The concept of One Person Company in India was introduced through
the Companies Act, 2013 to support entrepreneurs who on their own are capable of starting a venture by allowing
them to create a single person economic entity. One of the biggest advantages of a One Person Company (OPC) is
that there can be only one member in a OPC, while a minimum of two members are required for incorporating and
maintaining a Private Limited Company or a Limited Liability Partnership (LLP).
Similar to a Company, a One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate.
1. One shareholder:This is the fundamental concept
of a One Person Company. In fact, One Person Company is defined in the Companies Act as a Company which
has only one member. A single shareholder holds 100 percent shareholding.
2. One DirectorThe other important point is that a One Person Company may have only one director. But at the same time there is no bar on more number of directors. However, as per the Act, the total number of directors shall not be more than 15.
As per the Companies Act, if nothing is mentioned in the incorporation document, it would be assumed the sole shareholder shall also be the sole director in the one person company and which shall be practically the case in most One Person Companies incorporated.
3. NomineeThis is a very important concept where the person forming the One Person Company has to nominate a Nominee with his written consent who, in the event of death or inability to contract of the owner of the One Person Company, shall come forward and take over the reins of the one person company.
One more thing, the member can change the nominee at any point of time.
4. Taxation Since nothing has been specified as such by the finance ministry, it is assumed that the rates of taxation applicable for a private limited company shall apply to a One Person Company. Tax @30% along with other cess is to be paid.
5. Freedom from compliance
One Person Company also gets freedom from complying with many requirements as normally applicable to
other private limited Companies.
Certain sections like Section 96, 98 and sections 100 to 111 are not applicable for a One Person Company. Some of these are mentioned below:
No requirement to hold annual or extra ordinary general meetings. Only the resolution shall be communicated by the member of the company and entered in the minutes book and signed and dated by the member and such date shall be deemed to be the date of meeting
For the purposes of holding board meetings, in case of a OPC which has only One director, it shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes under Companies Act, 2013.
No requirement of Cash Flow Statement in the annual financial statements
Annual returns can be signed by the Director himself instead of A Company Secretary
6. Related Party Transactions Where One Person Company enters into a contract with the sole owner of the company who is also the 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 are recorded in the minutes of the first meeting of the Board of Directors of the company held next after entering into contract.
Further, 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 a period of fifteen days of the date of approval by the Board.
This clause shall be very much in vogue since the business of the One Person Company may use many assets of the owner and may pay compensation for that. Examples may be rent paid for using property or machinery or Furniture owned by the Owner. It may pay interest on loans taken from the owner. It may pay salaries to the Owner. All these contracts are covered under the section.
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