Nominee in OPC: Rules, Eligibility, Form, and Succession

Key Takeaways

• Every OPC must have a nominee, named in the MOA at incorporation, who becomes the member if the sole member dies or becomes incapable of contracting.
• Rules 3 and 4 of the Companies (Incorporation) Rules, 2014 set out appointment, replacement, and OPC nominee rules.
• Only an adult Indian citizen can be a nominee, whether living in India or abroad as an NRI, and only in one OPC at a time.
• The nominee accepts the role by signing Form INC-3. Every later change of nominee is reported to the RoC in Form INC-4 within 30 days.
• If the nominee withdraws or the member dies, a new nominee must be named within 15 days.
• Until succession, the nominee holds no shares and has no role in management. They can lend money to the OPC only if they are a director or a director’s relative.
• Late filing of Form INC-4 attracts an additional fee of 2 to 12 times the normal fee, depending on the delay.

Why is Naming a Nominee Mandatory in an OPC?

The proviso to Section 3(1) of the Companies Act, 2013, requires an OPC’s memorandum to name a person who will become its member if the sole member dies or becomes incapable of contracting. The nominated person must give prior written consent to the appointment.

This requirement addresses a key limitation of the OPC’s single-member structure. In a company with multiple shareholders, the remaining shareholders can continue to exercise membership rights if one shareholder dies. However, an OPC has no other member to take over this role, which could create uncertainty about who holds the shares and exercises membership rights. 

Therefore, appointing a nominee in advance establishes a clear path for succession and helps the company continue its operations.

One Person Company Nominee Eligibility Rules: Who Can Be a Nominee in an OPC?

Rule 3 of the Companies (Incorporation) Rules, 2014, sets out the eligibility requirements for an OPC nominee. A person must meet the following conditions to qualify:

• Natural person: Only an individual can be a nominee. A company, LLP, or trust cannot hold this role.
• Indian citizen: Under Rule 3(1), an Indian citizen can be a nominee of a One Person Company (OPC), whether they reside in India or abroad. Before April 1, 2021, the rules also required the person to have stayed in India for at least 182 days during the immediately preceding financial year. The amendment removed this residency requirement for eligibility and revised the residency threshold to 120 days in the preceding financial year for applicable purposes. 
• At least 18 years old: A minor cannot act as a nominee under Rule 3(4). The nominee must sign a written consent in Form INC-3. Under Section 11 of the Indian Contract Act, 1872, a minor is not competent to contract, so a minor cannot validly execute that consent.
• One OPC at a time: The person can be a nominee in only one OPC at a time under Rule 3(2). The same rule limits membership to one OPC.
• Written consent: The nominee must provide consent in Form INC-3.

The nominee can be the member’s spouse, parent, sibling, or trusted friend, provided they meet the eligibility requirements and agree to take on the role.

Note: A government employee can be the nominee of a One Person Company, since neither the Companies Act nor the Incorporation Rules sets a bar. However, certain rules apply, such as the employee taking prior approval from their department, as service conduct rules restrict business involvement if they later become the member.

How to Appoint a Nominee in a One Person Company?

During OPC incorporation, the member appoints a nominee through the SPICe+ application by following these steps:

1. Choose an eligible nominee: Select an adult Indian citizen who is not already a nominee in another OPC.
2. Collect the required documents: Obtain the nominee’s PAN, identity, and address proof.
3. Complete Form INC-3: Have the nominee sign the form to confirm their consent.
4. Add the nominee to the e-MOA: Include the nominee’s details in the Memorandum of Association (Form INC-33).
5. File the incorporation application: Submit INC-3 with the SPICe+ application on the MCA portal, along with the required digital signatures.

Once the RoC approves the application, the nominee’s details form part of the OPC’s incorporation records. If the member later changes the nominee, the company must follow the applicable Form INC-4 procedure.

