All about one person company

Shivani Sinha | 12-Feb-2016

Back in 2013, when the advent of the entrepreneurial culture started to turn pretty evident, all that was needed was a legal kick start to turn this rising into a revolution. The Companies Act, 2013 came as a welcomed change with the broad inclusion of One Person Company under its provisions. And that’s where the start-up proliferation actually started, later making India as one of the fastest growing entrepreneurial hubs around the globe. 

A One Person Company is basically an amalgamation of the sole proprietorship and the company models of business. It offers all the benefits of a sole entrepreneur willing to enter into the corporate framework, i.e. the power of sole ownership with the relief of limited liability.

The distinct features:

  1. There is only one Shareholder who must be an Indian citizen resident in India.
  2. The shareholder must appoint a consenting resident Nominee who shall become the shareholder  in case of death/incapacity of the former.
  3. The number of directors must be between one and fifteen. The shareholder can himself be a director of the company.

*The term “resident in India” means a person who has stayed in India for a period of not less 182 days immediately preceding one calendar year

The Companies Act in the provision of section 2(62) defines one person company as a company which has only one person as member. It is noteworthy that the Act classifies OPC as a Private Company for all the legal purposes.
The salient features of an OPC are summarized as follows:

  1. It can be formed as any of: company limited by shares or company limited by guarantee.
  2. A person shall not be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
  3. A minor cannot become a member in an OPC or be a nominee in one.
  4. An OPC has to mandatorily convert into private or public company in case its paid up share capital exceeds fifty lakh rupees or its average annual turnover exceeds two crore rupees during the relevant period. 

Now the question arises, why form an OPC after all?  Well, there are several privileges that an OPC avails:

  1. Liability of member is limited to the extent of his/her share holding or guarantee, as the case may be.
  2. Mandatory rotation of auditor which you can hire from after expiry of maximum term is not applicable.
  3. Lesser compliance work has to be followed.
  4. Minimum number of members, directors and authorized share capital (Rs. 1,00,000) are way lesser than that of a company

However, there are also a few prohibitions that need to be taken care of:

  1. An OPC cannot be incorporated or converted into a company under Section 8 of the Act. [Company not for Profit].
  2. An OPC cannot carry out Non-Banking Financial Investment activities including investment in securities of anybody corporate. 
  3. An OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of its incorporation.

But this model continues to remain the best for small enterprises. 
The formation of an OPC is easy with almost the same procedure as that of a company:

  1. Apply for a name to the Ministry of Corporate Affairs in form INC-1.
  2. Obtain Digital Signature Certificate [DSC] and a Director Identification Number [DIN]  for the proposed Director(s).
  3. Draft, sign and file the Memorandum of Association and Articles of Association [MOA & AOA] with the Registrar of Companies electronically
  4. File other required documents along with fee payment and stamp duty.
  5. The RoC, if satisfied, issues a Certificate of Registration/Incorporation and the OPC comes into existence.

It is not an overstatement to say that an OPC is the perfect package for entrepreneurs willing to start their own ventures. With the procedures becoming simpler and each step growing smoother, entrepreneurs need not waste time on complex compliances and rather, focus on their core competency which not only is relevant to personal growth, but also to the bloom of economy of the entire nation. Just check all the legal requirements for an OPC start-up and hire the experienced chartered accountant from and get started today!

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of The writers are solely responsible for any claims arising out of the contents of this article.
About the Author
Shivani Sinha
A Master degree holder is a Content Developer and an SEO specialist. Having more than 6 years of experience into content development and marketing, she has contributed substantially in this arena. She is good at brainstorming and fast in writing crispy content, bold slogans, catchy captions and punchy one liners. Her stories are well researched and provide for an interesting read. She enjoys working in association with entrepreneurs while spearheading business launches providing marketing advice.