One Person Company (OPC)

What is One Person Company (OPC)?

One person company, or OPC is a company set up with just one person as the member, which is a private company in nature.

Here, member refers to the subscriber to the Memorandum of Association (MoA), of the company. The concept aimed to promote entrepreneurship and corporatization of business.

Such a company is either limited by share or guarantee or unlimited company. However, if the company is limited by shares it has to fulfil the following requirements.

Legal Requirements of One Person Company
  1. Minimum paid-up capital of Rs. 1,00,000.
  2. Restriction on the right to transfer shares.
  3. Prohibits inviting the general public to subscribe for the shares of the company.
Note: OPC is not permitted to undertake Non-banking financial investment services, involving investment in shares or debentures, or other companies. Further, it has to intimate the registrar about every contract the company has entered into, as well as stated in the minutes of the board meeting, within 15 days from the date of approval by the board.

Characteristics of One Person Company

The characteristics of OPC are:

Legal Identity

OPC should have a specific name that acts as its legal identity. Also, all the business activities should take place, under that name.

Member

To form an OPC, requires only one person as a member and that company will be regarded as a private entity.

Restriction

The person who creates a one-person company is not eligible for incorporating multiple one-person companies. This means that commencement of only one OPC is possible legally, by that person.

Extension

Just below the name of the company, the term ‘one person company’ must be there, in all the places where the company’s name is in use.

Memorandum

The memorandum of OPC has to specifically indicate the name of a person (nominee) with a written acknowledgment in the stipulated format, who will continue as a member, at the time of death or incapacity of the subscriber.

Nominee

The nominee cannot become a nominee of more than one OPC.

Change of Name of Nominee

The member of the one-person company can change the name of the nominee at any time. For which he/she needs to give notice to the company and the company has to furnish it with the Registrar of Companies (RoC).

No perpetual succession

As the number of members in an OPC is only one, the death of the member may result in dissolution. Moreover, it is up to the nominee only to accept or reject to become the sole member of the OPC. However, this characteristic is different from the other companies, as they have perpetual succession.

Directors

An OPC should have at least one director. This is obviously the member and it can have a maximum of fifteen directors.

Conversion

The owner cannot convert one person company into a company set up for the promotion of commerce, art, sports, education, environment protection, social welfare, and so forth. Besides, in specific cases, its conversion into a private or public company is possible.

Exemptions to One Person Company

The concept of one person company has emerged to encourage small businesses and entrepreneurs. For this, the government provides a number of exemptions. So, they have lesser legal formalities to comply with. Therefore, these exemptions are:

  1. OPC need not prepare a cash flow statement.
  2. If one person company is not having a company secretary, then the company’s annual return can be signed by the director.
  3. There is no compulsion as to holding an Annual General Meeting.

Must Read: Ordinary Resolution

Advantages of OPC

  • Limited liability protection to directors and shareholders
  • Full-fledged control of the company with the sole owner
  • Tax flexibility and savings
  • Lesser legal formalities
  • Easy management
  • Easy availability of credit from banks and financial institutions

Cessation of OPC Status

As we all know, there are a number of advantages of OPC, as to legal compliance. However, there are certain circumstances when the OPC status can be ceased, these are:

  1. Paid-up share capital crosses 50 lacs or
  2. The average annual turnover of the concerned accounting period – the period immediately preceding three financial year crosses 2 crores.
  3. Announcement for an increase in the minimum limit has to be filed in the relevant form.

Wrap Up

Above all, OPC is the most common type of legal entity for micro-businesses or startups, in the budding phase. The responsibility of its commencement, management, and operation is in the hands of only one person.

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