Skip to main content

One Person Company

The revolutionary new concept of 'One Person Company' (OPC) has been introduced by the Companies Act, 2013. This concept of OPC was first recommended by the expert committee of Dr. JJ Irani in 2005. OPC provides a whole new bracket of opportunities for those who look forward to start their own ventures with a structure of organized business. OPC will give the young businessman all benefits of a private limited company which categorically means they will have access to credits, bank loans, limited liability, legal protection for business, access to market etc all in the name of a separate legal entity.
Though the concept of OPC is new in India but it is a very successful form of business in UK and several European countries since a very long time now.
The concept with special features
One Person Company is defined in Sub- Section 62 of Section 2 of The Companies Act, 2013, which reads as follows:
'One Person Company means a company which has only one member'
It shall also be important to note that Section 3 classifies OPC as a Private Company for all the legal purposes with only one member. All the provisions related to the private company are applicable to an OPC, unless otherwise expressly excluded.
The only exception provided by the Act to an OPC is that according to the rules only "NATURALLY-BORN" Indian who is also a resident of India is eligible to incorporate an OPC. Meaning thereby, the advantages of an OPC can only be obtained by those INDIANs who are naturally born and also a resident of India. At the same, it shall also be worth mentioning that a person cannot form more than 5 OPC's.
OPC and its Formation
An OPC is incorporated as a private limited company, where there is only one member and prohibition in regard to invitation to the public for subscription of the securities of the company.
The Salient features of an OPC include the following:
  • An OPC can be formed under any of below categories :
    •  Company limited by guarantee.Ø
    •  Company limited by sharesØ
  • An OPC limited by shares shall comply with following requirements :
    •  Shall have minimum [paid up capital of INR 1 LacØ
    •  Restricts the right to transfer its sharesØ
    •  Prohibits any invitations to public to subscribe for the securities of the company.Ø
  • An OPC is required to give a legal identity by specifying a name under which the activities of the business could be carried on. The words 'One Person Company' should be mentioned below the name of the company, wherever the name is affixed, used or engraved.
  • The member of an OPC has to nominate a nominee with the nominees written consent, and file it with the Registrar of Companies (RoC). This nominee in the event of death or in event of any other incapacity, shall become a member of an OPC. The member of an OPC at any time can change the name of the nominee providing a notice to the RoC in such manner as prescribed. On account of Death of a member, the nominee is automatically entitled for all shares and liabilities of OPC.
Exemptions available to one person company – legal provisions.
An OPC has certain privileges and exemptions which are not available to private companies. Such exemptions are enlisted for your ready reference:
  • Signatures on Annual Returns – Section 92 of the Companies Act,2013
It is provided in section 92 of The Companies Act, 2013, that the annual returns in the case of One Person Company shall be signed by the company secretary or where there is no company secretary, then by the director of the company.
  • Holding Annual General Meetings – Section 122 of the Companies Act,2013
    Section 122(1) of The Companies Act,2013, provides that the provisions of S.98, S.100 to S.111(both inclusive) are not applicable to One Person Company. Therefore, provisions relating to General Meetings, Extra Ordinary General Meeting and Notice Convening to General Meeting are not applicable to One Person Company. However, for fulfilling the purposes of S.114 of the Companies Act,2013, where any business is required to be transacted at an Annual General Meeting, or other General Meeting of the company by means of an ordinary or special resolution, it shall be sufficient if the resolution is communicated by the member of the company and entered in the minutes book which is required to be maintained U/s 118 and signed and dated by the member and such date shall be deemed to be the date of meeting under the purposes of Companies Act,2013.
  • Board Meetings and Directors – Section149, 152 & 173 of the Act
    One Person Company needs to have one director. It can have maximum of 15 directors which can also be increased by passing a special resolution as in case of any other company. For the purposes of holding board meetings, in case of a OPC which has only One director, it shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes under Companies Act, 2013.
  • Signatures on Financial Statements - Section 134 and 137 of the Act.
    The OPC shall file with the RoC a copy of financial statements duly adopted by its members along with all the documents which are required to be attached to such financial statement, within 180 days from the closure of the financial year along with cash flow statements. The financial statement shall be signed by only one director and the annual return shall be signed by the company secretary and the director, and in case if there is no company secretary then only by the director.
