•An One Person Company (OPC) is a hybrid structure, wherein it combines most of the benefits of a sole proprietorship and a company form of business.
•One person company, only 1 person is required who can be a shareholder as well as the Director. Hence the name, One Person Company.
•OPC is a new concept in India which has been introduced by the companies act 2013. Though the concept of OPC is new in India but it is a very successful form of business in UK and several European countries since a very long time now.
•This concept of OPC was first recommended by the expert committee of Dr. JJ Irani in 2005.
•The words ‘One Person Company’ will have to be mentioned in brackets below the name of such company, wherever its name is printed, engraved or affixed.
Sole proprietorship v/s One Person Company
•The biggest difference between a sole proprietor and a One Person Company would be that in case of a One Person Company, your liability in case the business fails, is limited to only the business assets.
•In case of a proprietorship, the liability is unlimited and the creditors of your business can even take hold of your home and personal assets like your house, personal bank accounts etc which can be used to settle the business liabilities.
•Owing to the feature of it having a separate legal entity from its owners, the OPC is taxed separately, unlike a sole proprietorship.
Concepts of OPC
1. One share holder:
•This is the fundamental concept of a One Person Company.A single shareholder holds 100 percent shareholding.
•Further the rules also specify that a person can be a shareholder in only one one person company at any given time. It simply means an individual cannot have two different one person companies in his name.
2. One Director:
•The other important point is that a One Person Company may have only one director. But at the same time there is no bar on more number of directors. However, as per the Act, the total number of directors shall not be more than 15.
•The sole member is deemed to be the first director.
3. Nominee
•This is a very important concept where the person forming the One Person Company has to nominate a Nominee with his written consent who, in the event of death or inability to contract of the owner of the One Person Company, shall come forward and take over the reins of the one person company.
•On the death of the sole member, the nominee shall be the person recognized by the company as having title to all the shares of the member. Such nominee shall be entitled to the same dividends and other rights and liabilities to which such sole member of the company was entitled or liable.
4. Freedom from compliance
•One Person Company also gets freedom from complying with many requirements as normally applicable to other private limited Companies.
5. No requirement to hold annual or extra ordinary general meetings.
6. No requirement of preparing cash Flow in the annual financial statements
7. Annual returns can be signed by the Director himself instead of A Company Secretary.
Conversion from OPC to Private Limited Company
•It is provided in the Act that when a One Person Company reaches a paid up Capital of 5 million or more or when the average turnover of the company which is 20 million or more for a period of 3 years, then the company shall be converted into a private limited company after making the necessary changes in the memorandum of association and articles of association and shall comply with all the requirements of a private limited company.
Conversion from Private Limited Company to OPC
•A private limited company which does not have a paid up capital of more than 5 million or where the average annual turnover for the past 3 years is less than 20 million can convert itself into a One Person Company.
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