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One Person Company: Meaning and Characteristics

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  • Last Updated : 26 Jul, 2022
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On the basis of ownership, a company can be of three types: 1. One Person Company 2. Private Company 3. Public Company. The Companies Act, of 2013, introduced a number of ideas that had never before been used in Indian corporate law. One such major shift was the emergence of the one-person company concept. Before the new Companies Act was passed in 2013, several other nations had previously acknowledged the capability of people to create a corporation. China, Singapore, the UK, Australia, and the USA were a few of these.

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:

  1.  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.
  2. 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.
  3. No minor shall become a member or nominee of the OPC or can hold share with beneficial interests.
  4. Under Section 8 of the Act, OPC cannot be incorporated or converted into a company.
  5. OPC cannot carry out non-banking financial investment activities, including investment in securities of any corporate.
  6. 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.
  7. When a natural person, being a member in OPC becomes a member in another OPC by virtue of his being a nominee in that OPC within a period of one hundred and eighty days, i.e., he shall withdraw his membership from either of the OPCs within one hundred and eighty days.
  8. The word “One Person Company” shall be mentioned in bracket below the name of such company, wherever its name is printed, affixed or engraved. 
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