Incorporating features of One Person Company across the world

1
Incorporating features of One Person Company
across the world

• In this blog, we have discussed about the
  incorporating features of one person
  companies and their advantages in world-wide

2
Incorporating features of One Person Company
across the world

• One person companies are not provided under the
  companies Act, 1956. It was introduced by the
  Companies Act, 2013. One Person Company, the name
  itself suggest that it should contain only one
  member. Moreover, an OPC is a vehicle that seeks
  remedies to solve problems faced by companies
  such as Sole proprietorship. It has the unlimited
  liability and able to balance the extensive
  requirements of incorporating and running
  business. Therefore, one person companies will be
  best choice of business for the person who wish
  to start a business venture with the structural
  and organizational advantages.

3

• Moreover, an one person company is a vehicle that
  seeks remedies to solve problems faced by
  companies such as Sole proprietorship. It has the
  unlimited liability and able to balance the
  extensive requirements of incorporating and
  running business. Therefore, one person companies
  will be best choice of business for the person
  who wish to start a business venture with the
  structural and organizational advantages.

4
Incorporating an OPC

• Several countries have already recognized the
  ability of individuals incorporating a company
  before the enactment of the new Companies Act in
  2013. Furthermore, members of a companies are
  nothing but subscribers to its memorandum of
  association (MOA), or its shareholders.
  Therefore, OPC is a company that has only one
  shareholder as its member. Such companies are
  generally created when there is only one founder
  or promoter for the business. Entrepreneurs whose
  businesses lies in early stages can start OPCs
  instead of sole proprietorship business because
  they provide several advantages.

5
Incorporating History of OPC

• The concept of one person company was first
  recommended by the experts committee of Dr. JJ
  Irani in 2005. Chiefly, the committee decided to
  classify the companies based on size, members and
  the control. In reference to the OPC, it is said
  that it is the time that entrepreneurial
  capabilities of the people are given an outlet
  for the participation in the economical
  activates.

6

• Moreover, it is also recommended that a simpler
  rule through exemptions be made applicable
  to OPCs in order that an entrepreneur is not
  required to expend excessive time and resources
  on procedure that could otherwise be applied to
  its business activities.
• Consequently, major counterparts of Indian OPCs
  are found in Europe, United States and Australia
  have resulted in strengthening the economies of
  the countries. Similarly, OPC will give
  businessmen all the benefits that a private
  business will give. OPCs provides the opportunity
  to people to take advantage of the unique
  characteristics of a company while remaining
  independent.

7
Reason for the formation

• Under the old companies act, there was a
  requirement of at least two people to form a
  private limited companies. Hence, this is
  considered to be the major difficulty for those
  business people who wish to start the business
  alone. The only option will be going for a
  private limited companies or public limited
  companies with seven members.
• Specifically, The reason why a private limited
  company necessarily have at least two people is
  to differentiate it from a sole
  proprietorship, which any individual could start
  on his own consensus.Incorporating features may
  vary from one company to other,

8
Idea of an OPC

• To over this problem, the companies are
  incorporating by individuals on appointing
  directors. They were given only one share, which
  is mandatory to become the member of the
  companies. The rest of the shares are retained by
  the owner of the company. In other words, the
  idea of one person company was introduced for the
  first time in the year 2009, but unfortunately,
  the idea could not cope up itself into something
  concrete. Then again in 2012, efforts were made
  to implement the idea, and it became a reality
  with the introduction of the Companies Act, 2013.

9
Features of a One Person Company
10

• Some of the 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
• Moreover, One person companies should 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.

11

• 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
• In essence, 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 enjoys privileges and exemptions under the
  Companies Act compared to other companies.

12
Who can form a one person company?

• In addition, Only a natural person who is an
  Indian citizen and resident in India, i.e., a
  person who has stayed in India for a period of
  not less than one hundred and eighty two days
  during the immediately preceding one calendar
  year can incorporate a One Person Company and a
  nominee for the sole member of a One Person
  Company.

13
AS PER ONE PERSON COMPANY (RULE 3 OF COMPANIES
(INCORPORATION) RULES, 2014)

• A person cannot incorporate more than one OPC or
  be the nominee of more than One Person Company
• A minor shall not become member or nominee of
  the One Person Company or can hold share with
  beneficial interest.
• Therefore, Company cannot be incorporated or
  converted into a company under section 8 of the
  Act.
• Consequently, Company cannot carry out
  Non-Banking Financial Investment activities
  including investment in securities of anybody
  corporate.
• No such company can convert voluntarily into any
  kind of company unless two years have expired
  from the date of incorporation of One Person
  Company, except when threshold limit (paid up
  share capital) is increased beyond fifty lakh
  rupees or its average annual turnover during the
  relevant period exceeds two crore rupees.

14
Privileges of One Person Companies

• OPC enjoys the following privileges under the
  Companies Act
• They do not have to hold annual general meetings.
• Their financial statements need not include cash
  flow statements.
• Annual returns are not signed by the company
  secretary, only directors can do so.
• Provisions relating to independent directors do
  not apply to them.
• Their articles can provide for additional grounds
  for vacation of a directors office.
• Several provisions relating to meetings and
  quorum do not apply to them.
• They can pay more remuneration to directors than
  compared to other companies.

15
Membership in One Person Companies

• Only natural persons who are Indian citizens and
  residents are eligible to incorporating a one
  person company in India. The same condition
  applies to nominees of OPCs. Further, such a
  natural person cannot be a member or nominee of
  more than one OPC at any point of time.
• Chiefly, it is important to note that only
  natural persons can become members of OPCs. This
  does not happen in the case of companies wherein
  companies themselves can own shares and be
  members. Further, the law prohibits minors from
  being members or nominees of OPCs.

16
Conversion of OPCs into other Companies

• Under the rules regulation the incorporating
  features of one person companies, the OPC cannot
  be converted into Section 8 companies, because
  the section 8 companies have the charitable
  objectives. Furthermore, OPCs can be converted
  into all other kinds of companies until the
  expiry date of 2 years for the date of company
  incorporation.
• An OPC will be terminated, if its paid-up share
  capital of the company exceeds 50 lakh or either
  the average annual turnover of the company
  exceeds 2 crores. In such a case, the OPC will be
  convert into a private or public limited company.
  The company can obtain no objection certificate,
  and the resolution should be filed with the
  registrar of companies within 30 days in Form no.
  MGT14.

17
One Person Company as a Global Perspective

• Although OPC is a recent concept in India, it has
  been widespread in the United Kingdom for many
  years by Lord Herschel in the renowned case of
  Saloman v. Saloman Co. Ltd where he
  acknowledged the idea of a one-person company as
  lawful. Further, under Section 7 of the UK
  Companies Act, 2006, a one-person public and
  a private company can be formed by complying with
  the registration and Memorandum of Association
  requirements, as laid down in the UK Act.
• Similarly, in the United States, almost all
  states issues license for single member limited
  liability companies with different state-specific
  laws. Amongst Asian countries, Pakistan,
  Singapore and China adopted OPC in their legal
  systems in 2003, 2004 and 2005 respectively.