi Companies (Chapter XXVI of the Companies Act, 2013) • On the basis of place of business • Company incorporated within a country • Foreign company rajkumarradukia@caaa.in

  12. rajkumarradukia@caaa.in

  13. Advantages of OPC • Promotes entrepreneurship across the country. • de-risks the business by transferring the promoter’s liability to the company. • very little paper work — the Articles of Association would be simple and short • If same person is doubling as director and shareholder there would be no need for board or shareholders’ meetings. • Quorum requirements, proxies, maintaining of various registers of members, filing of multiple e-forms fade away, leaving the single operator free from the fetters of corporate governance, except that he has to maintain his books of accounts, prepare and file annual audited balance sheet and profit and loss accounts, without the Board’s report. rajkumarradukia@caaa.in

  14. Advantages of OPC • The memorandum of a One Person Company shall indicate the name of the person who shall, in the event of the subscriber’s death, disability or otherwise, become the member of the company. • The memorandum of a company shall state the last letters and word “OPC Limited” in the case of a One Person limited company. • The One Person Companies are also not required to hold any Annual General Meeting under the new Companies Act 2013. This facility is not extended towards any other type of companies rajkumarradukia@caaa.in

  15. OPC v/s SOLE PROPRIETORSHIP • Separate legal entity • Limited Liability • Debt- not the sole responsibility of the owner • Finance- credit record of the company  • Legal requirements- will need to register itself as such • Separate tax • Owner & entity is same personality • Unlimited Liability • Debt - sole responsibility of the owner • Finance- credit history of the owner  • Legal requirements- will not have to draw up paper declaring its status • Tax paid by the owner rajkumarradukia@caaa.in

  16. One Person Company(OPC)- Companies Act, 2013 • one person as a member • promoter, director and member – All in One • a single shareholder corporate entity • Sec.2(62) of the Companies Act, 2013 • OPC new in India but a fairly successful form of business in US, UK & several other countries including Pakistan • OPC first recommended by the expert committee of Dr. JJ Irani in 2005 rajkumarradukia@caaa.in

  17. OPC- other countries • U.K. • U.K.Companies Act, 2006 & the Companies (Single Member) Private Companies Regulations 1992 • Singapore Company Amendment Act of 2004 and other regulations • United Arab Emirates One Person Company recognized • Only Articles of Association • United States • In US, several states permit the formation and operation of a single-member Limited Liability Company (LLC). rajkumarradukia@caaa.in

  18. OPC- other countries • China • introduced it in October 2005) in which the promoting individual is both the director and the shareholder. • In China, one person is allowed to apply for opening a limited company with a minimum capital of 1, 00,000 Yuan. The amended law of China prescribes that the owner should pay the investment capital at one time and bars him from opening a second company of the same kind.  • Pakistan • The amended company law of Pakistan permits one person to form a single-member company by filing with registrar, at the time of incorporation, a nomination in the prescribed form indicating at least two individuals to act as nominee director and alternate nominee director.  rajkumarradukia@caaa.in

  19. Salient features of OPC • Only one member/shareholder at a time • Min 1 and Max 15 of directors • Appointment of nominee Compulsory • Paid-up capital not to exceedRs.50 lakhs rule 6(1) • Average annual turnover not to exceed Rs.2 crore • Words ‘‘One Person Company’’ to be mentioned in brackets below the name of such company • Egrajkumaradukia consultants pvt ltd(opc) • Exempted from holding general meetings and Board meetings, if the company has only one director • Registrar of Companies to be informed about every contract entered into rajkumarradukia@caaa.in

  20. Companies Act 2013 - OPC • Registered as a Pvt Ltd • Min paid-up share capital of Rs. 1 Lakh • Right to transfer shares restricted • Natural person who is an Indian citizen & resident in India • Not eligible to incorporate more than one OPC or become nominee in more than one OPC • No minor • Nominate and indicate the name of the person in the memorandum rajkumarradukia@caaa.in

  21. Companies Act 2013 - OPC • Nomination in Form No INC.2 • Consent of nominee in Form No INC.3 • Sole member can be the first director • Mandatory rotation & maximum term of AUDITORS not applicable to OPC • No meetings of Board and quorum required if there is only one director rajkumarradukia@caaa.in

