Concept of One Person Company

In the Company Law Bill, one new concept is thrown in, that is the concept of One Person Company. Presently what the Law says regarding Company is that it is an association of persons, it means at least two persons, so the concept of one person company must be understood from the point of view of the meaning of Company itself as proposed.

Both  the present Act and the Proposed Bill defines Company as a company incorporated under the Act or any other previous Acts. But the meaning of company is well accepted that it means an association of persons. 

In the Proposed Bill, Companies are classified into three broad category based on the Number of Members, first the Public Company where the minimum number of members shall be 7, second the Private Company where it is 2. These are same as per the present Act. Third one is One Person Company where the Number of Members is one. 

Sec 2(1)(ZZK) defines it as "One Person Company” means a company which has only one person as a member" That means to say, if the Number of members increases to more that one, it has to alter its memorandum as well as the Articles to be converted either into a Private Company or Public Company.

Such Company will add the Words OPC after its name, e.g. ABC OPC Ltd.

Following are the extracts of the Company Bill,

Sec 12. (1) A company may, by a special resolution and after complying with the procedure specified in

this section, alter the provisions of its memorandum.

(2) Any change in the name of a company shall be subject to the provisions of subsections (2) and

(3) of section 5 and shall not have effect except with the approval of the Central Government in

writing:

Provided that no such approval shall be necessary where the only change in the name of

the company is the deletion therefrom, or addition thereto, of the word “Private” or letters

“OPC”, consequent on the conversion of any one class of companies to another class in

accordance with the provisions of this Act. 

The Bill proposes many relaxations for such kind of Companies regarding-

 - Managment and Administration of the Company - Chapter III

 - Accounts of the Company - Chapter IX

 - Remuneration of the managers - Chapter XIII

Broadly speaking, 

 - There can be only one Director

 - Annual Accounts and Returns are not to be authenticated by A Company Secretary

 - There is no Restriction on Remuneration to the Managers, but it has to be read along with the provisions of the Income tax to see whether there is any tax consequence on this.

 - No Annual General Meeting is required to be held, hence the Accounts can be approved by the One Member and can be filled.

Other Issues that I really searching for over the entire Bill is that who can be member of the One Person Company, whether any person as said in ses 2(1)(ZZK) or only individuals ? The answer is not given clearly, as accepted meaning of the word Person is that it includes Artificial and Judicial Persons also, so a Company can also be the only member of One Person Company.

Now when we say one person business, we recall sole proprietorship business. The above sentence is perhaps the basic difference between a sole proprietor business and One Person Company.

Because I find no benefit of converting one man business into OPC, why at all any one will put more pressure on it ?

Finaly, Its really a good step to accept one person company, this will help the Foreign Companies to start in India by forming an Indian Company easily, later it can be converted into other forms of Company easily.