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The Companies Act, 2013, proved to be revolutionary as it introduced many different concepts in the corporate world of India and it proposed new ways of conducting business. It gave a new light to conducting of business for the businessmen and entrepreneurs. 

One Person Company was one such new concept introduced in the Companies Act, 2013. It was initiated with a view to supporting entrepreneurs who on their own are capable of starting a venture by allowing them to create a single person economic entity. 

One Person Company is defined in Sub- Section 62 of Section 2 of The Companies Act, 2013, which reads as follows:

‘One Person Company means a company which has only one member’

It shall also be important to note that Section 3 classifies OPC as a Private Company for all the legal purposes with only one member. These companies have only one promoter or founder for the business. OPC is very similar to sole proprietorship but the main difference between OPC and Sole Proprietorship is their liabilities. In OPC, the founder is not personally liable for the debts of the company as OPC is a separate legal entity whereas in Sole Proprietorship, the founder is personally liable for all the debts and all the assets and liabilities are tied directly to him. Entrepreneurs opt for OPC instead of Sole Proprietorship due to its many advantages.  

Features of OPC:

  • The only exception provided by the Act to an OPC is that according to the rules only “NATURALLY-BORN” Indian who is also a resident of India is eligible to incorporate an OPC i.e. the advantages of an OPC can only be obtained by those Indians who are naturally born and also a resident of India. 
  • OPCs can have only one member or shareholder unlike other companies. 
  •  The minimum number of person as directors in OPCs is one and maximum is 15 directors. 
  • Another distinguishing feature of OPC is that at the time of registering the sole member has to mention a nominee. 
  • OPCs enjoy special privileges and exemptions under the Companies Act. 

Let us see who all are eligible to incorporate an OPC:

  1. Only a natural person who is Indian Citizen and resident in India can incorporate OPC.
    1. Resident in India means a person who had resided in India for a period not lesser than 182 days in the prior calendar year.
  2. Legal entities like company or LLP cannot incorporate an OPC.
  3. Minimum authorised capital is Rs 1,00,000. 
  4. Businesses involved in financial activities cannot be incorporated as an OPC.
  5. OPC cannot continue working when it’s paid up share capital is in excess of 50 lakhs and turnover is in excess of 2 crores so it must be converted to a private limited company.
  6. A minor is prohibited from being a member of OPC. 

The process for incorporation of an OPC is divided into four steps:

  • Obtaining Digital Signature Certificate (DSC)
  • Obtaining Director Identification Number (DIN)
  • Obtaining Name Approval
  • Incorporation Filing
  1. DSC is to be obtained by the sole promoter and nominee for the registration process. It can be obtained by submitting the following documents:

Address proof

Aadhar card 

Passport size photos of applicant

PAN Card

  1. After obtaining the DSC, DIN must be obtained by the sole promoter and nominee. No additional documents are required for obtaining DIN. 
  2. The next step is to apply for name reservation of the company. 1 preferred name is to be submitted along with the significance of choosing that name. Up to 6 name options can be submitted and all the names given have to conform to the naming standards and the name must include or end with the words OPC. 
  3.  After getting the name approved from MCA, signed Memorandum of Association (MOA) and Articles of Association (AOA) is to be submitted to the Registrar of Companies (ROC). The other documents to be submitted along with the MOA and AOA are identity proof, address proof, affidavits and declarations of the sole promoter. Affidavit and consent of the proposed Director is also to be attached with FORM INC-9. 
  4. All the above documents are to be submitted to SPICe form, SPICe- MOA, SPICe-AOA. 
  5. After verification, the Registrar of Companies (ROC) will approve and issue a Certificate of Incorporation and the business can commence.  

OPC aims at encouraging solo entrepreneurs to set up a company all by themselves. One of the biggest advantages of an OPC is that there can be only one member in an OPC, whereas a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership. 

OPC is already established and popular in foreign countries, including countries such as USA, Singapore, etc. It is a new concept in India and it is proving to be favourable due to its many advantages. Similar to a Company, an OPC is a separate legal entity from its members, offers limited liability protection to its shareholders and is easy to incorporate.

 Some other advantages of OPCS are:

  • Less compliance burden: OPC s are required to comply with the provisions applicable to private companies but OPCs are provided with many exemptions and therefore have less compliance burden. 
  • Single owner: Only one person runs the whole business. thus he has all the right to make decisions and control over the business which leads to quick and effective working of the business as he doesn’t have to get consent or wait for anybody else’s approval over the work.  
  • Limited liability: unlike, sole proprietorship, the person’s liability is only up to the extent of the value of shares they hold and their personal assets will not be bound with the company.
  • Minimum requirements:
    Minimum 1 Shareholder

Minimum 1 Director

The director and shareholder can be the same person

Minimum 1 Nominee

Letters ‘OPC’ to be suffixed with the name of OPCs to distinguish it from other companies

The above advantages prove that OPCs are easy to incorporate and manage the company. It is also beneficial for the small scale industries and young entrepreneurs. It is for those solo entrepreneurs who need 100% control of the business. However, it also has certain disadvantages which have to be carefully considered before converting or forming an OPC. 

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