This article aims to discuss the One Person Company (OPC) containing its statutory framework, key features, benefits and challenges, OPC registration guidelines, share transfer and its taxation.

The concept of One Person Company (OPC) was introduced through the 2020 amendment to the Companies Act 1994 of Bangladesh marking a significant evolution in corporate structure. Previously, business formation would involve multiple individuals which is at least seven for public companies and two for private companies, meaning that the sole entrepreneurs had no option but to operate as sole proprietorships with unlimited liability. The introduction of OPC addressed this gap by enabling a single person to incorporate a company while enjoying limited liability protection, particularly benefiting small and medium enterprises by reducing legal compliance requirements while maintaining corporate advantages. 

Under the Companies (2^nd Amendment) Act 2020 of Bangladesh, provisions for One Person Company are found in Section 2(1)(bb) of the Act defines One Person Company as a company which has only one natural person as a shareholder. As per section 11A(c) one person companies must include the suffix “One Person Company” or “OPC”.

If you are considering setting up other business structures, explore these guides below for more details:

• Sole Proprietorship
• Limited Company 
• partnership firm
• one person company
• joint venture
• All Foreign business options
• NGO and non profit company options

Key Features of OPC in Bangladesh

The Company Act of Bangladesh provides the following features of OPC:

1. Single Shareholder: By the name One Person Company, you can understand that the company will have only one shareholder being the only owner of the company has complete ownership of the business operations.

2. Limited Liability: Shareholders’ liability is limited to the amount they have invested in the company, and their personal assets are protected in case of the company’s debts or legal issues. It protects the individual entrepreneur from personal financial risk. 

3. Separate Legal Entity: The OPC has a distinct legal entity who can own property, enter contracts, and sue or be sued in its own name.

4. Formation: Any natural person can form One Person Company in Bangladesh. The company name must include “OPC” after the company name, e.g. ABC OPC.

5. Incorporation Requirements of OPC under Section 392B are that it- 

• (i) can be formed by any natural person for lawful purposes 
• (ii) one person can incorporate only one OPC 
• (iii) the Memorandum must also nominate a person/nominee, with his/her written consent who will become shareholder upon death/incapacity of original shareholder (iv) At the time of registration of a one-person company, the written consent of the nominated person shall be recorded in its memorandum , articles and register
• (v) the nominated person may withdraw his consent 
• (vi) if the nominee dies before the shareholder/director, another person may be nominated.
  (v) minimum one meeting is required per financial year to run the OPC.

6. Capital Requirement: as per Section 392C, the One Person Company must have paid-up capital of Taka 25 lakh to Taka 5 crore and annual turnover of Taka 1 crore to Taka 50 crore. 

7. Conversion: When Paid-up Capital exceeds the limit OPC must be converted. If the annual turnover exceeds Tk 50 crore, the OPC must be converted to a private or a public limited company while the company must comply with other requirements.

8. Director and Organizational Framework: As per Section 392E sole shareholder must serve as director and can appoint managers, secretary, and other employees. Decision making becomes faster and flexible since this does not involve any third party to make decisions.

9. Director’s Meeting: The OPC must hold at least one director’s meeting every six months.

10. Annual General Meeting: No such requirement for AGM is found in the law.   

11. Ownership Transfer: Shares of the One Person Company may be transferred  and transmitted to another natural person only. 

12. Accounts and Audits: The Companies Act 1994 makes it a requirement for an OPC to maintain proper books of accounts. All the provisions relating to auditors and audit reports which apply to a Company, will apply for an OPC, whereas modifications may be applicable. The existing provisions relating to auditors and audit reports will apply to an OPC with necessary adaptations. The financial statement (including every balance sheet and profit-loss account) of the company shall be signed by the only member and submitted to the Registrar within 180 days from the end of the financial year.

13. Perpetual Succession and Nominee Requirement: One of the very basic characteristics of the company is that in the event of the death of the shareholder or incapacity, the company does not get dissolved but the shares are transferred to his nominee or other parties and the company continues to run. It is to be noted that the nominee has no rights in the company until such an event occurs, but their appointment ensures the continuity of the company. 

14. Borrowing: OPC can borrow and also pay the loan from bank/financial institution with appropriate adjustments wherever required

15. Winding up: OPC may be winded up voluntarily following the existing provisions of winding up.  

Step-by-Step Process of OPC Registration in Bangladesh

The One Person Company (OPC) registration process is carried out by the Registrar of Joint Stock Companies and Firms (RJSC). As per Section 392(D) of the Companies Act, the rules and regulations applicable to private limited companies shall, with necessary adaptations, apply to the registration of a one-person company. The OPC registration process consists of the following steps:

1. Step 1: Name clearance

Name clearance is the first step in company registration in Bangladesh. Once you submit a name for approval, RJSC will review it based on its guidelines. If approved, the name clearance remains valid for 180 days. If it is about to expire, you can request an extension before the deadline.

2. Step 2: Draft and Prepare documents for registration

The desired company requires a Memorandum and Articles of Association along with other documents. 

