6 marks question.explain the concept of one person company?
Answers
This concept of one person company is great initiative from Ministry of Corporate Affairs and is a welcoming approach for various businessmen as it would give them to establish a company without requiring any other person in the board of the company and as a shareholder of the company.
One Person Company
The Companies Act, 2013 completely revolutionized corporate laws in India by introducing several new concepts that did not exist previously. On such game-changer was the introduction of One Person Company concept. This led to the recognition of a completely new way of starting businesses that accorded flexibility which a company form of entity can offer, while also providing the protection of limited liability that sole proprietorship or partnerships lacked.
Several other countries had already recognized the ability of individuals forming a company before the enactment of the new Companies Act in 2013. These included the likes of China, Singapore, UK, Australia, and the USA.
Definition of One Person Company
Section 2(62) of Companies Act defines a one-person company as a company that has only one person as to its member. Furthermore, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its member.
Such companies are generally created when there is only one founder/promoter for the business. Entrepreneurs whose businesses lie in early stages prefer to create OPCs instead of sole proprietorship business because of the several advantages that OPCs offer.
Features of a One Person Company
Here are some general features of a one-person company:
Private company: Section 3(1)(c) of the Companies Act says that a single person can form a company for any lawful purpose. It further describes OPCs as private companies.
Single-member: OPCs can have only one member or shareholder, unlike other private companies.
Nominee: A unique feature of OPCs that separates it from other kinds of companies is that the sole member of the company has to mention a nominee while registering the company.
No perpetual succession: Since there is only one member in an OPC, his death will result in the nominee choosing or rejecting to become its sole member. This does not happen in other companies as they follow the concept of perpetual succession.
Minimum one director: OPCs need to have minimum one person (the member) as director. They can have a maximum of 15 directors.
No minimum paid-up share capital: Companies Act, 2013 has not prescribed any amount as minimum paid-up capital for OPCs.
Special privileges: OPCs enjoy several privileges and exemptions under the Companies Act that other kinds of companies do not possess.