One person company is a concept introduced in India by the Companies Act, 2013. The concept opens up new vistas of business opportunities and particularly spectacular possibilities for sole proprietorships and entrepreneurs who can enjoy the advantages of limited liability, and the benefit of separate legal entity as well.
Ministry of Corporate Affairs vide its G.S.R. Notification No. 250(E) dated 31st March, 2014 notified the Companies (Incorporation) Rules, 2014 under the Companies Act, 2013 which provide for formation of One Person Company
The introduction of OPC in the legal system is a move that would encourage corporatization of micro businesses and entrepreneurship with a simpler legal regime so that the small entrepreneur is not compelled to
devote considerable time, energy and resources on complex legal compliances. This will not only enable individual capabilities to contribute economic growth, but also generate employment opportunity. One Person Company of sole-proprietor and company form of business has been provided with concessional /relaxed requirements under the Companies Act, 2013.
With the implementation of the Companies Act, 2013, a single national person can constitute a Company, under the One Person Company (OPC) concept.
Origin of the concept in India
The concept of OPC was mooted, in the report of Dr. J.J. Irani Committee. The Irani Committee briefly referred to OPC in its report. In Chapter III titled "Classification and Registration of Companies" the committee suggested multiple classification of companies as given hereunder.
This classification which included OPCs was:
- i. On the basis of size
- a. Small companies
- b. Other Companies
- a. One person company
- b. Private companies
- c. Public companies
- a. Holding companies
- b. Subsidiary companies
- c. Associate companies
- a. Limited
- I. by shares; and
- II. by guarantee (with or without share capital)
- b. Unlimited
- a. Listed companies
- b. Un-listed companies
The Committee expressed the view that the law should recognize the potential for diversity in the forms of companies and rather than seeking to regulate specific aspects of each form, seek to provide for principles that enable economic inter-action for wealth creation on the basis of clear and widely accepted principles.
Regarding OPC, the suggestions of the Committee were thus - One Person Company (OPC)”
With increasing use of information technology and computers, emergence of the service sector, it is time that the entrepreneurial capabilities of the people are given an outlet for participation in economic activity. Such economic activity may take place through the creation of an economic person in the form of a company. Yet
it would not be reasonable to expect that every entrepreneur who is capable of developing his ideas and participating in the market place should do it through an association of persons. We feel that it is possible for individuals to operate in the economic domain and contribute effectively. To facilitate this, the Committee recommends that the law should recognize the formation of a single person economic entity in the form of ‘One Person Company’. Such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters.
The concept of ‘One Person Company’ may be introduced in the Act with following characteristics :-
- (a) OPC may be registered as a private Company with one member and may also have at least one director;
- (b) Adequate safeguards in case of death/disability of the sole person should be provided through appointment of another individual as Nominee Director. On the demise of the original director, the nominee director will manage the affairs of the company till the date of transmission of shares to legal heirs of the demised member.
- (c) Letters ‘OPC’ to be suffixed with the name of One Person Companies to distinguish it from other companies.”