Concept of One Person Company Explained for Young Entrepreneurs

Posted on: 2017-04-18 03:48:29

The concept of one person company was introduced in India by the Companies Act, 2013. Ever since its introduction it has been deemed a revolutionary thought. It was an expert committee led by Dr. JJ Irani that recommended the said concept. For people looking to kick off their own businesses with a proper and organized structure the concept of One Person Company opens up some whole new opportunities. With such a company, as a young entrepreneur you will get all the benefits that are normally associated with a private limited company. This categorically implies that they will be able to access credits, business protection in a legal manner, bank loans, market, and enjoy limited liability as well.

Background of this business

As a concept, one person company registration may be a new one in India. However, it has been in existence – and also achieved a fair degree of success, it must be said – in the United Kingdom as well as several other countries across Europe. In fact, this form of business has been in existence for a significant period now. The concept itself has some special features that have been mentioned in the Sub Section 62, Section 2, The Companies Act 2013.

What is a One Person Company?

A One Person Company is basically a company that has only a single member. It also needs to be noted in this context, that for all legal intents and purposes such a company is defined in legal terminology as a private company. Normally, each and every law and provision that is applicable to a private company is applicable for one person company registration in India as well, until and unless anything else is mentioned in this regard. The Companies Act 2013 has however provided an exception to the concept.     

Exception to One Person Company

As per this exception, only a natural-born Indian would be able to register a One Person Company in India. That person needs to be a resident of India as well. This means that the advantages of such a company can only be availed by Indians who were born in the country and are staying in it as well. Alongwith this, it needs to be mentioned that the upper limit for forming such a company has been limited to 5 for each individual. Now, you may want to know how such a company is formed.

How to form a One Person Company

Normally, these companies are incorporated as private limited companies that only have a member each. Such companies normally have restrictions on inviting the public for subscribing to the securities held by the said company. These companies have some salient features such as limitation by guarantee, and limitation by shares. In case such a company is limited by shares there are some more restrictions that will apply to the same. For example it should have a minimum paid-up capital of INR 1 lakh. There are also restrictions on the number of shares to be held by the company. You can look up the internet for answers to this question - How can I register an One Person Company (OPC)?