This article has been written by Ms. Khushi Sarkhedi . a 1-Year BA LLB student from AURO University.

Company implies a “legal person” or “legal entity” isolated from and able of surviving past the lives of its individuals. There are different sorts of companies privet company, open company, one individual company (OPC) , section 8 company and numerous others.

The Companies Act, 2013, introduced a number of novel concepts that had never before been used in india corporate law. The inroduction of the one person company concept was one such game-changer . due to this a brand new method of starting a business was recognised it offered the flexibility that only a company form of entity can as well as the protection of limited liability that sole proprietorship and partnerships did not. Before the new companies act was passed in 2013 many other nations had already acknowledged the capability of individuals creating a company. China , Singapore , Uk, Australia were a few of these.

One Person Company (OPC): A Critical analysis

Men are judged by the company they keep . however thakns to 2013 companies act’s implementation a single person can now create  a company under the concept of a “one person company” here in after mentioned as OPC. OPC is defined in section 2 of the 2013 Companies Act sub section 62 . it describes OPC as a company with a single members whose entire legal and financial obligations are placed on the company as a whole rather than on any of its individual members . The New Companies Act of 2013 introduces a concept that is somewhat revolutionary since the previous companies act of 1956required a minimum of two members to establish a company.

Sub- section 62 of section 2 of The Companies Act 2013 says , “One person company means a company which has only one member”. It is also crucial to remember that Section 3 designates OPC as a privet company with a single member for all Legal Purpose unless specifically excluded , all provisions that apply to privet companies also apply to OPCs. Only “NATURALLY-BORN” Indians who are also residents of india are permitted to incorporate an OPC, which is the only exception made by the Act for OPCs  .therefore only Indians who are both residents of india and natural bone citizens can benefit from an OPC. Additionally it is important to note that a person is only premitted to form up to 5 OPCs these business typically come into existence when there is just one founder or promoter due to the many benefits that OPCs provide entrepreneurs who are starting out in business prefer to form them over sole proprietorship. “resident in india” here means a person who has stayed in india for a period of 120 or more days during the immediately preceding one financial year.

Background :

OPC is a relatively new concept in india . As was already mentioned the term was proposed before it was first used in india and was already popular in other nations in the US a number of states have given their approval for businesses to register as limited liability companies or OPCs . china and many other nations including Singapore introduced the idea of OPC in 2004 and 2005 respectively other nations like Bahrain, Mauritius , The Uk . Ireland and Qatar also have the OPC idea. Pakistan adopted this idea by amending its corporate law. In the majority of nations, the law stipulates that OPC is exempt from holding annual general meetings and should or may have more than one director.

Difference between OPC and Sole Proprietorships:

Difference	OPC	Sole Proprietorship
Registered	Is registered under MCA and companies Act 2013	is not registered type of entity
Liability	The liability is limited	Unlimited liablity
Transferability	Can be transferred to the nominee	Cannot be transferred
Taxation	Taxed as at 30% of profits plus cess and surcharge	Taxed as an individual
Annual fillings	Filed with the ROC	Income tax returns with the ROC
Perpetual Succesion	Existence if independent of the sole promoter and the nominee	The proprietorship comes to an end with the retirement of members.
Legal status	Separate legal entity	Here sole proprietorship and proprietor are consider to be one single entity

The OPC differs from a sole proprietorship in terms of the law and how it operates.one person company is treated as a privet limited company with limited liability even though the two terms sound similar . the only promoter of a one person company is one person and the other promoter is a nominee who is not supposed to be minor . the OPCs must hold at least one meeting in each half of the calendar and there cannot be a gap of less than 90 days between them .

Like a partnership or a private limited company , a sole proprietoris not a recognised legal entity . Additionally since the proprietor owns and controls the sole proprietor there is no need to old boar meetings or annual meetings.

