Closure of OPC
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Closure of OPC - Overview
One Person Company (OPC) is a company incorporated by a single person. Previously, a single person could not incorporate a company, but the implementation of Section 2(62) of the Companies Act, 2013, has made it possible.
Section 2(62) of the Companies Act, 2013, defines a one-person company as a company that has only one person as its member.
Furthermore, members of a company are subscribers to its Memorandum of Association (MOA) or its shareholders. So, an OPC can be viewed as a company that has only one shareholder as its member.
It is a company where the compliance and legal requirements are lesser than those of a private company.
The Companies Act, 2013, allows an individual to form a company with a single member and a single director. The director and member can be the same person.
Even though OPC has just one member, it is legally required to follow compliances similar to other registered entities. It must file all regulatory compliances and regular returns on time, even if it is inoperative, unless it has filed the closure documents with the Registrar of Companies (ROC).
Sometimes it is beneficial to file for the closure of OPC, relieving the member from fulfilling the legal and regulatory compliances.
The procedure to close an OPC is guided by a set of rules under the Ministry of Corporate Affairs (MCA). If the closure of OPC is not properly undertaken, penalties and fines may be imposed for non-compliance.
If an OPC is inoperative for more than a year from the date of incorporation, the owner may apply for closure under the normal procedure or the Fast Track Exit (FTE) scheme of the MCA.
It also has the option to voluntarily wind up, and in some cases, the winding up of OPC is done by the order of the tribunal.
Methods of Closing OPC
The process of closing a One Person Company (OPC) is prescribed under the Companies Act, 2013. There is a provision named Strike Off or company closure.
Company closure in India is done as per the Companies (Removal of Names of Companies) Rules, 2016, governed by Section 248 of the Companies Act, 2013.
Sections 248 to 252 of the Companies Act, 2013, provide the procedure for striking off company names by the ROC or voluntary strike-off by the company.
Strike-off of a company name is the process of closing an inoperative company quickly. It is the simplest way to dissolve a company.
Following are the two ways for closing an OPC:
Winding-up: The dissolution of OPC is done with the approval of the majority of creditors participating in the meeting. The board must submit a request (in writing or electronically via the company registration portal) with the dissolution resolution and the minutes of the general meeting. Winding up is a long process that requires the appointment of a liquidator to manage the affairs of the wound-up company.
Striking off: Striking off or removal of OPC through the Fast Track Exit scheme is a less complex method for closure. When OPC gains the status of a dormant company, it can be wound up with a fast-track procedure through Form STK-2.
Company closure is filed under Form STK-2 (previously Form FTE) along with the government fees of ₹5000, accompanied by essential documents. However, this form can only be filed under certain conditions:
- Paying all Liabilities: Liabilities should be paid off, and a No Objection Certificate should be obtained from the creditors.
- 75% Consent: This condition does not apply to OPC in India because, in OPC, the individual owns 100% of the shares and hence needs no approval from any other person.
- Prepare Application: The application should be drafted and filed with ROC through Form STK-2.
The following documents are needed for the closure of an OPC:
- Company’s Memorandum of Association (MOA), Articles of Association (AOA), Certificate of Incorporation, PAN card, and other registration certificates if any.
- Financial statements of the Company for the most recent year prepared within 30 days of filing the application.
- Indemnity Bond notarized by Directors (Form STK-3).
- A statement regarding pending litigations against the OPC, if any.
- Statement of Accounts containing assets & liabilities of the Company, audited by a CA.
- An affidavit in Form STK-4 by the sole Director.
- Signed resolution by the sole member.
- PAN card of OPC.
- Bank account closure certificate and bank details.
- No Objection Certificate (NOC) from creditors, if any.
- No Objection Certificate from Tax authorities.
Advantages of Closing OPC
- No need to pay compliance fees when the business is inoperative.
- No burden of yearly regulation and adherence to legal compliances once the OPC name is struck off.
- No unnecessary penalties are levied.
- No obligation to maintain accounting records.
- Saves company resources that were earlier engaged in auditing and unnecessary record maintenance.
Conditions before Closing OPC
For striking off the name of a company, the following conditions should be met:
- The OPC should not have changed its name or shifted its registered office from one state to another in the previous three months from the date of application.
- In the previous three months, the company should not have disposed of any property or rights it held before stopping trade or otherwise carrying on business, for the purpose of disposal for gain in the normal course of trading or otherwise carrying on business.
- In the preceding three months, the OPC should not have engaged in any business other than what it was created for and for making an application for strike off as a statutory requirement.
- The procedure for strike off can be initiated by an active company and a dormant company but not by a Section 8 company.
FAQs
A company strike-off is the process when the company’s name is removed from the Companies House register and ceases to exist.
Yes, Form INC-4 will be helpful in changing the Member/Nominee.
Yes, you can sell OPC to another person.
The closure of the OPC can be done voluntarily through the filing of Form STK-2 with the registrar. Winding up of the company can be done voluntarily or by the order of the Court by appointing an official liquidator to monitor the process of winding up.
Sub-section (1) of section 96 of the Companies Act, 2013 provides that an OPC is not required to hold its annual general meeting.
