Companies Act Section 122

Companies Act, Section 122: Applicability of This Chapter to One Person Company 

Section 122 of the Companies Act specifically addresses the applicability of corporate governance and compliance requirements to  One Person Companies (OPCs) . Since an OPC operates with a  single member  and may have a  single director , the procedural requirements for meetings and decision-making differ from those applicable to larger companies.

This section  exempts OPCs from certain provisions , provides  alternative methods for conducting business , and ensures that compliance obligations remain  practical and efficient  for a company with only one member.

1. Exemptions from Certain Provisions 

(a) Exemption from Sections 98 and 100 to 111 

Section 122(1) explicitly states that the provisions of Sections 98 and Sections 100 to 111 of the Companies Act shall not apply to OPCs. 

These sections primarily deal with procedural requirements related to  general meetings , such as the convening, conduct, and voting mechanisms.

Since an OPC has only  one shareholder , the concept of a general meeting is  redundant , making these provisions  inapplicable .

(b) Purpose of Exemptions 

The rationale behind this exemption is to  simplify the compliance process  for OPCs while ensuring that necessary decisions can still be recorded and implemented effectively.

2. Transaction of Ordinary Business by an OPC 

(a) Ordinary Business at Annual General Meetings 

Section 102(2)(a)  outlines the types of  ordinary business  that companies, other than OPCs, must transact at their  Annual General Meetings (AGMs) .

However, since an OPC consists of  a single member , it does not conduct AGMs like larger companies.

(b) Alternative Compliance for OPCs 

Instead of holding an  AGM , an OPC is required to  follow the alternative process  outlined in  Section 122(3)  for conducting business transactions.

This ensures that an OPC can  legally fulfill its obligations  without being required to conduct formal general meetings.

3. Decision-Making and Resolutions in an OPC 

(a) Alternative to General Meeting Resolutions 

In companies with multiple members, business matters requiring approval must be passed through an  ordinary resolution or special resolution  at a  general meeting .

However, for an OPC,  a formal general meeting is not necessary .

(b) Alternative Procedure for Resolutions in an OPC 

Instead of holding a general meeting, an OPC can transact business by simply recording resolutions in writing. 

The procedure for doing so is as follows:

1. The  single member  of the OPC  communicates the resolution to the company .

2. The resolution must be  entered in the minutes book , as required under  Section 118 .

3. The resolution must be  signed and dated  by the single member.

4. The  date of signing  will be considered as the  official date of the meeting  for all legal purposes.

(c) Legal Effect of This Process 

This process  ensures that resolutions are legally recognized  while  removing unnecessary formalities  that are typically required for multi-member companies.

The law recognizes the  written and recorded resolution as equivalent to a resolution passed in a general meeting .

4. Decision-Making by a Single Director in an OPC 

(a) Special Considerations for a Single-Director OPC 

In a normal company structure, the  Board of Directors  is responsible for conducting meetings to discuss and approve corporate decisions.

However, an OPC may have  only one director , making a  Board meeting impractical .

(b) Alternative Compliance for Board Resolutions in an OPC 

If an OPC has  only one director , the required business transactions can be conducted through the following process:

1. The  director records the resolution in the minutes book , as mandated under  Section 118 .

2. The resolution must be  signed and dated  by the director.

3. The  date of signing  is considered as the  official date of the Board meeting  for all legal purposes.

(c) Legal Recognition of This Process 

 This provision allows an OPC to  legally conduct board-level decisions  without requiring a formal  Board of Directors meeting .

The  written resolution signed by the sole director  is considered  legally binding and enforceable , just as if it were passed in a regular Board meeting.

5. Key Takeaways and Significance of Section 122 

(a) Simplification of Compliance for OPCs 

Eliminates unnecessary formalities  like AGMs and Board meetings.

Allows resolutions to be passed in writing , reducing administrative burdens.

(b) Flexibility in Corporate Governance 

OPCs can  conduct business efficiently  without needing to convene physical meetings.

Ensures  corporate decisions are still properly recorded  and legally recognized.

(c) Legal Validity of OPC Resolutions 

Resolutions passed under this section are considered  equivalent to resolutions passed in a general meeting or Board meeting .

Prevents  legal complications  for OPCs in executing corporate decisions.

(d) Distinctive Treatment for OPCs 

Recognizes that OPCs  do not function like traditional companies  with multiple shareholders or directors.

Tailors compliance requirements  specifically to their unique structure , making compliance more practical.