The introduction of the One Person Company (OPC) structure through amendments to the Companies Act 1994 in 2020 marked a significant development in Bangladesh’s corporate landscape. The amendment provides solo entrepreneurs with a formalised business structure that combines the operational simplicity often associated with sole proprietorships with the crucial benefit of limited liability, previously accessible only through multi-shareholder companies. An OPC allows a single individual to establish a company, thereby gaining a distinct legal identity separate from the owner. However, only natural person can form an OPC, an artificial entity like company or society cannot form OPC.
Understanding the One Person Company (OPC) Framework#
Under Bangladeshi law, an OPC is specifically defined as a company formed with only one natural person as its member. This legal structure empowers a single promoter to operate a business under a corporate banner, securing limited liability protection for their personal assets against business debts and obligations.
Several key features define an OPC:
- Sole Shareholder: The fundamental characteristic is that only one natural person can hold shares and be the member of the company.
- Nominee Requirement: A crucial safeguard involves the mandatory nomination of another natural person by the sole shareholder. This nominee is designated to assume membership in the event of the original member’s death or incapacity, ensuring business continuity.
- Limited Liability Protection: The shareholder’s liability is confined to the amount invested in the company’s share capital. This separation shields the owner’s personal wealth from potential business failures or liabilities.
- Distinct Legal Personality: An OPC possesses its own legal identity, separate from its owner. It can own assets, enter into contracts, incur debts, and initiate or defend legal proceedings in its own name.
- Mandatory Suffix: The company’s registered name must conclude with the designation “OPC” or “(One Person Company) Limited” to clearly indicate its structure.
Strategic Advantages of Forming an OPC#
Choosing the OPC structure offers several compelling benefits for individual entrepreneurs:
- Asset Protection: The primary advantage is the shield of limited liability, which segregates personal assets from business risks, offering peace of mind to the founder.
- Enhanced Credibility: Operating as an incorporated entity may boosts the business’s professional image and credibility among suppliers, customers, financial institutions, and potential partners compared to unincorporated structures.
- Perpetual Succession: The nomination mechanism ensures the company’s continued existence beyond the lifetime or capacity of the original founder, facilitating long-term planning and stability.
- Improved Access to Finance: Incorporated entities like OPCs may find it easier to secure loans and credit facilities from banks and financial institutions, which often view corporate structures more favourably due to enhanced transparency and governance.
- Separate Legal Status: The distinct legal identity simplifies business operations such as property ownership, contract negotiation, and legal actions.
Potential Drawbacks and Limitations#
Despite its advantages, the OPC structure also presents certain limitations and challenges:
- Ownership Restriction: The limitation to a single natural person shareholder inherently restricts the ability to raise equity capital by bringing in multiple investors or partners.
- Mandatory Conversion Thresholds: Growth necessitates structural change. An OPC is legally required to convert into a standard private or public limited company if its paid-up share capital surpasses BDT 2.5 crore or if its average annual turnover over the immediately preceding three consecutive financial years exceeds BDT 5 crore.
- Nominee Management: The requirement to appoint and maintain a relationship with a nominee adds an administrative layer.
- Increased Compliance: Compared to a sole proprietorship, an OPC faces a higher regulatory burden, including obligations for annual filings, maintaining statutory records, and potentially audits, increasing administrative costs.
- Formation and Investment Restrictions: An individual is barred from forming more than one OPC or acting as a nominee for more than one OPC. Furthermore, an OPC itself is prohibited from investing in the securities of any other corporate body.
The Registration Pathway via RJSC#
The registration process for a One Person Company (OPC) in Bangladesh is streamlined through the online portal of the Registrar of Joint Stock Companies and Firms (RJSC). Unlike previous multi-stage procedures, the current system integrates name clearance and document submission into a unified application flow. The key stages are as follows:
Document Preparation:#
Before initiating the online process, the entrepreneur needs to prepare all required documentation. This includes:
- Memorandum of Association (MoA), which outlines the company’s objectives and authorised capital,
- Articles of Association (AoA), which cover internal governance rules and specifying the nominee’s particulars.
- Form IX, which is the consent to act as a director.
- Subscriber Page, which mention the number of shares is being issued. The nominee will have to sign the Subscriber page as well.
- Form I, which is the declaration of registration of company.
- Identification information (such as National ID card or Passport) and Taxpayer Identification Numbers (TIN) for both the sole shareholder and the nominee, photographs, must be gathered.
Unified Online Submission and payment of fees#
The application is lodged through the RJSC’s online service portal. During this single submission step, the applicant proposes the desired company name (which must end with “(OPC) Limited” or “(One Person Company) Limited”) and uploads all prepared documents, including the signed MoA, AoA, identification proofs, and the nominee’s consent form.
Following the online submission, the system calculates the applicable government registration fees and stamp duty based on the company’s authorised share capital. These fees must be paid through the designated banking channels or online payment gateways integrated with the RJSC portal.
RJSC Scrutiny and Verification:#
Once the fees are confirmed, RJSC officials undertake a comprehensive review. This scrutiny covers the availability and compliance of the proposed name, the completeness and correctness of the submitted MoA, AoA, and other supporting documents. If discrepancies are found or the name is unavailable, the RJSC may revert with queries or require resubmission.
Issuance of Incorporation Certificate:#
Upon satisfactory review and verification of all aspects of the application, the RJSC approves the registration and issues a digitally signed Certificate of Incorporation. This certificate signifies the formal establishment of the OPC as a distinct legal entity.
Post-Registration Compliance#
Following incorporation, several administrative steps are essential to ensure operational readiness and compliance:
- Obtaining a Trade Licence from the relevant local government authority (e.g., City Corporation).
- Securing a corporate electronic Taxpayer Identification Number (e-TIN) from the National Board of Revenue (NBR).
- Registering for Value Added Tax (VAT) and obtaining a Business Identification Number (BIN) from the NBR, if turnover thresholds are met.
- Opening a dedicated corporate bank account in the OPC’s name.
- Undertaking any industry-specific registrations, potentially involving bodies like the Bangladesh Investment Development Authority (BIDA) or other sector regulators.
For professional assistance with OPC registration or advice on the optimal business structure in Bangladesh, please reach out to our corporate advisory team:
- Ariful Hasan
- Phone: +8801975603559
- Email: [email protected]
- Osman Goni
- Phone: +8801715569498
- Email: [email protected]