OPC Nominee Form: INC-3 Consent and INC-4 Filing

An OPC uses two forms for its nominee: Form INC-3 to record the nominee’s written consent and Form INC-4 to report any later change of nominee to the RoC. The table below shows the form and deadline for each change to the OPC nominee:

Event	What Happens	Deadline	Form
Incorporation (Rule 4(1))	Nominee gives written consent	Filed with SPICe+ form	INC-3
Member changes the nominee (Rule 4(5))	Member names a new nominee at any time	INC-4 within 30 days of the member’s intimation	INC-4 with INC-3
Nominee withdraws consent (Rules 4(3) and 4(4))	Nominee gives written notice; member names a new nominee	New nominee within 15 days; INC-4 within 30 days of the notice	INC-4 with INC-3
Nominee dies or becomes incapable of contracting (treated as a change of nominee under Rule 4(5))	Member names a new nominee	INC-4 within 30 days of the member’s intimation	INC-4 with INC-3
Member dies or becomes incapable of contracting (Rule 4(6))	Nominee becomes the member and names a new nominee	New nominee within 15 days; INC-4 within 30 days	INC-4 with INC-3

The OPC files Form INC-4 with the RoC. The form is digitally signed by the member and by a director, CEO, CFO, or company secretary of the OPC. If the change follows the member’s death or incapacity, the former nominee signs it as the new member. INC-4 must include the new nominee’s consent in Form INC-3 and their PAN, identity proof, and address proof. If the existing nominee withdrew consent, a copy of the withdrawal notice must also be attached.

Did You Know? Form INC-3 is used beyond incorporation and nominee changes. When a Private Limited Company converts into an OPC, it files INC-3 with Form INC-6, because the new OPC needs a nominee from day one.

What Happens When the Sole Member Dies or Becomes Incapable of Contracting?

If the sole member dies or becomes incapable of contracting, the nominee becomes the OPC’s member under Rule 4(6) of the Companies (Incorporation) Rules, 2014. The company can continue operating without being wound up, but the new member must complete the following steps:

1. Appoint a director, if needed: If the former member was the only director, appoint a replacement so the OPC can manage its affairs and complete required filings. File Form DIR-12 within 30 days of the appointment.
2. Update company records: Record the change in the register of members and update the company’s bank mandate and authorized signatories.
3. Appoint a new nominee: Appoint a new nominee within 15 days of becoming a member, with their consent in Form INC-3.
4. File Form INC-4: Report the change in membership and nominee to the RoC within 30 days.
5. Comply with the one-OPC limit: If the new member already belongs to another OPC, choose which membership to retain and comply with Rule 3(3) within 180 days of becoming a member.

Note: Rule 4 of the Companies (Incorporation) Rules, 2014, provides that an OPC nominee becomes the member of the company upon the sole member’s death. However, it does not expressly clarify whether the nominee becomes the absolute owner of the shares. Courts have addressed this issue in the broader context of share nominations:

• Earlier view: In Harsha Nitin Kokate v. Saraswat Co-operative Bank (2010), a single judge of the Bombay High Court held that a nominee becomes the absolute owner of the shares.
• Current legal position: In Jayanand Jayant Salgaonkar v. Jayashree Jayant Salgaonkar (2015), a single judge of the Bombay High Court held that Kokate was per incuriam because it had not considered binding precedents. A Division Bench of the Bombay High Court later upheld this view. On December 14, 2023, the Supreme Court dismissed the appeal in Shakti Yezdani v. Jayanand Jayant Salgaonkar. It held that a nomination under Section 109A of the Companies Act, 1956 and the depository bye-laws does not override succession law, does not make the nominee the beneficial owner of the shares, and does not create a separate mode of succession.

Although Shakti Yezdani concerned share nominations generally rather than OPC nominees specifically, its reasoning suggests that an OPC nominee may hold the shares subject to the rights of the deceased member’s legal heirs. To reduce the risk of disputes, the sole member should align the OPC nomination with their will and succession plans.

What Happens If the OPC Nominee Withdraws Consent?

An OPC nominee can withdraw consent at any time, but the member must appoint a replacement to maintain a valid nomination. Under Rules 4(3) and 4(4) of the Companies (Incorporation) Rules, 2014, the process is as follows:

1. Submit a withdrawal notice: The existing nominee gives written notice of withdrawal to both the sole member and the OPC.
2. Select a replacement: Within 15 days of receiving the notice, the member nominates another eligible person and informs the OPC.
3. Obtain the new nominee’s consent: The replacement nominee provides written consent in Form INC-3.
4. File Form INC-4: The OPC notifies the RoC of the change within 30 days of receiving the withdrawal notice and attaches the new nominee’s Form INC-3.

