Information About One Person Company

One Person Company is the new trend followed by the business owner to channelize their business process. The Companies Act of 2013 ushered in a period of profound change for corporate law in India by establishing several novel principles that had not been recognized earlier.

The development of the concept of a One Person Company examples played a key role being a game-changer. Because of this, a new method of beginning a business was recognized.

This method allowed for the freedom that can only be provided by a company as its form of the legal entity while simultaneously offering the protection of limited liability that sole proprietorships and partnerships lacked.

Before enacting the new Companies Act in 2013, many other countries had already acknowledged that people could start their own companies. These countries included the United States of America, China, Singapore, the United Kingdom, and Australia.

Meaning of One Person Company

According to section 2(62) of the Companies Act, a “one-person company” is a business that consists of only one individual in the capacity of a member.

In addition, stockholders and subscribers to a corporation’s memorandum of the organization are the only two types of people who can be considered company members.

Therefore, an OPC can be regarded as a corporation with a single member who also acts as the sole shareholder.

In most cases, such businesses form when there is only a single founder or promoter behind the enterprise.

Because of the many benefits of operating as an OPC rather than a sole proprietorship, start-ups still in the early stages of their development are more likely to form OPCs than to do so.

Distinction between One Person Company and Sole Propertiorship

A sole proprietorship and a one-person company, which feature a single individual owning the business, will appear to be comparable. However, there are, in fact, some differences between the two types of companies.

The nature of the responsibilities that each entity bears is the primary distinction between the two. Because an One Person Company is a distinct legal entity distinct from its promoter, it is responsible for its assets and obligations. The promoter will not be held personally accountable for repaying the company’s debts.

On the other hand, sole proprietorships are owned and operated by the same person throughout their existence. Therefore, if the firm’s obligations are not satisfied, the law permits the attachment and sale of the promoter’s assets.

Characteristics of One Person Company

The following is a list of general characteristics of a one-person company:

• A Business That Is Not Public: 

According to subsection (c) of section 3 of the Companies Act, a sole individual is permitted to establish a company for any legitimate reason. In addition, it identifies OPCs as being private firms.

In contrast to other private corporations, one-person companies (OPCs) are only allowed to have a single member or shareholder.

• Nominee of the Company

When registering an OPC, the sole member of the business is required to name a nominee, which is a distinctive quality that sets it apart from other types of corporations. This is what distinguishes OPCs from different kinds of companies.

• No Endless Succession: 

Because there is only one member in an OPC, the nominee will have to decide whether or not to become the organization’s sole member in the event of the deceased member’s passing. This kind of thing does not occur in other organizations since those businesses adhere to the principle of perpetual succession.

OPCs are required to have a minimum of one individual (the member) serving in the role of director at all times. They are allowed a maximum of 15 directors to oversee the company.

No sum has been established as the minimum paid-up capital for OPCs in the Companies Act of 2013. There is no minimum paid-up share capital.

OPCs are afforded several benefits and exemptions following the Companies Act that are unavailable to other businesses.

Concept of One Person Company

A sole proprietor can establish an OPC by adding his signature to the memorandum of association and satisfying the other prerequisites outlined in the Companies Act of 2013.

This memorandum must include information on a nominee who will take over as the company’s sole member if the current member passes away or is rendered incapable of entering into contractual relationships.

Along with an application for registration, this memorandum and the nominee’s consent to his nomination need to be filed with the Registrar of Companies.

The nominee in question can remove his name from consideration by submitting the appropriate paperwork to the Registrar. It is also possible for the member to withdraw his nomination later.

Members in One Person Company

In India, forming a one-person corporation is restricted to natural persons who are both citizens of India and permanent residents of the country. The nominees for OPCs are subject to the same condition as well.

In addition, a natural person who meets these criteria is ineligible to serve as a member or nominee of more than one OPC at any given period in time.

It is essential to keep in mind that the only type of entity that can become a member of an OPC is a natural person.

This does not occur in the case of corporations in which the firms themselves can own shares and be members of the company. In addition, the law makes it illegal for anybody under 18 to be a member of or nominee for OPCs.

One Person Company Being Transformed into Other Types Of Companies

The transformation of one-person businesses (OPCs) into Section 8 companies—that is, organizations whose primary mission is to further charitable causes—is expressly prohibited under the rules that govern the formation of OPCs.

OPCs are not permitted to freely transform themselves into other types of corporations until two years have elapsed from the day they were incorporated.

One Person Company Advantages

Following the Companies Act, OPC is entitled to the following privileges and exemptions:

• They are exempt from the requirement of holding yearly general meetings.
• Cash flow statements are not required to be included in their financial statements.
• Having a company secretary sign yearly returns is optional because directors can also do so.
• They are not subject to the necessities that pertain to liberated directors in any way.
• Their articles can allow for the provision of new grounds for the director’s office to be vacated.
• They are exempt from several provisions that relate to meetings and quorums. Thus those provisions do not apply to them.
• Compared to other companies, they are able to offer their directors a higher wage.