What is One Person Company?

One Person Company, or OPC, was introduced by the Companies Act of 2013. Now, one person can form a company and act as the director as well as the sole member, which was not possible before. The previous Companies Act of 1956 required you to look for at least one more person to get started. Now, entrepreneurs and small business owners can form a company with limited liability by themselves. This is a complete game-changer for people who want to go solo but still want to enjoy the benefits of running a full-fledged company.

What is annual compliance?

It is a list of things that you have to do every year, as required by the law. 

·       Filing financial statements

·       Submitting annual returns

·       Maintaining your company records

·       Handling taxes.

These are not just things that you have to do because they are boring. They are also a way of showing that you are running your business honestly and that you are following the rules.

Why do all of this?

Running a successful business is not just about making money. It is also about gaining the trust of the customers and showing them that you are a company that follows the rules. Annual compliance will keep your company safe, sound, and in good standing.

Advantages of OPC Compliance

1. Legal Protection

If you are always in compliance, your OPC will always be in effect, and you won’t have to think about fines, penalties, or the MCA striking your OPC off the records.

2. Limited Liability Security

If you are in compliance, you will always have your limited liability protection. Your personal funds will always be secure, even if your business hits a rough spot.

3. Improved Business Credibility

When you file your returns on time and keep your records in order, it impresses people. Customers, lenders, and investors trust you more.

4. Easier Access to Funding

If you are in compliance, it is simply easier to get loans, attract investors, and develop good relationships with lenders.

5. Smooth Business Operations

If you keep your statutory records and filings in order, you won’t have as many legal problems. Your business can continue to operate smoothly without annoying interruptions.

6. Better Financial Discipline

When you have to do audits and filings, it forces you to be more open and honest about your finances.

7. Avoidance of Heavy Penalties

You won’t have to deal with large penalties and additional government fees. Being in compliance will save you from unnecessary financial punishment.

Types of One Person Company Compliance

1. Annual Filings (ROC):

Form AOC-4 to file your financial statements, Balance Sheet, and Profit & Loss Account, within 180 days of closing the financial year.

Form MGT-7A is required for filing your Annual Return. You are required to file it within 60 days of the annual general meeting, or if you have not held the AGM, within 60 days of 180 days from the close of the financial year, that is, by November 29.

2. Income Tax Compliance:

You are required to file your company's Income Tax Return (ITR-6) by September 30 or October 31, depending on the year. If your turnover exceeds the government's threshold, you are required to undergo a tax audit.

3. Director Compliance:

Each director (DIN holder) is required to undergo DIR-3 KYC annually by September 30. Directors are also required to file an MBP-1 to reveal any interest they may have in other companies or entities.

4. Administrative & Secretarial:

Conduct at least one board meeting in every half-year of the calendar year. Maintain at least a 90-day gap between the meetings. Don’t forget to appoint your statutory auditor using form ADT-1.

5. Other Mandatory Compliances:

If your company owes any funds to MSME vendors, you are required to file MSME-1 every six months to disclose the outstanding payments. If your company has outstanding loans, you are required to submit DPT-3 as a return of deposits. And when you are setting up your company, you are required to file INC-20A to confirm the commencement of business within 180 days of incorporation.

Step by Step Procedure for OPC Compliance

Step 1. Board Meeting Requirements 

According to Section 173 of the Companies Act 2013, an OPC is required to conduct at least one Board meeting in each half of a calendar year, and the meetings must be held at an interval of not less than 90 days between them. In the case of a single director, you are exempted from the quorum requirements.

Step 2. Appointment of Auditor 

As per Section 139, it is mandatory for every OPC to appoint an auditor, typically a Chartered Accountant firm, to audit the accounts and submit an audit report. The requirement of auditor rotation is not applicable to OPCs.

Step 3. Filing of Annual Return 

It is mandatory for every OPC to file its Annual Return in Form MGT-7 within 180 days of closing the financial year. The Annual Return includes information about shareholders, members, and directors.

Step .4. Financial Statement Submission 

You are required to submit your financial statements, including the Balance Sheet, Profit and Loss Account, and Director’s Report, in Form AOC-4 within 180 days of closing the financial year.

Step 5. Disclosure of Interest by Directors

The directors must report their interests in other companies every year. They do this at the first Board meeting, using Form MBP-1. If they fail, they can be imprisoned for up to a year.

Step 6.KYC Compliance for Directors

If you are a director and have a Director Identification Number (DIN), you must file Form DIR-3-KYC by September 30 every year after the end of the financial year.

Step 7. Filling Form DPT-3

Every year, you must file Form DPT-3 by June 30. This form lists deposits and what is not a deposit as of March 31.

Step 8. Maintain statutory registers

Therefore, whenever there is a transfer of shares, a new director, a resignation, a change in nominees, a new bank signatory, or an auditor appointment, you must update the registers. If you fail to file annual financial statements, there is a fine of ₹100 per day, up to ₹10,00,000.

Step 9. Income Tax Returns

on a yearly basis. For individuals, the last date is July 31. For businesses, it is September 30. The return should include income, expenses, and deductions. Late filing may result in a penalty of ₹10,000.

Step 10. GST Compliance

It is required to file its returns on time. Companies with a turnover of up to ₹5 crores file returns quarterly. However, if the turnover is more than ₹5 crores, the return is filed monthly. If the yearly turnover exceeds ₹2 crores, the OPC is required to file an annual return and have its accounts audited.

Basic Company Documents

1.     Certificate of Incorporation

2.     Memorandum of Association (MOA)

3.     Articles of Association (AOA)

4.     PAN Card of the Company

5.     TAN

Financial Documents

1.     Books of Accounts

2.     Balance Sheet

3.     Profit & Loss Statement

4.     Bank Statements

5.     Auditor’s Report

6.     Income Tax Return documents

Director & Nominee Documents

1.     PAN Card of Director

2.     Aadhaar Card

3.     DIN (Director Identification Number)

4.     Consent of Nominee (Form INC-3)

Annual Filing Forms

1.     AOC-4 (Financial Statements)

2.     MGT-7A (Annual Return)

3.     ADT-1 (Auditor Appointment)

Other Documents (if applicable)

1.     GST Registration Certificate

2.     TDS Returns

3.     Professional Tax Registration

4.     Board Resolutions

5.     Statutory Registers

It is an important for One Person Companies in India to be on top of their compliance. The regulations are not as stringent as they are for larger companies, but they are important nonetheless. It is a fact that proper compliance helps the owner of the company avoid liability, keeps the company legal, and helps investors feel more at ease with the idea of investing their money into the company. When One Person Companies are organized and keep their books straight, they are doing more than just complying with the regulations. They are setting themselves up for success.