The Companies Act, 2013 has introduced a new concept of ‘One Person Company’ (herein after referred to as ‘OPC’). Section 3 (1) (c) of Companies Act, 2013 has been notified vide notification dated 26th March 2014, and the same shall be effective from 01st April 2014.
It is a new form of business by which a company can be incorporated with one person only. It enables the entrepreneur carrying 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 relaxed requirements under the Companies Act, 2013.
Important Notes:
- Only a natural person can be a member of One Person Company.
- The director and shareholder can be the same person.
- The person should be an Indian citizen and resident in India only.
- NRIs not allowed to incorporate One Person Company.
- No person shall be eligible to incorporate more than one OPC.
- No minor shall become a member of OPC or can hold a share with beneficial interest.
- No OPC can convert voluntarily into any kind of company unless two years have expired from the date of incorporation.
- The minimum capital requirement is Rs. 1,00,000/-
- OPC is suitable only for small businesses. If paid up share capital exceeds Rs. 50,00,000/- (Rupees Fifty Lakhs) or its average annual turnover during the relevant period exceeds Rs. 2,00,00,000/- (Rupees Two Crores) or if during financial year its balance sheet total exceeds one crore rupees, it would cease to continue as an OPC. However, such OPC would be mandatorily required to convert itself within a period of six months into a Private or Public Company.
- While doing business as a proprietorship firm, the personal assets of the proprietor can be at risk in the event of failure, but this is not the case for a One Person Private Limited Company, as the shareholder liability is limited to his shareholding. This means any loss or debts which are purely of business nature will not impact, personal savings or wealth of an entrepreneur.
- Very few ROC compliances required.
- No requirement to preparing cash flow in the annual financial statements.
- No, FDI is allowed in One Person Company, if it does then it will lose its very nature of One Person Company.
- In the case of OPC money can be arranged only through a loan(s).
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