A boon for individual entrepreneurs.
One Person Company concept was commenced under Law in 2013. J J Irani Committee’s report on Company Law explained the apprise in the knowledge of information technology and computers could be beneficial for the economy if the entrepreneurial capabilities of such people are encouraged. So the main purpose of the Companies Act of 2013 introducing the concept of One Man Company, was to promote entrepreneurship. Earlier at least 2 directors for a private company and 3 for a public company were required to establish a company, and a single person could not incorporate a company alone. Section 2(62) of the Company’s Act 2013 allowed establishing Companies with 1 Director and 1 member, with the authorised capital as low as 1 lakh, namely- One Person Company. Such companies are to be registered in the Registrar of Companies. Looking into its international existence, the United Kingdom, and China had allowed the formation of the OPC since 2006.
Salient Features of OPC
[+Benefits]
- Unlike a sole proprietorship, in which the liability can extend to the belongings of the person, OPC has limited liability.
- It provides operational transparency as all such companies are registered under the Registrar of Companies.
- Only a naturally born Indian, who is a resident of India can incorporate such a company.
- The minimum paid-up share capital required is INR one lakh.
- It has all features of a private company Company has its own existence separate from that of its Director and Shareholder
- Section 98 and Sections 100 to 111 are not applicable to OPCs, so they do not have to organize AGMs – Annual General Meeting.
- OPC shall be involuntarily converted into a Private limited company, if annual turnover exceeds 2 crores, in 3 continuous years and willingly after 2 years.
Shortcomings of OPC:
- It discourages Foreign Direct Investment by not permitting foreign and multinational companies to incorporate their subsidiaries in India as a One Person Company.
- Mandatory Requirement To Appoint Nominee – in death and incapacity – fails the main motive, which aimed to encourage entrepreneurship by not requiring to look for other people.
- Heavy Burden of Tax- Private company taxation at 30%, and should be recognized under the Income Tax Act 1961.
- OPCs are not allowed to invest in securities of any body corporate.
ONLINE REGISTRATION PROCESS BY CLEARTAX
The First OPC incorporated in India on 28th April 2014 at Delhi under RoC-Delhi jurisdiction was -VIJAY CORPORATE SOLUTIONS OPC PRIVATE LIMITED”, where Mr. Vijay K. Sharma being the only Director and Shareholder of the Company. The statistics of the Ministry of Corporate Affairs, by 30th November 2019, a number of 25,763 OPCs were registered in India. They collectively authorized capital amounts of Rs. 749.08 crore. OPC subsists as a remarkable change, allowing small scale companies to grow, by raising capital and enjoying their sole leadership. But it still needs to remove its inefficient flaws. It’s a consensus that it should be included in the Income Tax Act 1961, and the one person, the only OPC provision should be checked, and more likely removed, and investment should be allowed.
- By Dharna Prasad, Hindu College.
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