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CA Intermediate · Corporate and Other Laws · Incorporation of Company and Matters Incidental Thereto

Kabir and Nisha are the only two members of Sunrise Foods Pvt Ltd, which was incorporated as a One Person Company by Kabir, who later admitted Nisha as a second member. The company has paid-up capital of Rs 40 lakh and turnover of Rs 1.5 crore. Under the Companies Act, 2013 and the rules, what is the position of the company's status as an OPC?

The company cannot continue as an OPC. An OPC has only one member by definition, so once Nisha is admitted as a second member it must convert into a private or public company. Paid-up capital and turnover limits do not save its OPC status.

  1. AIt ceases to be an OPC only if its turnover crosses Rs 2 crore
  2. BIt remains an OPC as long as its paid-up capital stays below Rs 50 lakh
  3. CIt cannot continue as an OPC because an OPC can have only one member, and it must be converted into a private or public companyCorrect
  4. DIt continues as an OPC, but Nisha must be treated as the nominee of Kabir

Explanation

An OPC is a company with only one person as member. Once a second member is admitted, the company has more than one member and cannot continue as an OPC, so it must convert into a private or public company. The capital and turnover figures are not relevant to this point, so the options that rely on them are wrong.

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