Meaning of One Person Company: According to Section 2 (62) of the Companies Act, 2013, One Person Company means a company which has only one person as a member.
It is incorporated as a private company which has only one member. Therefore, a corporation can be registered even when it only has one shareholder or member. The main aim of One Person Company was to encourage corporatization of micro-businesses and entrepreneurship. The JJ Irani Expert Committee recommended the formation of OPC in India, in 2005. It has all the benefits of a private limited company, such as a separate legal entity, protecting personal assets from the liabilities of the business and perpetual succession.
One Person Business (OPC) is officially a company with only one shareholder, as its member are recognized as the company’s shareholders. OPCs often develop when there is just one founder or promoter of the company. Due to the multiple benefits that OPCs provide, businessmen or entreprenerd, who are just starting a business, choose this form of business over sole proprietorships.
Characteristics of a One Person Company
The characteristics of One Person Company are as follows:
- Only a natural person, who is an Indian citizen and resident in India: a) shall be eligible to incorporate a One Person Company; b) shall be a nominee for the sole member of a One Person Company. The term ‘resident’ of India’ means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one calendar year.
- OPCs differ from other types of businesses in that the sole member of the company must appoint a nominee when registering the business. No person shall be eligible to incorporate more than one OPC or become a nominee in more than one such company.
- No minor shall become a member or nominee of the OPC or can hold share with beneficial interests.
- Under Section 8 of the Act, OPC cannot be incorporated or converted into a company.
- OPC cannot carry out non-banking financial investment activities, including investment in securities of any corporate.
- OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except when paid-up capital is increased beyond 50 lakh rupees or its average annual turnover during the relevant period exceeds 2 crore rupees.
One Person Company (OPC) Registration Process:
Timelines for OPC Registration
The DSC and DIN of the proposed directors can be obtained in 1 day. The Certificate of Incorporation of an OPC is obtained in 3-5 days. The whole incorporation process of an OPC takes approximately 10 days, subject to departmental approval and revert from the respective department.
Nominee
‘Nominee’ concept is a very important concept. As per Section 3 [14] of the Companies Act, 2013 Shareholder owning the One Person Company has to nominate a Nominee with his written consent. Such a nominee, in the event of death or inability to contract of the owner of the OPC, shall come forward and take over the reins of the OPC. Further, if the person so nominated becomes the member of such a One Person Company and is already a member of another such OPC, at the same time, then, by virtue of the Company Rules, he must decide within 6 months which one person company he has to continue.
Another point, the member can change the nominee at any point of time.
Nominee shall give his prior written consent in prescribed form (INC-3) and same shall be filed with ROC. However, nominee also holds the right to withdraw his consent.
Also, the sole member of OPC may, at any time, change the nominee by giving notice to company and company shall intimate same to the registrar. (INC-4 Change in member/ nominee).
Only a natural person who is an Indian citizen and resident in India, shall be eligible to be a nominee for the sole member of a OPC. No minor shall become a nominee of the OPC.
Documents required for Change in Nominee in OPC
he soles owner and the nominee shall execute two forms – INC-3 and INC-4 for the entire process of change in nominee. INC-3 is the witness consent form. It’s an internal form. It’s not an e-form but a physically form. The new nominee shall sign the form INC-3 along with the following attachments:
- Proof of Identity: – Voters Identity card/Passport/ Driving License/ Aadhar Number
- Residential Proof: – Bank Statement/ Electricity Bill/Telephone Bill/Mobile bill
The Nominee shall manually sign INC-3.
Impact of OPC in Indian Entrepreneurship
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 organisation is all set to become the most preferred form of business organization specially for small entrepreneurs. The benefits emanating from this concept are many, to name a few – • Minimal paperwork and compliances • Ability to form a separate legal entity with just one member • Provision for conversion to other types of legal entities by induction of more members and amendment in the Memorandum of Association.
Cases Related to One Person Company:
In the case of Motor Owners’ Insurance Company Ltd. v. Jadavji Keshavji Modi 1981 ACJ 507 (SC), the Supreme Court has held that an accident caused by truck resulting in death of more than one person, the insurance company is liable for payment of compensation in respect of death or injuries suffered by each one of the persons separately. The insurance company is thus liable to the extent of statutory liability in case of each death.
Section 86H of the 1913 Act restricts the right of the Directors of a public company or a subsidiary company to sell or dispose of the undertaking of the company and to remit any debt due by a Director except with the consent of the company in its general meeting. Section 87E prohibits a company to give any loan to or guarantee any loan made to any company under management by the same managing agent but the loans made or guarantees given by a company to or on behalf of a company under its own management or loans made by or to a company to or by a subsidiary company thereof or to guarantees given by a company on behalf of a subsidiary company are not prohibited. Section 132A mandates that the Balance sheet of a holding company shall include the particulars of a subsidiary company or companies when the holding company, holds shares, either directly or through a nominee, in such company or companies such as the last audited balance sheet, profit and loss account and auditors’ report of the subsidiary company or companies, and a statement signed by the persons by whom, the balance-sheet of the holding company is signed staking how the profits and losses of the subsidiary company, shall be attached for the purposes of the accounts of the holding company. Thus, under the Companies Act, 1913, the subsidiary company is subject to control and restrictions in its working existence, whereas each of the Company registered under the 1956 Act is completely independent juristic entity. The Supreme Court in the judgement reported as Vodafone International Holdings B.V v. Union of India, (2012) 6 SCC 613, held that each of the incorporated Company (under the 1956 Act) is a distinct juristic entity and the fact that all its shares are owned by one person or by the parent company has nothing to do with its separate legal existence. It was held as under:
The Apex Court in the case of Associated Rubber Industry Ltd., reported in 1986 (157) ITR-77 (S.C), relying upon its earlier judgment in case of Medowell & Co. Ltd. v. CTO, reported in 1985 154 ITR-148, 161 (S.C) has held that even if companies are distinct legal entities having separate existence, this is not the end of the matter and it is the duty of the Court in every case, where ingenuity is expended, to get behind the smokescreen and discover the true state of affairs. Thus, the principle of lifting the corporate veil for discovering the true state of affairs behind the veil of the corporate entity is a well settled legal principle. It is this principle which has to be applied for determining as to whether two or more manufacturing units owned by separate partnership firms, private limited companies and/or public limited companies are to be treated as the units of the same manufacture. On this point, the Apex Court in case of CCE, Delhi v. Modi Alkalies & Chemicals Ltd., reported in 2004 (171) E.L.T 155 (S.C), has held that when on lifting the corporate veil it is found that only one person/company has extraordinary interest and pervasive control over the financial matters and management of other companies, irrespective of the latter having separate sales tax, income tax and central excise registration, their clearances have to be clubbed for determining their eligibility for the SSI Exemption Notification No. 1/93-C.E. In this regard, Para 87 of the judgment is reproduced below:
Conclusion:
The single entrepreneurs are in the need of a speedy mechanism to get incorporated into the company form of a business & OPC seems to be the possible solution where the entrepreneurs are not required to fritter away their time, energy & resources on procedural matters
The most important benefit of establishing One Person Company is that the owner is solely responsible for all the affairs. The matters of the company have less liability and enjoy benefits like that of Private Limited Company. The owner is exclusively the most powerful authority for one Person Company.
Dipti Shashikant Shete
SNBP law college, Pune
LLB II
