Companies Act Section 2(62) One Person Company

One Person Company Section 2 (62)

A One Person Company (OPC) is a legal entity that allows a single individual to operate and manage a business as a separate legal entity, distinct from its owner.

It provides a hybrid structure that combines the benefits of a sole proprietorship and a private limited company, offering limited liability protection to the owner while allowing full control over company operations.

Key Features and Requirements:

1. Single Member: 

An OPC can be formed with only one natural person as its member/shareholder. 

This individual holds all the shares of the company and is the sole owner of the business.

2. Limited Liability: 

Like private limited companies, OPCs provide limited liability protection to their members. 

This means the liability of the member is limited to the extent of unpaid subscription money in his/her name.

Personal assets of the member are generally protected from the liabilities of the company, except in cases of fraud or wrongful acts.

3. Nominee Director: 

As per the Companies Act, 2013, an OPC must nominate a natural person as a nominee director in the memorandum of association (MoA) and articles of association (AoA).

The nominee director will take over the management of the OPC in case the sole member becomes incapacitated or dies.

4. Corporate Identity: 

An OPC enjoys a separate legal identity from its owner, allowing it to enter into contracts, acquire assets, incur debts, and sue or be sued in its own name.

This enhances credibility and facilitates business transactions, including access to funding, contracts, and partnerships.

5. Conversion and Compliance: 

An OPC can be converted into a private limited company after fulfilling certain criteria, such as increasing the minimum number of directors and shareholders.

OPCs must comply with statutory requirements, including annual filings, maintenance of books of accounts, and adherence to corporate governance norms prescribed by the Companies Act.

6. Restrictions: 

OPCs are restricted from undertaking certain business activities, such as non-banking financial investment activities, including investment in securities of another body corporate.

Benefits of One Person Company:

Ease of Setup: 

Simplified registration process compared to private limited companies, requiring only one person as shareholder and director.  

Limited Liability: 

Provides protection to the sole member’s personal assets against business liabilities, fostering entrepreneurship with reduced risk.

Operational Flexibility: 

Allows full control and decision-making authority to the sole member, promoting efficient management and operational autonomy.

Business Continuity: 

Nominee directorship ensures continuity in business operations and compliance in the event of the sole member’s incapacitation or demise.