This article titled ‘One Man Company: Meaning and Explanation.’ is written by Mayank Shekhar and reflects on the concept of One Man Company. I. Introduction The concept of One Person Company under the Companies Act 2013 is a new dimension. A few critical ideas have been presented interestingly under the Companies Act, 2013 and one of them being One… Read More »

This article titled ‘One Man Company: Meaning and Explanation.’ is written by Mayank Shekhar and reflects on the concept of One Man Company.

I. Introduction

The concept of One Person Company under the Companies Act 2013 is a new dimension. A few critical ideas have been presented interestingly under the Companies Act, 2013 and one of them being One Person Company. Segment 2(62) characterizes one individual organization as a privately owned business with only one investor and one shareholder. In any case, it can have more than one investor but only up to a limit of 15.

Individual business visionaries working together as sole owners can now profit from the advantages of restricted responsibility without a subsequent individual to shape an organization.

As per an examination paper on the New Companies Bill by law office Nishith Desai Associates, “One individual organization is a change in outlook in the Indian corporate system, bringing it at standard with worldwide guidelines.”

II. One Man Company

One person company (OPC) means a company formed with only one (single) person as a member, unlike the traditional manner of having at least two members. The concept of OPC is not alien to the world. Through the years, this concept has been legally recognized in the UK (2006), USA (Limited Liability Company in the US), China (2005), Singapore (2004), Turkey (2012), UAE, Pakistan (2003).

In India, the acceptance of OPC was given in the Dr J.J Irani Committee report dated May 31, 2005, which guaranteed the acceleration of businesspeople in the commercial centre, making their commitment to the economy broadly powerful. Subsequently, acknowledgement of a single individual financial element eases up a way for little dealers, craftsmen and other specialist organizations to wander into business by extending their chances, restricting their obligation with insignificant procedural/compliances.

III. Guidelines for Formation of OPC

A solitary individual can frame an OPC by buying in his name the reminder of affiliation and satisfying different necessities recommended by the Companies Act, 2013. Such notice should state subtleties of a chosen one who will turn into the organization’s sole part in the event that the first part passes on or becomes unequipped for going into authoritative relations.

This notice and the chosen one’s agreement to his assignment ought to be documented to the Registrar of Companies alongside the use of enrollment. Such chosen one can pull out his name anytime by accommodation of essential applications to the Registrar.

Under Section 3 (1)(c) of the Companies Act, 2013, one individual organization can be shaped for any legal reason by one person. The Memorandum of Association of One Person Company will show the name of someone else preceding his assent that will be the endorser after his demise and will turn into an individual from the company.

The assent in the composed type of such individual will be recorded with the enlistment centre of the organizations at the hour of consolidation of One Person Company alongside the Memorandum of Articles.

One individual organization goes under Section 12 (3) of the Act. The page of the capital of one individual organization can’t surpass 50 lakh and the yearly normal turnover can’t surpass 2 crores. According to control 2.1(2), an individual can fuse a limit of 5 one individual organizations.

  1. Only a characteristic individual (Not Association of people, Body of Individuals, Company, or whatever other substance) who is an occupant of India in going before schedule year (remained in India for 182 days) can shape OPC.
  2. No one can consolidate more than one OPC or be the chosen one of more than one OPC.
  3. There is an edge of settled up capital (Rs. 50 lakh) and normal yearly turnover (Rs. 2 crores in 3 quick going before monetary year) past which the situation with OPC is lost.
  4. Rules of OPC don’t allow Non-Banking Financial Institutions

IV. How OPC is different from Sole Proprietorship?

A sole ownership type of business may appear to be basically the same as a one-person company since the two of them affect a solitary individual possessing the business, however, there really exist a few contrasts between them.

The principle distinction between the two is the idea of the liabilities they convey. Since an OPC is a different lawful substance recognized from its advertiser, it has its own resources and liabilities. The advertiser isn’t actually obligated to reimburse the obligations of the organization.

Then again, sole ownerships and their owners are similar people. Along these lines, the law permits connection and offer of advertiser’s own resources if there should be an occurrence of non-satisfaction of the business’ liabilities.

V. Membership of OPC

Just normal people who are Indian residents and inhabitants are qualified to frame a one-individual organization in India. A similar condition applies to candidates of OPCs. Further, a particularly normal individual can’t be a part or choose one or more than one OPC anytime.

Note that main normal people can become individuals from OPCs. This doesn’t occur on account of organizations wherein organizations themselves can claim shares and be individuals. Further, the law disallows minors from being individuals or chosen people of OPCs.

VI. Conversion of OPC

Rules directing the arrangement of one-individual organizations explicitly limit the transformation of OPCs into Section 8 organizations, for example, organizations that have altruistic targets. OPCs likewise can’t intentionally change over into different sorts of organizations until the expiry of a long time from the date of their fuse.

  1. Obligatory Conversion

As expressed over one individual organization share capital ought not to surpass Rs. 50 needs and normal capital turnover ought not to surpass 2 crores. One Person Company should modify its update and article by passing goal under Section 122 (3) of Companies Act, 2013 to give the impact of discussion and essential changes which must be done. One Person Company inside 60 days from the date of the relevance of above arrangements should give a notification to Registrar in structure number INC.5.

  1. Willful Conversion

For changing over into a private or public organization one individual organization needs to expand the number of individuals and chiefs up to 2 or least of 7 individuals and a few chiefs as the case may be.

VII. Exemptions to OPC

There have been a number of capacities that have been given to the one-person company.

  1. It isn’t required for the one individual organization to get ready income articulation as a piece of budget summary. This has been expressed under
    segment 2(40)
    of the Companies Act, 2013.
  2. If there is no organization secretary present under one individual organization then the yearly return can be endorsed by the head of the organization this has been expressed under Section 92(1) of the Companies Act, 2013.
  3. It isn’t necessary for One Person Company to hold a yearly General Meeting. This has been saved under Section 96 one of the Companies Act, 2013.

VIII. Drawbacks of OPC

OPC likewise faces preclusion of conveying any Non-Banking Financial Investments exercises, changing over a completely possessed auxiliary into an OPC and furthermore giving any sort of Employ Stock Scheme. The Companies Act, 2013 additionally disappoints the entire rationale of the OPC by precluding an individual to have multiple OPCs or turn into a chosen one in more than one OPC. This, generally, invalidates the general purpose of the presentation as referenced in the Committee Report.

However, the Government has been advancing major unfamiliar interests in India, there are limitations forced on the unfamiliar financial backers to join an OPC, which has spread a demeanour of misery. The significant inconvenience of an OPC is set off according to the duty viewpoint. The Income Tax, Act, 1961 doesn’t perceive the idea of an OPC and has put it in a similar chunk as a privately owned business under the section of 30% on all-out pay. Actually, sole owners are charged at the rate appropriate to people.

IX. Conclusion

Under the One Person Company, even a solitary individual can begin a business unafraid of limitless obligation regardless of how dangerous it is. He can autonomously complete business under the organization structure. Adaptability will be given to an individual or an expert to oversee his business productively.

Updated On 21 Oct 2021 6:30 AM GMT
Mayank Shekhar

Mayank Shekhar

Mayank is an alumnus of the prestigious Faculty of Law, Delhi University. Under his leadership, Legal Bites has been researching and developing resources through blogging, educational resources, competitions, and seminars.

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