One Person Company in detail

The corporate laws in India have been completely revolutionized with the introduction of the concept of One Person Company (OPC’s) in the Companies Act, 2013. It is a completely new way of incorporating a company with only one person as its member.

OPC is similar to the existing concept of Sole-proprietorship with separate legal entity distinct from its proprietors and promoters. Thus , it has the features of both Sole proprietorship as well as Company forms.

Section 2(62) of Companies Act defines a One-person company as a company that has only one person as  its member. 

Section 3 of the Companies Act, 2013 further clarifies that OPC shall be treated as private company for all legal purpose with only one member.

FEATURES OF OPC

The following are the main features of One Person Company-

  • A person, who registers one-person company, is not eligible to incorporate more than one one-person company
  • A unique feature of OPCs that separates it from other kinds of companies is that the sole member of the company has to mention a nominee while registering the company.
  • OPCs need to have minimum one person (the member) as director. They can have a maximum of 15 directors.
  • There is no minimum paid up capital subscribed for OPC’s.
  • OPCs can have only one member or shareholder, unlike other private companies.

 

FORMATION OF OPC-

An OPC can be formed by a single person by subscribing his name to the Memorandum of Association after fulfilling the other requirements specified by Companies Act, 2013.

This MOA must state all the details of the nominee who will become the member of the company’s in the event of death of the owner.

After this, both the Memorandum along with the nominee’s consent are to be submitted with the Registrar of companies with an application of registration.

ADVANTAGES OF A ONE PERSON COMPANY-

The various benefits of forming a OPC are –

  • No annual general meetings are required to be conducted by an OPC.
  • An OPC can avail the various benefits provided to Small Scale Industries like the lower rate of Interest on loans, easy funding from the bank etc.
  • OPC’s can easily avail funds through investors, venture capital & financial institutions.
  • They can pay more remuneration to directors than compared to other companies.

DISADVANTAGES OF OPC-

  • The owner cannot become the owner or say shareholder of two OPC’s at the same time.
  • With respect to business activities, it cannot carry Non – Banking Financial Investment activities including investment in securities.
  • Since the firm is treated in the same way as a private company, the tax slab applicable is the same which means an OPC would have to pay 30% tax on all profits which is quite high.

 

Thus, in simple words an OPC is effectively a company that has only one shareholder as its member. offering limited liability protection, while having continuity of business and being easy to incorporate.

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