NOTES ON ONE PERSON COMPANY

 NOTES ON ONE PERSON COMPANY [SEC. 2(62)]

 · ‘One person company’ means a company which has only one person as a member.

· Such a company is described under section 3(1)(c) as a private company.

 · One person company has been introduced to encourage entrepreneurship and corporatization of business.

 · OPC differs from sole proprietary concern in an aspect that OPC is a separate legal entity with a limited liability of the member whereas in the case of sole proprietary, the liability of owner is not restricted and it extends to the owner’s entire assets constituting of official and personal. Provisions applicable

· ‘One person company’ is also a private company. Thus all the provisions as are applicable to a private company shall also apply to “One person company”.

· However certain provisions of the Act and the rules are applicable only to ‘One Person company ‘and not to all private companies.

· To conclude except for the specific provisions applicable only to ‘One Person Company ‘ all the provisions of the act and the rules as are applicable to a private company shall equally apply to ‘One Person Company’ Specific provisions applicable to 'One Person company'

· In case the company proposed to be formed is a ‘One Person Company’ the memorandum must be subscribed to by 1 person.

· In the case of a One Person Company, the memorandum shall state the name of a person ,who in the event of death of subscriber ,shall become the member of the company .

· In case of One Person Company, the words ‘One Person Company’ shall be mentioned in brackets below the name.

· Every private company shall have a minimum of 2 members. However, ‘One Person Company’ shall have 1 member only

The number of members shall exceed 200 in the case of a private company. However, in ‘One Person Company’ shall have 1 member only.

· Every private company shall have a minimum of 2 directors. However, every ‘One Person Company’ shall have a minimum of 1 director.

 Law with respect to formation of OPC provides that –

• The memorandum of OPC shall indicate the name of the other person, who shall, in the event of the subscriber’s death or his incapacity to contract, become the member of the company.

• The other person whose name is given in the memorandum shall give his prior written consent in prescribed form and the same shall be filed with Registrar of companies at the time of incorporation.

• Such other person may be given the right to withdraw his consent.

• The member of OPC may at any time change the name of such other person by giving notice to the company and the company shall intimate the same to the Registrar.

• Any such change in the name of the person shall not be deemed to be an alteration of the memorandum.

• Only a natural person who is an Indian citizen and resident in India (person who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year)- - shall be eligible to incorporate a OPC; - shall be a nominee for the sole member of a OPC.

• A natural person shall not be member of more than a One person company at any point of time and the said person shall not be a nominee of more than a One person company.

· Where a natural person being member in OPC becomes member in another such company by virtue of his being a nominee in that OPC, such person shall meet the eligibility criteria (as given in point above) within a period of 182 days.

• No minor shall become a member or nominee of the OPC or can hold share with beneficial interest.

• Such Company cannot be incorporated or converted into a company under section 8 of the Act. Though it may be converted to private or public companies in certain cases.

• Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of anybody corporate.

• OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation, except where the paid up share capital is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.

Compulsory Conversion:

(a) A One Person Company shall, cease to be entitled to continue as a One Person Company, if —

(i) Its paid up share capital exceeds Rs. 50 lakh; or

 (ii) Its average annual turnover during the relevant period exceeds Rs. 2 crore. Relevant period means the period of immediately preceding 3 consecutive financial years

(b) Within 6 months, such One Person Company shall be required to convert itself, in accordance with the provisions of Sec. 18, into —

 (i) a private company with a minimum of 2 members and 2 directors; or

(ii) a public company with at least 7 members and 3 directors.

• If One Person Company or any officer of such company contravenes the provisions related to the formation and nomination by the subscriber/member of OPC, the OPC or any officer of such company shall be punishable with fine which may extend to 5000 rupees and with a further fine which may extend to 500 rupees for every day after the first during which such contravention continues.