One Person Company (OPC) Registration & Conversion Rules 2020

Legal Framework: One Person Company (OPC) in Bangladesh

The concept of a One Person Company (OPC) was introduced in Bangladesh through the Companies (2nd Amendment) Act, 2020, which amended the Companies Act, 1994. This amendment allows a single individual to form a company, providing a structured alternative to sole proprietorships with the benefits of limited liability. The detailed rules for registration, nominee appointment, and conversion are governed by the Companies Act, 1994, as amended.

Eligibility and Formation of an OPC

An OPC can be formed by a natural person who is a citizen of Bangladesh and resident in Bangladesh. A 'resident in Bangladesh' means a person who has lived in Bangladesh for a period of at least one hundred and eighty-two days during the immediately preceding financial year. This is stipulated under Section 2(1)(p) of the Companies Act, 1994 (as amended).

The sole shareholder of an OPC must also be its sole director. This unique structure simplifies governance but places significant responsibility on the individual.

Nominee Appointment in an OPC

A crucial aspect of an OPC is the mandatory appointment of a nominee. The sole shareholder must, at the time of incorporation, nominate another natural person who is a citizen of Bangladesh and resident in Bangladesh, to become the member of the company in the event of the subscriber's death or incapacity. This is mandated by Section 152A(2) of the Companies Act, 1994.

The nominee's written consent must be obtained and filed with the Registrar of Joint Stock Companies and Firms (RJSC) at the time of incorporation. The nominee can withdraw their consent by giving written notice to the sole shareholder and the company, and the sole shareholder must then nominate another person within 15 days, informing the RJSC within 30 days of the change. Similarly, the sole shareholder can change the nominee at any time by giving notice to the company and the RJSC.

Registration Process for an OPC

The registration process for an OPC largely follows the general company registration procedures with specific adaptations for the single-member structure. The steps typically involve:

1. Name Clearance: Apply to RJSC for name clearance for the proposed OPC.
2. Drafting Memorandum & Articles of Association: Prepare the Memorandum of Association (MOA) and Articles of Association (AOA). The MOA must state that it is an OPC, and the AOA must include provisions for the nominee.
3. Subscriber & Nominee Details: The sole subscriber must provide their details, and the nominee's written consent along with their details must be included.
4. Filing with RJSC: Submit the application for registration, along with the approved name clearance, MOA, AOA, nominee's consent, and other requisite forms (e.g., Form IX for director's consent, Form X for registered office).
5. Fee Payment: Pay the prescribed registration fees to RJSC.
6. Certificate of Incorporation: Upon successful verification, RJSC will issue the Certificate of Incorporation.

Conversion of an OPC to a Private Limited Company

An OPC is not intended to remain a single-member entity indefinitely if its business grows significantly. The Companies Act, 1994, mandates conversion under certain conditions, as per Section 152B:

• Paid-up Share Capital Threshold: If the paid-up share capital of an OPC exceeds BDT 5 Crore (Five Crore Taka) at any time.
• Annual Turnover Threshold: If the annual turnover of an OPC, as per its last audited financial statement, exceeds BDT 10 Crore (Ten Crore Taka).

Upon reaching either of these thresholds, the OPC must convert itself into a private limited company within six months. The conversion process involves:

1. Passing a special resolution by the sole shareholder/director for conversion.
2. Increasing the number of directors to at least two and shareholders to at least two.
3. Amending the Memorandum and Articles of Association to reflect the change from OPC to a private limited company.
4. Filing the necessary forms and documents with RJSC, including the amended MOA and AOA, and details of the new directors and shareholders.
5. Obtaining a new Certificate of Incorporation from RJSC reflecting the change in company type.

An OPC may also voluntarily convert into a private limited company after two years from its incorporation, provided it meets the requirements of a private limited company. This is also covered under Section 152B(1) of the Companies Act, 1994.

Compliance and Reporting

An OPC, like any other company, must comply with annual filing requirements. This includes filing annual returns, financial statements, and an auditor's report with RJSC, as per Section 152C of the Companies Act, 1994. The financial statements must be audited by a chartered accountant.

It is important for the sole director to maintain proper books of accounts and ensure timely compliance to avoid penalties.