  22. Companies Act 2013 -OPC • terms of the contract or offer contained in the memorandum / recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract • inform the Registrar - every contract other than in ordinary course of business within 15 days of the date of approval by the Board of Directors • annual return in Form No. MGT.7 • extract of the annual return in Form No. MGT.9 to form part of the Board’s report rajkumarradukia@caaa.in

  23. Exemptions - One Person Company • General Meetings, Extra Ordinary General Meeting and Notice for convening General Meeting • Not required to hold two board meetings - in case of only one director • Quorum for meetings, voting procedures etc. • Provisions of Sec.98 and Secs.100 to 111 rajkumarradukia@caaa.in

  24. Restrictions on OPC • Cannot be incorporated or converted into a company under s.8 of the Companies Act, 2013 • Cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporates • Cannot convert voluntarily into any kind of company unless two years is expired from the date of incorporation rajkumarradukia@caaa.in

  25. Mandatory Conversion of OPC into Public or Private Company • Rule 6 of the Companies (Incorporation) Rules, 2014 • Paid up share capital exceeds 50 lakh rupees or its average annual turnover exceeds 2 crore rupees • Convert itself, within six months rajkumarradukia@caaa.in

  26. Conversion of private company into OPC • Rule 7of the Companies (Incorporation) Rules, 2014 • By passing a special resolution in the general meeting • Not applicable to s.8 company • Should obtain No objection in writing from members and creditors • File an application in Form No.INC.6 for its conversion rajkumarradukia@caaa.in

  27. Provisions of Companies Act, 2013 as applicable to Private Company rajkumarradukia@caaa.in

  28. Private Limited Company • Minimum – 2 members • Maximum – 200 members • Liability of members limited • Not allowed to invite public to subscribe to its shares and debentures rajkumarradukia@caaa.in

  29. Incorporation • Application for incorporation in Form no. INC.7 • Memorandum of a company - forms specified in Tables A, B or C in Schedule I of the Act • Application for the reservation of a name in Form No. INC.1 • Rule 8 of the Companies (Incorporation) Rules, 2014 deals with undesirable names • Articles of a company - forms specified in Tables, F, G and H in Schedule I rajkumarradukia@caaa.in

  30. Private Placement of Securities • S.42 & Rule 14 under Companies (Prospectus and Allotment of Securities) Rules 2014 • Does not cover Qualified Institutional Buyers and Employees for the limit of 200 people • Value of the Offer per person not to be less than Rs.20,000 of ‘face value’ of securities • Valuation report by a Registered Valuer  • Allotment within 60 days or refund from 75th day • Return of allotment of securities to Registrar rajkumarradukia@caaa.in

  31. Share capital, Dividend, Accounts • Share capital and debentures - Chapter IV of Act & Companies (Share Capital and Debentures) Rules, 2014 • new procedure for increasing the share capital • Declaration and payment of dividend - Chapter VIII of the Act & Companies (Declaration and Payment of Dividend) Rules, 2014 • only out of profit of the company for the financial year or out of undistributed profit of any previous financial year or out of both • Accounts - Chapter IX & Companies (Accounts) Rules, 2014 • accrual basis and according to the double entry system of accounting rajkumarradukia@caaa.in

  32. Directors • Directors - Chapter XI & Companies (Appointment and Qualification of Directors) Rules, 2014 • Appointment of Managing Director now applicable to private limited companies also • Maximum number of directors – 15 • At least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year • Duties of directors - S.166 • No loans to directors rajkumarradukia@caaa.in

  33. Related party transactions • Sec.188 of the Companies Act 2013 & Companies (Meetings of Board and its Powers) Rules, 2014. • Prior approval of the company by a special resolution • company having paid-up share capital of Rs. 10 crore or more • sale, purchase or supply of goods or materials exceeding 25% of annual turnover • selling, buying property of any kind exceeding 10% of net worth • leasing of property of any kind exceeding 10% of net worth or exceeding 10% of turnover • Availing/ rendering of any services exceeding 10% of net worth rajkumarradukia@caaa.in