If Form INC-4 is filed late, the OPC pays an additional fee on top of the normal filing fee of ₹200 to ₹600, which depends on its authorized capital. The additional fee grows with the delay:

Period of Delay	Additional Fee	Amount (₹)
Up to 30 days	2 times the normal fee	₹400 to ₹1,200
31 to 60 days	4 times the normal fee	₹800 to ₹2,400
61 to 90 days	6 times the normal fee	₹1,200 to ₹3,600
91 to 180 days	10 times the normal fee	₹2,000 to ₹6,000
Beyond 180 days	12 times the normal fee	₹2,400 to ₹7,200

Failing to file INC-4 at all is also a default under the Companies Act. Since Rule 4 doesn’t set a specific penalty, the general penalty under Section 450 applies. That is ₹10,000, plus ₹1,000 per day of continuing default, up to ₹2 lakh for the company and ₹50,000 for every officer in default. For an OPC, Section 446B caps this at half: ₹5,000 plus ₹500 per day, up to ₹1 lakh for the company and ₹25,000 for every officer in default.

How to Choose the Right Nominee for Your OPC?

The nominee may eventually become the company’s sole member, so choose someone who is willing to take on the role and can handle its responsibilities. Consider these factors:

• Trust and capability: Choose someone you trust who can understand the business, manage its affairs if needed, or oversee an orderly closure.
• Continued eligibility: Confirm that the person meets the eligibility requirements and can continue to serve as a nominee, including the restrictions on holding this role in another OPC.
• Willingness to accept the role: Explain the nominee’s responsibilities and the circumstances in which they may become the member before they provide consent in Form INC-3.
• Access to key information: Make sure the nominee knows where to find important company records, banking information, and statutory filings so they can act promptly if succession occurs.
• Periodic review: Reconsider your choice after major life changes or changes in your relationship with the nominee. If you decide to appoint someone else, follow the prescribed procedure and file Form INC-4.

Rights and Limitations of an OPC Nominee

An OPC nominee has no ownership rights while the sole member remains in place. Their role changes only when succession occurs, so what they can do depends on whether they have become the company’s member.

Rights of an OPC Nominee

Even before becoming the member, a nominee can:

• Decline the nomination, since no one can be appointed as a nominee without written consent in Form INC-3.
• Withdraw consent at any time by giving written notice to the member and the OPC.
• Serve as a director if separately appointed, with consent in Form DIR-2.
• Lend money to the OPC if they are a director or a director’s relative. Under Rule 2(1)(c)(viii) of the Companies (Acceptance of Deposits) Rules, 2014, such a loan is not treated as a deposit if the lender declares in writing that the funds are not borrowed.

Limitations of an OPC Nominee

While the original member remains alive and capable of contracting, the nominee cannot:

• Buy shares in the OPC, as this would create a second member.
• Vote or take decisions, unless separately appointed as a director.
• Claim any share of the company’s profits or dividends.
• Lend money if they are neither a director nor a director’s relative, as the loan would count as a deposit.
• Transfer shares, since they own none. After succession, the nominee can transfer the entire holding to one eligible person under Section 56 of the Companies Act, 2013.

Nominee vs Member vs Director in an OPC

An OPC has three distinct roles: member, director, and nominee. One person can hold more than one role, so the sole member often serves as the director, and the nominee can also be appointed as a director. However, each role carries different rights and responsibilities. The table below explains how these roles differ:

Basis	Nominee	Member	Director
Ownership	None until succession	Holds 100% of shares	None, unless also the member
Control	None	Full control as sole shareholder	Manages day-to-day operations
When the role begins	On the member’s death or incapacity	At incorporation	On appointment
Form	INC-3 (consent)	Subscribes to the MOA	DIR-2 (consent)

Conclusion

Every OPC must have a nominee to provide a clear path for succession if the sole member dies or becomes incapable of contracting. The member should review the nomination as circumstances change and report any changes to the RoC through Form INC-4 within 30 days.

Delays in replacing a nominee can attract additional fees, while the absence of a valid nominee can complicate succession. To avoid these issues, get in touch with RegisterKaro for expert help with appointing or replacing a nominee and completing the required filings on time.