Salient Features of One Person Company:

An one person company can be formed in any below catagories:

1. Company Limited By Guarantee
2. Company Limited By Shares

An OPC limited by shares must meet the following requirements:

• It must have a minimum paid-up capital of INR 1 Lac
• Limits the ability to sell its shares 
• Disallows any public invitations to subscribe for the company’s securities.

An OPC is required to provide a legal identity by stating a name by which the business’ operations may be conducted wherever the name of the company is attached ,used or engraved , the word “one person company” should be mentioned beneath it. A member of an OPC must submit a nominee’s nomination to the registrar of companies with the nominee’s written consent . (ROC). This nominee will become a member of an OPC in the event of death or any other incapacity. A member of an OPC may at anytime changes the name of the nominee by notifying the ROC in the manner specified by law.

Formation of one person company:

By adding his name to the memorandum of association and meeting other requirements outlined by the companies act 2013 one person can create an opc this memorandum must include information about a nominee who will take over as the only member of the company in the event that original member passes away or becomes unable to enter into a binding contract.

Along with a registration application the ROC should receive this memo and the nominee’s consent to his nomination such a nominee may opt out at any time by submitting the necessary application to the registrar. The member may also withdraw his nomination at a later time.

Privileges of one person companies:

OPC enjoys following privileges and exemptions under the companies act :

• The annual general meetings are not required.
• Cash flow statements are not required in their financial statements.
• Annual returns may be signed  by directors without a company secretary present .
• They are exempt from a number of meeting and quorum-related provisions.
• Their bylaws may stipulate additional justifications for a director’s office vacation.
• They are exempt from independent director provisions 
• When compared to other companies they are able to pay directors a higher salary.

Criticism: 

on January 7 2009 , the LLP act was presented with the objective of giving constrained obligation for the accomplices in commerce other than bringing the all little and medium undertakings within the sloopy segment into composed segment. The concept of LLP has not been fruitful and till date roughly as it were 10,000 substances are enlisted. The victory of the exceptionally concept is dicey to a few degree due to a few reasons which have been specified underneath.

• As an privet limited company, an OPC cannot borrow money from anyone . Existing proprietors, on he other hand are free to seek funds from their family and friends.
• While some existing privet limited companies may work as well as proprietorship hey may accept another 200 shareholders on the other hand the capital of the OPC is limited only by the owner’s funds.
• In banks , share trading etc nominating a successor is slowly gaining traction but hasn’t yet reached the business world. Normally the business assets of a proprietorship are share my multiple legal heirs.
• Outside companies may not be able to join their auxiliaries as OPC’s as the endorser must be as it were an person which as well with a assignment of another individual. The concept of the backup company is that the whole offers are held  by the holding company and so it isn’t conceivable for MNCs to consolidate their backups as OPCs.
• Over all the prerequisite of recording archives with the controller may not energize little commerce business visionaries to consolidate as or to switch over to OPCs.

Conclusion :

OPCs are basic since they would grant entrepreneurial capabilities of individuals an speedy interest in financial movement and such financial action may take put through the creation of an financial individual within the frame of a company . in any case there has been feedback in certain quarters against the arrangement of such a company because it may grant room for avoidance of open stores and assess obligation by an person .

OPC will give a person more freedom to mange their business effectively and gain the advantages of a corporation at the same time many foreign business will benefit from the OPC concept because they currently have to name at least two nominees when forming a wholly-owned subsidiary. OPC will  make it possible for these business owners to access more advantageous banking services particularly loans. Additionally the idea will increase the flow of foreign funds into india because it eliminates the need for nominee shareholders. 

Citation:

• https://www.indiafilings.com/learn/difference-between-one-person-company-and-sole-proprietorship/
• https://www.legalservicesindia.com/article/1722/One-Person-Company.html#:~:text=OPC%20is%20defined%20under%20sub,and%20not%20to%20its%20members.
• https://www.toppr.com/guides/business-laws/companies-act-2013/one-person-company/#:~:text=Section%202(62)%20of%20Companies,one%20shareholder%20as%20its%20member.
• Bare act of company law 

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