One Person Company

The Companies Act, 2013 completely revolutionized corporate laws in India by introducing several new concepts that did not exist previously. On such game-changer was the introduction of One Person Company concept. This led to the recognition of a completely new way of starting businesses that accorded flexibility which a company form of entity can offer, while also providing the protection of limited liability that sole proprietorship or partnerships lacked.

Several other countries had already recognized the ability of individuals forming a company before the enactment of the new Companies Act in 2013. These included the likes of China, Singapore, UK, Australia, and the USA.

Definition of One Person Company

Section 2(62) of Companies Act defines a one-person company as a company that has only one person as to its member. Furthermore, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its member.

Such companies are generally created when there is only one founder for the business. Entrepreneurs whose businesses lie in early stages prefer to create OPCs instead of sole proprietorship business because of the several advantages that OPCs offer.

Difference between OPCs and Sole Proprietorships

1.      A sole proprietorship form of business might seem very similar to one-person companies because they both involve a single person owning the business, but they actually exist some differences between them.

2.      The main difference between the two is the nature of the liabilities they carry. Since an OPC is a separate legal entity distinguished from its promoter, it has its own assets and liabilities. The promoter is not personally liable to repay the debts of the company.

3.      On the other hand, sole proprietorships and their proprietors are the same persons. So, the law allows attachment and sale of promoter’s own assets in case of non-fulfilment of the business’ liabilities.

Features of a One Person Company

Here are some general features of a one-person company:

a.      Private company: Section 3(1)(c) of the Companies Act says that a single person can form a company for any lawful purpose. It further describes OPCs as private companies.

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

c.       Nominee: 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.

d.      No perpetual succession: Since there is only one member in an OPC, his death will result in the nominee choosing or rejecting to become its sole member. This does not happen in other companies as they follow the concept of perpetual succession.

e.      Minimum one director: OPCs need to have minimum one person (the member) as director. They can have a maximum of 15 directors.

f.        No minimum paid-up share capital: Companies Act, 2013 has not prescribed any amount as minimum paid-up capital for OPCs.

g.      Special privileges: OPCs enjoy several privileges and exemptions under the Companies Act that other kinds of companies do not possess.

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