OPC - One Person Company

1. ONE PERSON COMPANY
http://www.bizandlegis.com

2. What is One Person Company?
 Company formed by a single person
 one-person company in the legal system is a move that
would encourage corporatisation of business and
entrepreneurship
 OPC is a one shareholder corporate entity.
 legal and financial liability is limited to the company only.
http://www.bizandlegis.com

3. Salient Features of OPC
 Promotes entrepreneurship across the country.
 de-risks the business by transferring the promoter’s liability to the company.
 very little paper work — the Articles of Association would be simple and short
 If same person is doubling as director and shareholder there would be no need
for board or shareholders’ meetings.
 Quorum requirements, proxies, maintaining of various registers of members,
filing of multiple e-forms fade away, leaving the single operator free from the
fetters of corporate governance, except that he has to maintain his books of
accounts, prepare and file annual audited balance sheet and profit and loss
accounts, without the Board’s report.
 The memorandum of a One Person Company shall indicate the name of the
person who shall, in the event of the subscriber’s death, disability or otherwise,
become the member of the company.
 The memorandum of a company shall state the last letters and word ―OPC
Limited‖ in the case of a One Person limited company.
 The One Person Companies are also not required to hold any Annual General
Meeting under the new Companies Draft Bill, 2009. This facility is not
extended towards any other type of companies.
http://www.bizandlegis.com

4. Company vis-à-vis ONE PERSON
COMPANY
Common Seal
Perpetual Succession
Separate finances
Separate legal entity
Separate property
Limited liability
Management and Control
http://www.bizandlegis.com

5. OPC v/s SOLE PROPRIETORSHIP
OPC Sole proprietorship
 Separate legal entity  Owner & entity is same
personality
 Limited Liability  Unlimited Liability
 Debt- not the sole responsibility  Debt - sole responsibility of the
of the owner owner
 Finance- credit record of the  Finance- credit history of the
company owner
 Legal requirements- will need  Legal requirements- will not
to register itself as such have to draw up paper declaring
its status
 Tax paid by the owner
 Separate tax
http://www.bizandlegis.com

6. One Person Company – In Foreign
Jurisdictions
 China
1. introduced it in October 2005) in which the promoting
individual is both the director and the shareholder.
2. In China, one person is allowed to apply for opening a limited
company with a minimum capital of 1, 00,000 Yuan. The
amended law of China prescribes that the owner should pay the
investment capital at one time and bars him from opening a
second company of the same kind.
 Pakistan
1. The amended company law of Pakistan permits one person to
form a single-member company by filing with registrar, at the
time of incorporation, a nomination in the prescribed form
indicating at least two individuals to act as nominee director
and alternate nominee director.
http://www.bizandlegis.com

7.  U.K.
1. U.K.Companies Act, 2006 & the Companies (Single Member)
Private Companies Regulations 1992
 Singapore
1. Company Amendment Act of 2004 and other regulations
 United Arab Emirates
1. One Person Company recognized
2. Only Articles of Association
 United States
1. In US, several states permit the formation and operation of a
single-member Limited Liability Company (LLC).
 In most countries, the law governing companies enables a single-
member company to have more than one director and grants
exemptions to such companies from holding AGMs, though
records and documents are to be maintained.
http://www.bizandlegis.com

8. ONE PERSON COMPANY IN
INDIA
 J.J Irani Report
 Companies Bill, 2009
http://www.bizandlegis.com

9. Draft Companies Bill, 2009
 The Draft Companies Bill, 2009, (Bill No. 59 of 2009),
as introduced in Lok Sabha on 3rd august 2009,
introduces the OPC concept for the first time in India.
 The Bill will provide a substantive legal framework
while leaving the procedural issues to the rules to be
notified subsequently.
 Articulation of shareholders democracy with
protection of the rights of minority stakeholders,
responsible self regulation with disclosures and
accountability has been the objective behind this
simplified company law.
http://www.bizandlegis.com