  • Contracts by One Person Company – Section 193 of the Act.
    The new Companies Act, 2013 gives special attention to the contracts which will be entered by One Person Company.
If the company fails to comply with the provisions as to providing the information to the RoC then it shall be liable for punishment of fine which will be not less than twenty thousand rupees and extend to one lakh rupees and the imprisonment for a term which may extend upto 6 months.
The concept of OPC allows a single person to run a company limited by shares, and Sole proprietorship means an entity where it is run and owned by one individual and where there is no distinction between the owner and the business. The distinction between both the structures is as follows:
  • Limited Liability - Fundamentally the basic difference between a sole proprietorship and an OPC is the way and manner in which the liability is treated in an OPC. OPC is different from sole proprietorship because it is a completely separate entity and that is the distinction between the promoter and the company. The liability of the share holder will be limited to the unpaid subscription money in his name. On the other hand the liability in a sole proprietorship, the person/owner is alone liable for the claims which will be made against the business.
  • Tax Bracket - Though the concept of an OPC has been incorporated in the Companies Act, 2013 but the concept of same does not exist in tax laws as yet, as a result an OPC can be put in the same bracket of taxation as other private companies. According to Income TA,1961 a private limited company is under the bracket of 30% on total income with an additional surcharge of 5% if the income exceeds 10 million with an addition to 3% of education cess.
  • Succession - In an OPC there is a nominee designated by the member. The nominee which will be a Natural Born citizen of India and who resides in India. The nominee shall in the event of death of the member become a member of the company and will be responsible for the running of the company. But in the case of sole proprietorship this can only happen through an execution of WILL which may or may not be challenged in the court of law.
  • Compliances - A One Person Company has to file annual returns etc just like a normal company and would also need to get its accounts audited in the same manner. On the other hand a soleproprietorship would only need to get audited under the provisions of Section 44 AB of the Income Tax Act, 1961 once its turnover crosses the certain threshold.
Though the concept of an OPC is still very new in Indian entrepreneurship and thus very revolutionary, it will take time for such a new concept to be incorporated with complete efficiency, but as and when the time will pass, an OPC will have a sparkling future and it will be embraced as a most successful business concept. The reason behind it is the incorporation of same is less paper work, one person can form a company without any additional shareholder, and if the member is willing to add shareholders, all he needs to do is to modify the Memorandum of Association and file it before Roc. Small entrepreneurs will grow in Indian entrepreneurship, be it weaver, traders, artisans, small to mid level entrepreneurs, OPC is a bright future for them to grow and to get a recognition globally. Foreign Investors will be dealing with one member to establish a corporate relationship and not with a score of shareholders/directors where there are more chances for disparity in Ideas, concepts etc for a business to grow. Any foreign company who wishes to establish in India through an Investment, through a merger or through a Joint venture will have to just lock the deal with the member of an OPC, and the venture will be expected to start sooner with more effective results. In upcoming years the impact of an OPC will be remarkable and it is a promising future for Indian Entrepreneurship. Expectedly, there will be good Foreign Investments, Joint Ventures, and Mergers etc. An OPC is doing well in European Countries, In United States, Australia the same is resulting in strengthening the economy of the countries. In India when the expert committee of Dr. JJ Irani proposed the concept of an OPC, it was solely aimed for the structured organized business, with a different legal entity altogether and to organize the private sector of the entrepreneurship, which indeed is expected to be done, alongwith a significant growth in Indian Economy benefiting the country on the Global Level.
The Ministry of Corporate Affairs is yet to issue the commencement notification for the provisions dealing with One Person Company. This concept of One Person Company is set to organize the unorganized sector of proprietorship firms and other entities which will be convenient to regulate and manage if the same is in the form of One Person Company. It will also be favorable for boosting of foreign funding from the investors who keen to expand their ventures in India. One Person company is next big thing in India, and it will be favorable for the economic conditions in India through its small to medium sized entrepreneurship. An OPC will have the accessibility to target the markets, execution of business places in a corporate framework, loans, banks etc directly, there will be no middleman conjuring the profits.


