OPC Annual Compliance in India

One Person Company (OPC) is a unique business structure under the Companies Act, 2013, designed to provide solo entrepreneurs the benefits of limited liability while allowing sole proprietorship. However, OPCs must meet specific annual compliance requirements like all registered entities. Staying compliant ensures the business operates legally, avoids penalties, and builds credibility with stakeholders.

In this write-up, CA Manish Mishra talks about the One Person Company in India and how it can be a game changer for businesses in India.

Overview of One Person Company (OPC) in India

An OPC is a hybrid structure that combines the benefits of a sole proprietorship and a corporate entity. It allows a single individual to operate as a company while enjoying limited liability.

- Importance of Annual Compliance

Annual compliance ensures that the company adheres to the laws, maintains transparency in its operations, and protects its legal status.

- Legal Framework for OPCs under the Companies Act, 2013

The Companies Act, 2013, governs OPCs, with detailed provisions on formation, operation, and compliance. Non-adherence can lead to penalties or disqualification of directors.

Key Annual Compliance Requirements

- Overview of Key Annual Filings for OPC

The OPC needs to file essential returns such as the Annual Return (MGT-7A), Financial Statements (AOC-4), and Income Tax Returns annually.

- Appointment and Role of a Chartered Accountant

A Chartered Accountant (CA) ensures the accuracy of financial records, oversees audits, and guides on tax savings and compliance.

Board Meetings & Resolutions

- Importance of Board Resolutions in OPCs

Although an OPC has a single director, resolutions are documented for major decisions such as loan approval, investments, or financial changes.

- Frequency and Documentation of Board Meetings

While OPCs are exempt from holding frequent meetings, documenting key decisions is vital for maintaining legal clarity.

Annual Return Filing (Form MGT-7A)

- Overview of MGT-7A

The simplified annual return form designed for OPCs highlights the company's structure, ownership, and other details.

- Filing Process

MGT-7A is filed online through the MCA portal using a Digital Signature Certificate (DSC).

- Deadline and Penalties for Non-Compliance

The annual return must be filed within 60 days from the end of the financial year. Non-compliance attracts penalties under the Companies Act.

Financial Statements (Form AOC-4)

- Preparation and Submission of Financial Statements

Financial statements, including the balance sheet and profit and loss account, must be prepared in accordance with Indian Accounting Standards.

- Auditing Requirements

Every company be it OPC, Private Limited or Public company is required to have statutory audit.

- Filing Deadlines and Common Errors

The deadline for AOC-4 is 30 days from the AGM date. Errors in data entry or format can lead to rejection.

Income Tax Compliance

- Filing of Income Tax Returns

OPCs must file annual income tax returns by October 31.

- Key Tax Deductions for OPCs

Deductions for business expenses, depreciation, and government incentives help reduce the tax burden.

- Tax Audit Thresholds

A tax audit is mandatory if turnover exceeds ₹1 crore (or ₹10 crore for digital transactions).

GST Compliance

- Applicability of GST for OPCs

OPCs must register under GST if their turnover exceeds ₹20 lakh or if they deal in inter-state supplies.

- Monthly/Quarterly GST Returns Filing

Regular filings such as GSTR-1, GSTR-3B, and annual returns (GSTR-9) are mandatory.

Other Key Filings

- DIR-3 KYC for Director

Directors must update their KYC details annually to maintain their DIN.

- MSME-1 Filing

Mandatory for OPCs dealing with Micro, Small, and Medium Enterprises (MSMEs).

- DPT-3 Filing for Deposit Returns

Ensures transparency in loans or advances received.

Mandatory Registers

- Registers to be Maintained (Members, Shares, Debentures)

Keeping updated registers of members, shares, and debentures is essential for corporate governance.

- Importance of Updating Registers

Accurate records facilitate smooth audits and avoid legal disputes.

Digital Signature Certificates (DSC)

- Renewal and Usage of DSCs for Filing

A valid DSC is necessary for submitting forms on the MCA portal. Renew it periodically to avoid interruptions.

Changes in OPC Structure

- Conversion of OPC to Private/Public Company

Now as per new update, OPC can convert itself into a Private Limited or Public company anytime after incorporation.

- Amendments to Memorandum of Association (MOA)

Update the MOA to reflect changes in company structure or objectives.

Common Challenges in Compliance

- Issues Faced by OPCs in Meeting Deadlines

Small businesses often lack resources, leading to missed deadlines and penalties.

- Errors in Financial Reporting

Inaccurate or incomplete financial records are a common issue.

- How to Avoid Late Filing Penalties

Maintain a compliance calendar and seek professional assistance.

Benefits of Staying Compliant

- Building Credibility with Stakeholders

Compliance demonstrates reliability to investors and partners.

- Avoiding Legal Consequences

Timely compliance prevents penalties, litigation, and disqualification.

- Eligibility for Government Schemes

Compliant businesses can access subsidies and incentives.

Hiring Professionals for Compliance

- Importance of Chartered Accountants and Company Secretaries

Professionals streamline compliance and ensure accuracy.

- Cost of Outsourcing Compliance

The cost varies based on the size and complexity of the OPC.

Latest Amendments in OPC Compliance

- Recent Regulatory Changes Affecting OPCs

The MCA periodically updates compliance rules, affecting filing processes and deadlines.

- Implications of Amendments on Compliance Requirements

Amendments aim to simplify processes for small businesses like OPCs.

Step-by-Step Compliance Checklist

- Complete Checklist for OPCs

Include filing MGT-7A, AOC-4, GST returns, and income tax returns.

- Timeline for Filing Annual Compliance

Prepare documents well in advance and adhere to the deadlines.

FAQs

- What is the penalty for late filing of MGT-7A or AOC-4?

Late filing attracts a fine of ₹100 per day.

• Can an OPC have more than one director?

Yes, but it must always have a minimum of one director.

• How to convert an OPC into a private limited company?

File Form INC-6 with the MCA after meeting eligibility criteria.

• Are GST filings necessary for a dormant OPC?

Yes, if registered under GST.

• What are the consequences of non-compliance for an OPC?

Penalties, legal issues, and loss of credibility.

Conclusion

Annual compliance is must for One Person Companies in India. Adhering to legal requirements avoids penalties and builds a foundation of trust and transparency for business growth. Seek professional guidance to ensure timely and accurate filings from GenZCFO. Contact us now.