Name: Shweta Subhash Gawde.

Sub: Business law-III

Std: SYBAF-B (SEM-4)
Roll no: 20071
TOPIC: ONE PERSON COMPANY
What is One Person Company ?
• The concept of One Person Company [OPC] is a new vehicle/form of
business, introduced by The Companies Act, 2013 [No.18 of 2013], thereby
enabling Entrepreneur(s) carrying on the business in the Sole-Proprietor form
of business to enter into a Corporate Framework.

• One Person Company is a hybrid of Sole-Proprietor and Company form of

business, and has been provided with concessional/relaxed requirements
under the Act.
Features of One Person Company
1. Only One Shareholder
2. Nominee for the Shareholder
3. Director
1. Only One Shareholder
• Only a natural person, who is an Indian citizen and resident in India shall be
eligible to incorporate a One Person Company.
• Explanation: The term "Resident in India" means a person who has stayed in
India for a period of not less than 182 days during the immediately preceding
one calendar year.
2. Nominee for the Shareholder
• The Shareholder shall nominate another person who shall become the
shareholders in case of death/incapacity of the original shareholder.
• Such nominee shall give his/her consent and such consent for being
appointed as the Nominee for the sole Shareholder.
• Only a natural person, who is an Indian citizen and resident in India shall be a
nominee for the sole member of a One Person Company.
3. Director
• Must have a minimum of One Director, the Sole Shareholder can himself be
the Sole Director. The Company may have a maximum number of 15 directors.
Terms and Restrictions of OPC
1. A person shall not be eligible to incorporate more than a One Person
Company or become nominee in more than one such company.
2. Minor cannot shall become member or nominee of the One Person
Company or can hold share with beneficial interest.
3. An OPC cannot be incorporated or converted into a company under Section
8 of the Act. [Company not for Profit].
4. An OPC cannot carry out Non-Banking Financial Investment activities
including investment in securities of any body corporate.
5. An OPC cannot convert voluntarily into any kind of company unless two
years have expired from the date of incorporation of One Person Company,
except threshold limit (paid up share capital) is increased beyond Rs.50 Lakhs
or its average annual turnover during the relevant period exceeds Rs.2 Crores
i.e., if the Paid-up capital of the Company crosses Rs.50 Lakhs or the average
annual turnover during the relevant period exceeds Rs.2 Crores, then the OPC
has to invariably file forms with the ROC for conversion in to a Private or Public
Company, with in a period of Six Months on breaching the above threshold
limits.
Steps to incorporate OPC
1. Obtain Digital Signature Certificate [DSC] for the proposed Director(s).
2. Obtain Director Identification Number [DIN] for the proposed director(s).
3. Select suitable Company Name, and make an application to the Ministry of
Corporate Office for availability of name.
4. Draft Memorandum of Association and Articles of Association [MOA &
AOA]. Steps to Incorporate One Person Company (OPC)
5. Sign and file various documents including MOA & AOA with the Registrar of
Companies electronically.
6. Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp
Duty.
7. Scrutiny of documents at Registrar of Companies [ROC].
8. Receipt of Certificate of Registration/Incorporation from ROC.
Advantages of OPC
1. A Separate Legal Entity : One Person company is a separate legal entity and
capable of doing everything that an entrepreneur would do.
2. Easy Funding : Like a Private company, One Person Company can raise funds
through venture capital, financial institutions, angel investors etc. A One
Person Company can raise funds thus graduating itself to a private limited
company.
3. More Opportunities, Limited Liability : Since the liability of the One Person
Company is limited to the extent of the value of the share you hold, the
individual could take more risk in business without affecting or suffering loss of
personal assets. It is the encouragement to new, young and innovative
start-ups.
4. Minimum Compliances : One Person Company have to face little compliance
burden as compared to private limited companies , hence One Person
Company can more focus on other functional and core areas.
5. Credit Rating : The One Person company with bad credit rating may even get
the loan. Credit rating of One person company will not be material if the rating
of One person company is as per norms.
6. Benefits under Income Tax Law : Any remuneration paid to the director will
be allowed as deduction as per income tax law unlike proprietorship. Other
benefits of presumptive taxation are also available subject to income tax act.
7. Benefits of being a Small Scale Industries : An One Person Company can avail
the various benefits provided to Small Scale Industries like lower rate of
Interest on loans, easy funding from bank without depositing any security to a
certain limit, manifold benefits under Foreign Trade policy and others. All these
benefits can be boon to any business in initial years.
8. The Only Owner : You, only the owner helpful in quick decision-making,
controlling and managing the business without following any elongated
processes and methodologies as adopted in other companies. The sense of
belonging inspires to grow the business further.
9. Receive Interest on any late Payment : One Person company avails all the
benefits under Enterprises development Act, 2006. The newly start-up One
Person company is micro, small, or medium, hence they are covered under this
act . As per the Act, if buyer or receiver receives any late payment (receives
payment after specified period) , then he is entitled to receive interest which is
three times the bank rate.
10. Increased Trust and Prestige : Any business entity that runs in the form of
company always enjoys an increased trust and prestige.
Partnership Firm V/S OPC
● Registration is mandatory ● Registration is not mandatory
● Minimum 2 persons required ● Only one person required
● Maximum 10 or 20 ● Maximum 3 (2nd: nominee)
● Joint owner ● Single owner
● Registration is not compulsory ● Registration is compulsory
● Ownership is not Transferrable ● Ownership is transferable
● Partne and firm both are same ● Owner and company both are
different
Conclusion
The concept of OPC is still in its nascent stages in India and would require
some more time to mature and to be fully accepted by the business world.
With passage of time, the OPC mode of business organization is all set to
become the most preferred form of business organization specially for small
entrepreneurs.
The One Person Company concept holds a bright future for small traders,
entrepreneurs with low risk taking capacity, artisans and other service
providers.
An OPC as a business structure doesn’t seem efficient from tax perspective as
an OPC would be treated as a company and be subject to a higher rate of tax
compared to a Sole Proprietorship. Since an OPC is a company, there would
be an incidence of tax (dividend distribution tax) while distribution of
dividend.
Thank you..!