10. Provisions Under Company Bill
 One Person Company is defined under section
2(1) (zzk) as:
―One Person Company‖ means a company which
has only one person as a member‖
http://www.bizandlegis.com

11.  Section 3(1) (c) deals with the formation of One Person Company. It
states:
―One person, where the company to be formed is to be a One Person
Company, by subscribing their names or his name to a memorandum in
the manner prescribed and complying with the requirements of this Act
in respect of registration:
Provided that the memorandum of a One Person Company shall
indicate the name of the person who shall, in the event of the
subscriber’s death, disability or otherwise, become the member of the
company:
Provided further that it shall be the duty of the member of a One Person
Company to intimate the Registrar the change, if any, in the name of the
person referred to in the preceding proviso and indicated in the
memorandum within such time and in such form as may be prescribed,
and any such change shall not be deemed to be an alteration of the
memorandum‖
www.bizandlegis.com

12.  Section 5(1) deals with the memorandum of the One
Person Company. It states
―The memorandum of a company shall state— the last
letters and word ―OPC Limited‖ in the case of a One
Person limited company‖.
 Section 13(1) a, b, c deals with alteration of articles
including the conversion of Private Companies, Public
Companies to One Person Companies and vice-versa.
One very important feature of the OPC concept is the
conduction of Annual General Meeting.
 Section 85(1) of the Draft Bill excludes One Person
Company from holding Annual General Meeting at
least once in a year.
www.bizandlegis.com

13. Section 171 is perhaps the most important and fascinating provision to look out for. It
states:
―Contracts by One Person Companies-
171. (1) Where a One Person Company limited by shares or by guarantee enters into a
contract with the sole member of the company who is also director of the company, the
company shall, unless the contract is in writing, ensure that the terms of the contract or
offer are contained in a memorandum or are recorded in the minutes of the first meeting
of the Board of Directors of the company held next after the entering into the contract:
 Provided that nothing in this sub-section shall apply to contracts entered into by the
company in the ordinary course of its business.
 (2) The company shall inform the Registrar about every contract entered into by the
company and recorded in the minutes of the meeting of its Board of Directors under sub-
section (1) within fifteen days of the date of approval by the Board of Directors with such
fee as may be prescribed, or with such additional fee as may be prescribed within the
time specified, under section 364.
 (3) Where the company fails to inform the Registrar under sub-section (2) before the
expiry of the period specified under section 364 with additional fee, the company shall be
punishable with fine which shall not be less than twenty-five thousand rupees but which
may extend to one lakh rupees and every officer who is in default shall be punishable
with imprisonment for a term which may extend to six months or with fine which shall
not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or
with both.‖
www.bizandlegis.com

14. Conclusion
 OPCs are imperative because they would give
entrepreneurial capabilities of people an outlet for
participation in economic activity and such economic
activity may take place through the creation of an economic
person in the form of a company.
 However, there has been criticism in certain quarters
against the formation of such a company as it may give
room for evasion of public funds and tax liability by an
individual.
 Whether only an individual or even a legal person can form
a one-person company?
 Whether a single member can form a company without any
limit on the paid-up capital or some ceiling?

15.  If the turnover of the one-person company exceeds
certain limits, whether it should to be converted into
private/public limited
 small entrepreneurs who are running their businesses
under the proprietorship model could convert to OPCs,
with the benefit of limited liability and none of the
cumbersome compliance requirements.
 On a positive note, OPCs are expected to attract
investors who were earlier afraid to take risk in
investing in sole proprietorship business because of
unlimited liability.
 Process of starting a business getting simpler it could
be a boon for every form of small business.
 Opportunity for a lot of Non Resident Indians (NRIs)
and Persons of Indian Origin (PIOs) who can set up
their companies in India.
www.bizandlegis.com

16. QUESTIONS ???
www.bizandlegis.com

17. THANK YOU
http://www.bizandlegis.com