As per Section 2(62) of the Companies Act, 2013, a One Person Company is defined as any company with just one member. Section 3 of the Act, also clarifies that an OPC will be considered a Private Company when it comes to legal matters. Hence, all rules which must be held in place for a Private company is also valid for an OPC. The only exception to this rule is that an OPC can be made only by a “Natural Indian” who lives in India can form an OPC. Also, another law states that one particular individual cannot create more than 5 OPCs in his or her name.
Features of an OPC are as follows:
An OPC may be formed as either of the two:
(a) Limited by Guarantee
(b) Limited by Shares
If shares limit the OPC, then it should have an internal capital of at least Rs 1 lakh and should have the power to restrict share transfers. It will also not be allowed to invite people to subscribe to it.
An OPC must have a legally registered name, under which it operates and the term; One Person Company must be mentioned wherever the name of the company is used.
An OPC member must nominate another with consent and have this nominee’s name filed to the Registrar of Companies.
This nominee will run the OPC if the founding member dies or meets with some exceptional circumstances. The member may change the name of the nominee, as and when he or she desires by approaching the Registrar of Companies. If the member dies, while in power, then all the shares and liabilities that the OPC has accumulated automatically pass onto the nominee.
Benefits of an OPC:
Limited Liability – Liability is treated differently in an OPC as it is a separate entity, and so shareholder liability is limited to the payment of subscription money. Hence, the member’s personal assets are not at risk.
Smooth Succession- As the name of the nominee is made during the creation of the OPC, succession laws are simple. In the event of the death of a member, all the shares and investments of the OPC are handed down to the nominee. There is no need for any lengthy procedure or submission of will as is the case with sole proprietorships.
Easier Compliances – A One Person Company has more relaxed and less binding compliance regulations. This dramatically reduces paperwork associated with running the company and hence, reduces the load on the HR department.
Helps in organizing the unorganized proprietorship by giving it the same legal status of a private limited company. This provides better banking facilities to such companies. It also helps such companies have better status and recognition with respect to other companies.
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