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Published : February 09, 2015 | Author : Megha Maji
Category : Company Law | Total Views : 3900 | Rating :

Megha Maji
I am a student of KIIT School of Law, Bhubaneswar pursuing BBA LLB (Business Hons).

One Person Company under Companies Act 2013-A New Dimension

Several significant concepts have been introduced for the first time under Companies Act, 2013 and one of them being One Person Company. Section 2(62) defines one person company as a private company with only one director and one shareholder. However, it can have more than one director, and up to a maximum of 15. Individual entrepreneurs doing business as sole proprietors will now be able to avail the benefits of limited liability without a second person to form a company. According to a research paper on the New Companies Bill by law firm Nishith Desai Associates, "A one person company is a paradigm shift in the Indian corporate regime, bringing it at par with global standards."

Important guidelines required for the formation of One Person Company

In terms of section 3(1)(c) of the 2013 Act, an OPC may be formed for any lawful purpose by one person. Salient features in relation to incorporation include:

The memorandum of association of an OPC shall indicate the name of another person (nominee), with his prior written consent, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company. This provision will ensure perpetuity and continuity to the life of the Company. The written consent of such person shall also be filed with the registrar of companies at the time of incorporation of the OPC along with its memorandum and articles.

By the rules only Indian resident can avail of 'One Person Company' benefit and the word ‘One person Company’ shall be a part of the name of the company as per Section 12(3) of the Act.

The paid up capital of the OPC cannot exceed 50 lakhs and its average annual turnover cannot exceed 2 crores.

A person can incorporate a maximum of 5 OPCs. [Rule 2.1(2)]

Exemptions provided to OPC

OPCs have been provided with a number of exemptions and therefore have lesser compliance related burden. Few of them are:

OPC is not required to prepare cash flow statement as a part of financial statement. [Section 2(40)]
In case an OPC does not have a company secretary, the annual return can be signed by the director of the company. [Proviso to section 92(1)]
An OPC is not required to hold an annual general meeting. [Section 96(1)]

The single most advantage of an OPC is that a person can start a business, however risky, without the fear of unlimited liability threatening his very existence and he can independently carry out business under the company structure i.e. OPC will provide greater flexibility to an individual or a professional to manage his business efficiently and enjoy its benefits. However, from a taxation point of view, the concept of OPC may not appeal to smaller proprietorships since the base rate of tax of a company is quite steep (30% approx) and may result in a higher incidence of taxation for the smaller sole ventures.


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