The One Person Company Registration Act, of 2013 fundamentally altered Indian corporate law by adding numerous new ideas. One such game-changer was the emergence of the notion of the One Person Company. This resulted in the recognition of a wholly new kind of business formation that combined the freedom of a corporation with the protection of limited liability that sole proprietorships and partnerships lacked.
One person Company -corporation is defined in Section 2(62) of the Companies Act as one that has only one member. Additionally, members of a corporation are nothing more than subscribers to the corporation’s memorandum of association or stockholders. As a result, an OPC is functionally a firm with a single shareholder as a member.
These businesses are typically formed when there is only one founder/promoter. Entrepreneurs in the early phases of their company choose to form OPCs rather than sole proprietorships due to the numerous advantages that OPCs provide.
Features of a One Person Company
Here are some general features of a one-person company:
Private company:Â
As per Section 3(1)(c) of the Companies Act, an individual may incorporate a company for any legitimate purpose. Additionally, it refers to OPCs as private businesses.
Single-member:
In contrast to other types of private organizations, OPCs can only have one member or shareholder.
Nominee:Â
A distinguishing feature of OPCs from other types of businesses is that the lone member of the firm must specify a nominee when registering the business.
No perpetual succession:
Due to the fact that an OPC has only one member, his death will result in the nominee selecting or declining to become the OPC’s single member. This does not occur in other businesses, which adhere to the principle of eternal succession.
Minimum one director:
OPCs must have a minimum of one director (the member). They may have up to fifteen directors.
No minimum paid-up share capital:
The Companies Act, 2013 does not specify a minimum paid-up capital requirement for OPCs.
Special privileges:Â
OPCs are entitled to a number of benefits and exemptions under the Companies Act that other types of businesses do not.
Benefits of One Person CompanyÂ
A one-person business is the corporatization of a sole proprietorship; as such, it has all the privileges of a corporation, as well as some exemptions from certain provisions of company law. The following are some of the advantages of the one-person business.
- It has a separate legal entity.
- The liability of shareholder/ director is limitedÂ
- The organized version of OPC will open the avenues for more favourable banking facilities
- Â Legal status and social recognition for your business. It gives suppliers and customers a sense of confidence in business.
- The director and shareholder can be the same person
- On the death/disability company can be succeeded by the nominee.
- The exemption was available from various provisions under Company law.Â
Formation of One Person Companies
A single individual may create an OPC by submitting his or her name to the memorandum of association and complying with all other conditions imposed by the Companies Act, 2013. This memorandum must include information on a nominee who will become the sole member of the firm in the event that the original member dies or becomes incapable of entering into contractual relationships.
This memorandum and the nominee’s approval of his nomination should be included with an application for registration with the Registrar of Companies. A such nominee may revoke his designation at any moment by submitting the necessary applications to the Registrar. Additionally, the member may revoke his nomination at any time.
Membership in One Person Companies
In India, only natural individuals who are citizens or residents of India are entitled to register a one-person corporation. The same is true for candidates for OPCs. Additionally, such a natural person may not serve on or be a nominee for more than one OPC at any given time.
It is important to note that only natural persons can become members of OPCs. This is not the case with corporations, as corporations can hold shares and be members. Additionally, the statute forbids minors from membership in or nomination to OPCs.
Conversion of OPCs into other Companies
Regulations governing the establishment of OPCs expressly prohibit the conversion of OPCs into Section 8 corporations, those with charitable aims. OPCs cannot transform freely into other forms of corporations until two years have passed from the date of their establishment.
Privileges of One Person Companies
One-Person Companies benefit from the following privileges and exemptions under the Companies Act:
- OPCs are not required to have annual general meetings.
- Their financial statements do not have to include cash flow statements.
- Annual returns may be signed by directors as well; a company secretary is not necessary.
- OPCs are exempt from provisions relating to independent directors.
- Directors might earn a higher salary than employees at other organisations.
