One Person Company
• The corporate laws in India got revolutionized by The Companies Act, 2013 with the
introduction of various new concepts that were non-existent previously. The introduction of the
concept of One Person Company was one of the game-changers. A whole new way of starting
businesses was recognized which granted flexibility that an entity like a company could offer. It
also protected limited liability that was lacking in partnerships and sole proprietorships.
• The ability of individuals to form a company was already identified by various other countries
like the USA, China, Singapore, UK and Australia before the new Companies Act 2013 was
enacted.
• The Companies Act, 2013 completely changed the rules of business in India by introducing a
number of new concepts that were not previously available. One person and one of the new
ideas introduced.
• An individual company (OPC) defines a company constituted with one person (one) as a
member, in contrast to the standard practice of having at least two members. It is a recognition
of a one-man economic organization that paves the way for small businesses, service providers
to enter the business by increasing their opportunities with corporate ownership.
One Person Company
• Definition: In terms of section 2 (62) of the Companies Act, 2013 defines "one-
person company" to mean a company having only one person as the member of
the company. Because members of a company are recognized as the company’s
shareholders or the subscribers to its Memorandum of Association, One Person
Company (OPC) is functionally a company with only one shareholder as its
member.
• OPCs are usually formed when the business has just one founder or promoter. Due
to the many advantages that OPCs offer, entrepreneurs whose businesses are at a
nascent stage give more preference to the creation of OPCs rather than sole
proprietorships.
• Any natural person (should not be a minor) who is an Indian citizen whether or not
an Indian citizen, i.e. the NRI will be eligible to enter One Person Company and
appoint an OPC nominee, India's non-resident timeline has been reduced to 120.
Days.
One Person Company
• Difference between One Person Company and Sole Proprietorships
• An OPC and a sole proprietorship form of business might come across to
be alike since both the forms of businesses have a single person involved
who owns the business, but in reality, they are quite different from each
other. The nature of the liabilities carried by both of them is the major
difference between the two forms.
• OPC being a separate legal entity on its own which is distinctive from its
promoter has its own liabilities and assets. The promoter cannot be held
liable personally to pay off the debts of the company.
• Whereas, the sole proprietorship and its proprietor are the same. So, in
the case of non-fulfilment of the liabilities of the business, the
promoter’s assets are attached and sold by the law.
One Person Company
• The general features of a One-Person Company are as follows:
• Private Company
• Section 3(1)(c) of the Companies Act, 2013 states that a company can be formed by a
single person for any purpose recognized by the law. OPCs are further described as
private companies.
• Single - Member
• Unlike other private companies, OPCs can have only one shareholder or member.
• Nominee
• The sole member of the company nominates a nominee during the registration of the
company. This is a feature unique to OPCs and this distinguishes it from all other
types of companies.
• No Perpetual Succession
• The death of the only member of the company allows the nominee to either reject or
choose to become its sole member. In other kinds of companies, the concept of
perpetual succession is followed.
One Person Company
• Minimum One Director
• Minimum one person needs to be the director of OPCs, which is the
member in this case. There can be a maximum of 15 directors.
• No Minimum Paid-up Share Capital
• For OPCs, any minimum paid-up share capital has not been
prescribed by the Companies Act, 2013.
• Special Privileges
• Many privileges and exemptions are enjoyed by the OPCs under the
Companies Act that other types of companies are not entitled to.
One Person Company
• Formation of One Person Companies
• An OPC can be created by a single person by subscribing his name to
the Memorandum of Association and fulfilling the other prerequisites
prescribed by the Companies Act, 2013. The MoA also needs to
declare all the details of a nominee who would go on to become the
sole member of the company in case of death of the original member
or he becomes incapable of entering any contract.
• The MoA and the nominee’s consent to his nomination are to be
submitted to the Registrar of Companies in addition to the application
for registration. That nominee is allowed to withdraw his name at any
given point of time by submitting the required application to the
Registrar. The member is also entitled to cancel his nomination later.
One Person Company
• Membership in One Person Companies
• In India, only natural individuals who are the citizens and residents of the country are
eligible to create an OPC. The nominees of OPCs are also guided by the same directive.
Also, such a natural person is not allowed to be a member or nominee of more than
one OPC at any given point of time.
• One significant point is that only a natural person can become a member of an OPC
which doesn’t apply in case of companies. Companies can themselves be members and
own shares of the companies. Additionally, minors are prohibited by the law from
becoming members or nominees of OPCs.
• Conversion of One Person Company (OPCs) Into Other Companies
• Regulations monitoring the formation of OPCs explicitly impede the conversion of OPCs
into companies under Section 8, the ones that have philanthropic objectives.
• Until the expiry of two years from the date of their incorporation, OPCs can’t convert
into other types of companies voluntarily.
One Person Company
• Privileges of One Person Companies
• One-Person Companies benefit from the following privileges and
exemptions under the Companies Act:
• OPCs don’t have to conduct annual general meetings.
• Cash flow statements need not be included in their financial
statements.
• Directors could sign the annual returns too; a company secretary
is not mandatorily required.
• Provisions in regard to the independent directors are not applied
to OPCs.
• Directors can take home more remuneration as compared to
other companies.
One Person Company
• Q1: Does an OPC follow the principle of perpetual
succession?
• Ans: No, it does not. An OPC can reach its end with the
death of its sole member.
• Q2: OPC was recognized under the Companies Act, 1956.
TRUE or FALSE?
• Ans: FALSE. The concept of OPCs was introduced by the
Companies Act, 2013.
One Person Company
• Digital Signatures Certificates (DSC)
• All the documents need to be submitted to ROC online through
www.mca.gov.in. Therefore, to sign the documents digitally for authentication,
one needs to have a Digital Signature Certificate (DSC), a digital code, which can
be attached to an electronic document to verify the applicant’s identity.
• In simple words, it can be understood as a signature which is done
electronically. We all do Manual signatures by Pen, but we cannot sign on
computers, therefore, to sign any electronic document we need a
digital signature. Digital signature looks like the followings.
• Digital signatures are protected with a PIN. It takes 1-2 days to get it issued, and
it costs around Rs.800/- to Rs.1500/-
• Every proposed Director must have a DSC for making an application to obtain
the DPIN is Designated Partner Identification Number.
One Person Company
• Director Identification Number (DIN)
• DIN is an eight digit number allotted to every director. No person
can become a director without first applying for DIN.
• It is a unique identification number for an existing director or a
person intending to become one, and it is allotted by the
Ministry of Corporate Affairs (MCA).
• In simple words, just like a PAN, DIN is also unique identification
number assigned to every individual Director. You need to file eForm
for DIN-1 to obtain DIN. DIN is instantly granted upon after the form
is uploaded. The cost of DIN is Rs.500/-.
• A person can have only one DIN, no matter in how many companies
or LLPs he or she holds the position as director.
