The concept of One Person Company (OPC) in India was introduced through the Companies Act, 2013 to support entrepreneurs who are on their own capable of starting a venture by allowing them to create a single person economic entity. One of the biggest advantages of a OPC is that there can be only one member in a OPC, while a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership. Similar to a Company, an OPC is a separate legal entity from its members, offers limited liability protection to its shareholders, has continuity of business and is easy to incorporate.
Features of a One Person Company-
- Only one shareholder- only a natural person, an Indian citizen and resident in India is eligible to incorporate a One Person Company.
- Nominee for the shareholder- the shareholder can appoint another person to become the shareholder in case of death or incapacity of the original shareholder.
- Director- can have minimum one director. The Sole shareholder can himself be the Sole Director. A One Person Company may have a maximum of 15 directors.
There are a few limitations even though OPC allows a single entrepreneur to run a business. Cited below are some of the limitations:
- Every OPC must nominate a nominee Director in the MOA or AOA who will become the owner of the OPC in case the promoter Director is disabled.
- An OPC has to be converted into a Private Limited Company if the annual turnover crosses Rs. 2 Crores and file audited financial statement with the Ministry of Corporate Affairs at the end of each Financial Year.
Advantages of one person company-
- Separate legal entity.
- Uninterrupted Existence.
- Borrowing Capacity.
- Easy Transferability.
- Owning Property.
- Limited Liability.
The concept of OPC is a new concept and it will take some time to be incorporated with complete efficiency. The reason behind it may be less paper work, one person company can form a company without any additional shareholder, and if the members are willing to add shareholders, all he needs to do is modify the Memorandum of Association and file it before ROC. When the concept of OPC was first introduced in India, it was solely aimed for the structured organized business, with a different legal entity altogether and to organize the private sector of the entrepreneurship along with a significant growth in Indian Economy benefiting the country at a global level.