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WHEATHER A NON-BANKING FINANCIAL INVESTMENT COMPANY CAN BE FORMED AS A ONE PERSON COMPANY?

WHEATHER A NON-BANKING FINANCIAL INVESTMENT COMPANY CAN BE FORMED AS A ONE PERSON COMPANY?

INTRODUCTION

A one-person company (OPC) is a company that is incorporated with only one member. It is a type of private limited company that is registered under the Companies Act, 2013. OPCs offer the benefits of a private limited company, such as limited liability, perpetual succession, and a separate legal entity, while also being easy to set up and manage

  1. It can be formed by a single natural person who is an Indian citizen.
  2. The member of an OPC must appoint a nominee who will become the sole member of the company in the event of the member’s death or incapacity.
  3. The OPC must have a minimum authorized capital of Rs. 1 lakh.
  4. The OPC must have a board of directors consisting of at least one director. The director can be the same person as the member of the company.
  5. The OPC must file its annual returns and financial statements with the Registrar of Companies.

No, a non-banking financial investment company (NBFC) cannot be formed as a one-person company (OPC). This is because the Companies Act, 2013 prohibits the formation of an OPC for carrying on the business of a NBFC.

The relevant section of the Companies Act, 2013 is Section 2(68), which defines a NBFC as: “non-banking financial institution” means any company which is not a bank and which is engaged in the business of

(i) receiving deposits, (ii) lending money, (iii) acquiring shares, debentures or other securities, (iv) providing financial assistance in any other manner, (v) investing in securities

KEY POINT

The key point of a non-banking financial investment company (NBFC) that cannot be formed as a one-person company (OPC) is that NBFCs are considered to be high-risk businesses. The government wants to ensure that NBFCs are properly regulated, and an OPC, with only one member, would not be able to provide the same level of regulation and oversight as a larger company.

Here are some of the specific reasons why NBFCs cannot be formed as OPCs:

  1. NBFCs are involved in the business of receiving deposits, lending money, and investing in securities. These activities are considered to be high-risk, and the government wants to ensure that NBFCs are properly capitalized and managed. An OPC, with only one member, would not be able to provide the same level of capital and management as a larger company.
  2. NBFCs are subject to a number of regulations, including the Reserve Bank of India Act, 1934, the Securities and Exchange Board of India Act, 1992, and the Insurance Act, 1938. These regulations are designed to protect investors and depositors, and an OPC would not be able to comply with these regulations as easily as a larger company.
  3. NBFCs are often involved in complex financial transactions, and they need to have a strong financial and management team in place. An OPC, with only one member, would not be able to have the same level of financial and management expertise as a larger company.

AURIGA ACCOUNTING HELP YOU

  1. Financial Record-Keeping: Auriga  Accounting can help NBFIs maintain accurate and organized financial records, including transaction data, income, expenses, and investment portfolios. This is essential for monitoring financial health and regulatory reporting.

  2. Portfolio Management: Auriga  Accounting can assist NBFIs in tracking and managing their investment portfolios. It can provide tools for asset allocation, risk assessment, and performance analysis.

  3. Regulatory Compliance: Auriga  Accounting can be complex and stringent. Accounting and compliance software can help ensure that the company adheres to regulatory requirements by automating reporting and monitoring obligations.

  4. Risk Management: Auriga  Accounting can assist in risk assessment and management by providing tools for risk modeling, stress testing, and scenario analysis. This helps NBFIs make informed investment decisions.

  5. Tax Compliance: Auriga  Accounting can facilitate tax calculations and reporting, ensuring that NBFIs comply with tax laws and regulations applicable to their investments.

  6. Investor Relations: Auriga  Accounting solutions offer features for managing investor relations, including communication, reporting, and maintaining records of investor transactions and interactions.

  7. Financial Reporting: Auriga  Accounting can generate standardized financial statements and reports that comply with regulatory requirements, making it easier to submit necessary filings to regulatory authorities.

  8. Automation of Routine Tasks: Auriga  Accounting can automate routine financial tasks, reducing the risk of errors and improving operational efficiency. This includes functions like invoicing, expense tracking, and reconciliation.

  9. Data Security: Financial institutions handle sensitive financial data, and data security is paramount. Accounting and financial software should have robust security features to protect sensitive information.

  10. Integration with Regulatory Reporting Systems: Auriga  Accounting can integrate with regulatory reporting systems, streamlining the process of submitting required reports to regulatory authorities.