• Memorandum of Association (MoA): Specifies the company’s objectives, operational scope, and authorized capital, etc. However, in OPC, the nominee must be mentioned in the memorandum. The Nominee will take over as the shareholder if the original shareholder passes away or becomes unable to manage the company. This nominee shall have the same rights and responsibilities as the original shareholder. In case the  nominee wants to step down, he/she can simply withdraw their consent. If the nominee passes away or becomes unfit, the original shareholder can appoint someone else, and the nominee can also name a successor.
• Articles of Association (AoA): The AoA generally defines the internal management and governance.
• Name clearance certificate from RJSC
• Other forms and schedules prescribed by RJSC.
• NID or Passport Copies of the shareholder(s)
• National ID card
• Passport size picture
• TIN certificate
• Mobile number
• Email address
• Signature

3.  Step 3: Company registration

Once you have all the required documents, the next step is to formally apply for company registration. At this stage, you must fill in all the required information, upload the necessary documents, and pay the prescribed fees and stamp duties to the designated bank accounts of RJSC.

4. Step 4: Certificate Collection

RJSC examines all the submitted information and documents, which is done by its personnel. If they are satisfactory, you will receive a Certificate of Incorporation. The certificate will include the company’s name, establishment date, and registration number.

5. Step 5: Post registration 

One of the statutory compliance requirements in Bangladesh is that after completing the registration process, any company, including an OPC, must follow statutory compliance procedures. Thereafter, it must obtain various licenses and permissions to commence business operations, including:

(i) Trade License
(ii) Tax Identification Number (TIN)
(iii) Value Added Tax (VAT) Registration
(iv) Factory Layout Approval
(v) Fire License
(vi) Environmental Clearance Certificate

The introduction of One Person Companies (OPCs) through the Companies (2nd Amendment) Act 2020 marks a significant advancement in Bangladesh’s corporate framework, creating new opportunities for sole entrepreneurs by bridging the gap between sole proprietorships and traditional companies. Despite the challenges, OPCs have the potential to significantly contribute to Bangladesh’s economic growth, if the challenges on legal and regulatory developments are addressed and clearer guidelines are provided.

Frequently Asked Questions (FAQ) on One Person Company (OPC) in Bangladesh

A One Person Company (OPC) is a new concept in Bangladesh, introduced by amending the Companies Act, 1994. Below is a comprehensive FAQ covering various aspects of OPC:

1. What is a One Person Company (OPC)?

Unlike sole proprietorships, OPCs are separate legal entities, meaning the owner’s personal assets are protected from business liabilities. An OPC is a separate legal entity, just like an individual, and the owner’s personal assets are protected from being used to meet business liabilities, unlike in a sole proprietorship. OPC is a wise option for start-ups as it can help small business; by creating a distinct business entity. 

2. What is the minimum share capital required for an OPC?

The paid-up capital for a One Person Company is to be within the range of 25 lakh taka to 5 crore taka, compared to the turnover every financial year to be in the range of 1 crore to 50 crore taka.

3. How to choose a name for an OPC?

• The name must be unique.
• It must not be similar to any existing company.
• The suffix ”OPC Limited” shall have to be added
• The name should reflect the nature of the business.

4. Benefits of forming an OPC in Bangladesh

There are numerous benefits in Registering a One Person Company (OPC) in Bangladesh. Easy to Start: Only one member is required, with one nominee (they can be the same person), and company management is simple with one person making decisions. This structure allows small businesses to access simple financing channels, loan interest rates and minimal regulatory burden. Moreover, annual audits add credibility, and a central management system allows the company to contribute to the national economy and attract foreign investments, guaranteeing a stable business with fewer conflicts.

5. Challenges of Forming an OPC in Bangladesh

Several issues need to be addressed in Bangladesh for further enhancement of OPC growth. Nonetheless, there are different challenges an OPC brings. Low turnover requirements, for example, may be difficult for newly minted entrepreneurs to achieve, and OPCs are ill-suited for running large-scale operations or attracting considerable capital from several backers. One key person in charge of decision-making can lead to management problems in the absence or illness of the owner. Additionally, the limited liability protection offered is not unconditional and certain business actions are prohibited within this structure. Multiple compliance issues are already cumbersome, and ambiguous legal laws can cause litigation to become messy.

6. Which type of the business can register as an OPC?

Some small and medium-sized businesses suitable for OPC are:

• Service-based businesses or freelancing.
• Unique breed of e-commerce or online businesses.
• Consultancy services.
• Production, industrial or manufacturing activities. etc.

7. Can an OPC be converted into another type of company?

Yes, you can convert your OPC into a Private Limited Company as well as Public Limited Company by following the procedures prescribed by the RJSC.

8. Can an OPC hire employees?

Yes, OPC can hire company secretary, CEO, COO, and employ any number of employees without any restriction.

9. Can an OPC accept foreign investment?

Yes, foreign investment is allowed but should be approved by the Bangladesh Investment Development Authority (BIDA).

10. Is there any restriction on OPC participating in government tenders?

No,, as long as it has all required docs like TIN, VAT registration and incorporation certificate, and of course it has met the Tender requirements and guidelines.

11. Can an OPC be voluntarily closed?

Yes, the OPC can be closed voluntarily by paying off the liabilities and applying to RJSC for dissolution.

12. Can an OPC operate multiple businesses?

Yes, it can take part in a number of businesses if the business activities are mentioned in the MOA.

13. Can an OPC be run completely online?

Yes, businesses like e-commerce and freelancing can be operated online.

14. Can an OPC take business loans?

Yes, banks and financial institutions provide loans to OPCs based on financial records.

15. Can an OPC invest in other companies?

Yes, an OPC can buy shares in other companies.

16. Can an outsider be appointed as a director in an OPC?

No, the sole owner must be the director. However, advisors or managers can be appointed.