One Person Company

INTRODUCTION:

One person companies are in existence in certain countries. In India this concept has been mooted by the Ministry of Corporate Affairs by allowing One Person Companies in India in line with UK, China, USA, Australia, Singapore, Qatar, Pakistan and several other countries. It is a right thinking in right direction by the Ministry of Corporate Affairs. One Person Companies have been in existence in UK for several years now. China allowed formation of OPC’s as recent as in 2005.

FEATURES OF ONE PERSON COMPANY:

  1. Complete Control Of The Company With The Single Owner:

    This leads to fast decision making and execution. Yet he/she can appoint as many as 15 directors in the OPC for administrative functions, without giving any share to them.

  2. Nominee for the Shareholder:

    The Shareholder shall nominate another person who shall become the shareholders in case of death/incapacity of the original shareholder. Such nominee shall give his/her consent and such consent for being appointed as the Nominee for the sole Shareholder. Only a natural person, who is an Indian citizen and resident in India shall be a nominee for the sole member of a One Person Company.

  3. Loan from Banks:

    Banking and financial institutions prefer to lend money to the company rather than proprietary firms. In most of the situations Banks insist the entrepreneurs to convert their firm into a Private Limited company before sanctioning funds. So it is better to register your start-up as a One Person private limited rather than proprietary firm.

  4. Tax Flexibility and Savings:

    In an OPC, it is possible for a company to make a valid contract with its shareholder or directors. This means as a director you can receive remuneration, as a lessor you can receive rent, as a creditor you can lend money to your own company and earn interest. Directors’ remuneration, rent and interest are deductible expenses which reduce the profitability of the Company and ultimately brings down taxable income of your business.

ADVANTAGES OF FORMING A ONE PERSON COMPANY:

  1. The advantages of limited liability. The most significant reason for shareholders to incorporate the ‘single-person company’ is certainly the desire for the limited liability.
  2. OPC’s are not proprietorship concerns; hence, they give a dual entity to the company as well as the individual, guarding the individual against any pitfalls of liabilities. This is the fundamental difference between OPC and sole proprietorship.
  3. OPC’s require minimal capital to begin with. Being a recognized corporate, could well raise capital from others like venture capital financial institutions etc., thus graduating to a private limited company.
  4. The annual return of a One Person Company shall be signed by the company secretary, or where there is no company secretary, by the director of the company.
  5. A One Person Company needs to have minimum of one director. It can have directors up to a maximum of 15 which can also be increased by passing a special resolution as in case of any other company.
  6. The financial statements of a one person company can be signed by one director alone. Cash Flow Statement is not a mandatory part of financial statements for a One Person Company. Financial statements of a one person company need to be filed with the Registrar, after they are duly adopted by the member, within 180 days of closure of financial year along with all necessary documents.
  7. Board’s report to be annexed to financial statements may only contain explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
  8. Mandatory rotation of auditor after expiry of maximum term is not applicable.

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