One Person Company: An Overview

A number of new concepts were introduced by the Companies Act, 2013 that had never existed before in Indian corporate law. One Person Companies introduced one game-changing concept. Thus, a new way of starting a business was created that provided all the flexibility that a company has to offer while also providing the limited liability protection that sole proprietorships and partnerships lack.

A number of other countries recognized the ability to form a company before the newly enacted Companies Act of 2013. Chinese, Singaporean, UK, Australian, and American companies were some of them.

Definition of One Person Company

The Companies Act defines a one-person company as one with only one member. Members of a company are simply its shareholders and subscribers to its memorandum of association. One shareholder is the only shareholder of an OPC.

There is usually only one founder or promoter in a company of this type. Opc company registration is preferred by entrepreneurs at the beginning of their businesses because of their numerous advantages. 

Difference between OPCs and Sole Proprietorships

Due to their single owner, one-person companies and sole proprietorships may seem very similar, but they differ as well.

Basically, their liabilities are the only difference between them. OPCs are separate legal entities from their promoters, so they have their own assets and liabilities. It is not the promoter’s responsibility to repay the company’s debts.

Sole proprietorships, however, have the same owner as their businesses. When a promoter fails to fulfill his or her obligations to the business, the law allows the assets of the promoter to be attached and sold.

Features of a One Person Company

An individual company generally consists of the following features:

Private company: The Companies Act stipulates that anyone can form a company pursuant to section 3(1)(c). Additionally, OPCs are private companies, according to the document.

Single-member: Unlike other private companies, OPCs can only have one member or shareholder.

Nominee: OPCs are different from other kinds of companies since the sole member of the company must name a nominee when registering the company.

No perpetual succession: As an OPC has only one member, his nominee will decide whether to become the sole member after his death. As opposed to this, succession occurs in other companies perpetually.

Minimum one director: OPCs must have a minimum of one director (the member). Their maximum number of directors is 15.

No minimum paid-up share capital: In terms of OPCs, the Companies Act of 2013 does not specify a minimum paid-up capital.

Special privileges: Companies Act gives OPCs several privileges and exemptions that other types of companies do not have.

Formation of One Person Companies

In accordance with the Companies Act, 2013, OPCs can be formed by one person by signing a memorandum of association. A nominee must be named as the sole member if the original member dies or becomes incapable of entering into contractual relations.

Registrar of Companies must receive the nomination memorandum and consent from the nominee. Registrars accept withdrawal applications from nominees at any time. It is also possible for the member to revoke his nomination at any time.

Membership in One Person Companies

It is only possible for an Indian citizen and a resident of the country to form a one-person company in India. The same applies to nominees of OPCs. An individual cannot serve on more than one OPC at the same time.

OPCs are open only to natural persons. When it comes to companies where shares can be owned by the company itself, the same is not true. Moreover, minors are not allowed to participate or act as nominees in OPCs.

Conversion of OPCs into other Companies

One-person companies are expressly prohibited from being converted into charitable companies, e.g., nonprofit corporations. It is impossible for OPCs to convert voluntarily into another type of company two years after incorporation.

Privileges of One Person Companies

The Companies Act grants OPC the following privileges and exemptions:

  • They are not required to hold annual general meetings.
  • Financial statements do not require cash flow statements.
  • A company secretary does not have to sign annual returns; directors can do so as well.
  • Provisions relating to independent directors do not apply to them.
  • Director’s offices may also be vacated for additional reasons in their articles of incorporation.
  • In addition, they are not subject to several provisions regarding meetings and quorums.
  • A company can’t pay its directors as much remuneration as another can.

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