  34. Audit and auditors • Appointment of auditors only for a period of 5 years • mandatory appointment and rotation of auditors • listed companies • unlisted public companies having paid up share capital of Rs.10 crore or more • private limited companies having paid up share capital of rupees 20 crore or more • Companies below threshold limit but public borrowings from financial institutions, banks or public deposits of rupees 50 crores or more • Does not apply to one person companies and small companies rajkumarradukia@caaa.in

  35. Audit and auditors • Individual Auditor - completed his term of 5 consecutive years - not eligible for reappointment - for Subsequent 5 yrs • Audit firm - completed its two terms of 10 consecutive years - not eligible for reappointment for Subsequent 5 yrs • Appointment of auditors subject to ratification in every annual general meeting till the 6th such meeting by an ordinary resolution • Incoming auditor or audit firm not eligible if such auditor/audit firm associated with outgoing auditor/audit firm under the same network of audit firms rajkumarradukia@caaa.in

  36. Audit and auditors • Appointment of internal auditor or a firm of internal auditors • every private company having turnover of two hundred crore rupees or more during the preceding financial year • or • outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year rajkumarradukia@caaa.in

  37. Meetings • 21 clear days notice to the shareholders • notice can be given by electronic mode also • first AGM within 9 months from the close of the financial year • other cases within 6 months from the close of the financial year • postal ballot is applicable to private limited companies also for certain transactions • OPC and other companies having members upto 50 – exempted • quorum, notice, proxies etc applicable for pvt ltd cos also rajkumarradukia@caaa.in

  38. Annual Returns • To be certified by a Company Secretary in practice in Form No. MGT.8 • a company having paid-up share capital of ten crore rupees or more or • turnover of fifty crore rupees or more • Extract of annual return to form part of the Board’s report rajkumarradukia@caaa.in

  39. Corporate Social Responsibility • S.135 • Schedule VII • Companies (Corporate Social Responsibility Policy) Rules, 2014 • Applicable to Every company having • net worth of Rs. 500 crore or more, or • turnover of Rs. 1000 crore or more or • net profit of Rs. 5 crore or more rajkumarradukia@caaa.in

  40. National Company Law Tribunal • Chapter XXVII • Rules not yet notified • Principal Bench to be at New Delhi • President and such number of Judicial and Technical members as may be notified rajkumarradukia@caaa.in

  41. National Company Law Appellate Tribunal • Appeal to be filed within a period of 45 days from the date on which a copy of the order of the Tribunal is made available • Chairperson and such number of Judicial and Technical Members, not exceeding eleven • Appeal to the Supreme Court within sixty days from the date of receipt of the order of the Appellate Tribunal • Mediation and Conciliation Panel also proposed to be created rajkumarradukia@caaa.in

  42. About the Author • CA. Rajkumar S Adukia is an eminent business consultant, academician, writer, and speaker. He is the senior partner of Adukia & Associates. • In addition to being a Chartered Accountant, Company Secretary, Cost Accountant, MBA, Dip IFR (UK), Mr.Adukia also holds a Degree in Law and Diploma in Labor Laws and IPR. • Mr. Adukia, a rank holder from Bombay University completed the Chartered Accountancy examination with 1st Rank in Inter CA & 6th Rank in Final CA, and 3rd Rank in Final Cost Accountancy Course in 1983. • In his three decades of practice as a Chartered Accountant on he left no stone unturned, be it academic expertise or professional development. rajkumarradukia@caaa.in

  43. About the Author • He has been coordinating with various Professional Institutions, Associations, Universities, University Grants Commission and other Educational Institutions. • Authored several books on a vast range of topics including Internal Audit, Bank Audit, SEZ, CARO, PMLA, Anti-dumping, Income Tax Search, Survey and Seizure, IFRS, LLP, Labour Laws, Real estate, ERM, Inbound and Outbound Investments, Green Audit etc. • The author can be reached at rajkumarradukia@caaa.in Mob – 09820061049 / 09323061049 rajkumarradukia@caaa.in

  44. THANK YOU rajkumarradukia@caaa.in

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