Popular posts from this blog

Non-Banking Financial Companies (NBFC)

A Non-Banking Financial Company (NBFC) is a  company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company). Advantages of NBFC a)it can provide loans and credit facilities, b)it can trade in  money market instruments c)it can do wealth management such as Managing portfolios of stocks and shares d)it can underwrite stock and shares and oth…

Nidhi Companies in India

This article enumerates the brief transaction procedure involved in the establishment of a Nidhi Company and the laws relating to Nidhi Company in force in India. It shall be noted that the activities described hereunder covers various relevant legislations, regulations and rules, for the time being in force in India and the legal entity has to obtain approval/register itself with Ministry of Corporate Affairs (“MCA”).
Preface In the Indian financial sector, Nidhi Company refers to any mutual benefit society notified by the MCA. They are created mainly for cultivating the habit of thrift and savings amongst its members. The amount of business conducted by Nidhi Companies is not as big as commercial banks or deposit taking Non-Banking Finance Companies. Nidhi Companies are highly localized and mostly single office institutions. They are also referred to as mutual benefit societies, because they accept deposits and give loans to only their own members; and membership is limited to individ…

Types of Companies under New Companies Act-2013

With new testament of Corporate law in force has introduced several different types of companies with special features.
ONE PERSON COMPANY (OPC) One Person Company is defined in Sub- Section 62 of Section 2 of The Companies Act, 2013, which reads as follows: 'One Person Company means a company which has only one member' It shall also be important to note that Section 3 classifies OPC as a Private Company for all the legal purposes with only one member. All the provisions related to the private company are applicable to an OPC, unless otherwise expressly excluded. ØOnly a natural person who is an Indian citizen and resident in India- üshall be eligible to incorporate a One Person Company; üshall be a nominee for the sole member of a One Person Company. ØNo person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company. ØNo minor shall become member or nominee of the One Person Company or can hold share with beneficial interest. ØT…

SEBI VS PACL: Trouble in Paradise

In its biggest-ever crackdown on a large-scale money pooling scheme estimated at nearly Rs. 50,000 crore (twice the amount to be recover from SAHARA group), regulator SEBI has ordered  Pearls Agrotech Corporation Limited (“PACL”) to refund investors within three months and wind up operations. SEBI had found PACL violating Collective Investment Scheme Regulations by mobilizing the money without being registered with the regulator, SEBI. Besides, closure of PACL operations, SEBI  is initiating further proceedings against PACL and its nine promoters and directors for fraudulent and unfair trade practices, as also for violation of SEBI's CIS Regulations, among others, as per a direction from the Supreme Court. At present, it is being estimated that PACL has more than 58.5 million customers, more than twice the 22 million demat accounts in the entire country and has paid commission of
Rs 7,893.8 crore up to March 2012  to more than its 8 lakh agents who works as network of chain system fo…

NBFC & Companies Act 2013 w.r.t. issue of Debentures

With the new testament of corporate law, Companies Act, 2013 to be effective from April 01, 2014, NBFC are facing lack of oxygen supply for their survival as to ensure that debenture issuances did not trespass into the domain of public deposits and were beginning to understand that optionally convertible debentures market will die out slowly that the rules have thrown language open to interpretation. Section 71 of the Companies Act, 2013 along with the rules implies that the debenture issuances have to be secured by specific moveable and immoveable properties. NBFCs may face a rocky time in finding these specific moveable and immoveable properties for issue of secured debenture.  Section 71 of the Companies Act, 2013 states that – 1.A company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption: Provided that the issue of debentures with an option to convert such debentures into shares, wholly or partly, shall be ap…

Nidhi Companies Rules 2014- An analysis w.r.t. Nidhi Company Registration

“Nidhi is a company formed with the exclusive object of cultivating the habit of thrift, savings and functioning for the mutual benefit of members by receiving deposits only from individuals enrolled as members and by lending only to individuals, also enrolled as members” -Section 406, Companies Act, 2013 & Companies Rules 2014
Nidhi Company are registered or formed only for the benefit for its members only, an outsider i.e. who is not the member of the Nidhi Company is not allowed to deposit any money or doing any kind of business with the concerned Nidhi Company. In this article we will analyze the impact of Nidhi Companies Rules 2014 on the registration of Nidhi Company Incorporation of Nidhi Company i)A Nidhi Company to be incorporated under the Companies Act, 2013 (“Act”) shall be a public company and with a minimum paid up equity share capital of five lakh rupees; ii)On and after the commencement of Companies Act, 2013, no Nidhi Company shall issue preference shares; iii)Except as…


In Sahara Desert- Distress Hours Once upon a time, Sahara’s Subrarta Roy- a friend to all who came calling-whether a matinee idol in his 80s or a sports star in her teens, self bestowed title- “Sahara Shri”- the sponsor of the Indian cricket team and a group headed by a colourful, flamboyant CEO hobnobbing with Bollywood stars and cowbelt politicianscould boast of having friends in high places. Today in this distress hours, there seems to be few people who he can turn to in his hour of distress. For the sleepy Lucknow of the 1990s whose favourite past-time seemed to be reminiscing the city’s long gone glory days, Subrata Roy Sahara brought a cash of heavy bling and some more. Sahara has stayed afloat for more than 35 years despite repeated regulatory onslaughts. The first setback was in the late '90s when RBI slashed the discretionary investment powers of its finance firm. The next blow came in 2006 when its depository services firm had to be shut down. The big jolt came in 2008 whe…