Best provisions of One Person Company under Companies Act

One Person Company (OPC) is a new concept under the Companies Act of 2013. Only one person acts as a member in a One Person Company. That type of Company is called a One Person Company (Section 2(62)). It means, it is a gift of the Companies Act, 2013 that any person, may incorporate a company, who is competent to contract. Previously, under the Companies Act of 1956, such type of company could not be incorporated.

In this article, we will look into the salient features and important provisions of One Person Company under the Companies Act, 2013.

What are the salient features of One Person Company?

One Person Company shall have the status of a Private Company.  

The word One Person Company must be written in the “()” below the name of the Company, wherever the name of the company shall be mentioned. 

The Memorandum of Association of One Person Company shall also indicate the name of the other person who shall be a nominee of Member. Therefore, In this regard written consent shall be taken from such Nominee member. Such provisions of One Person Company have been mentioned in the Law due to only observing that, in the case of the original member shall be incapable due to any reason at any time or due to his death.  

The nominated Person shall become a Member of the Company after the incident.

Further, it shall be the duty of the Company to file such consent letter with the Registrar of Companies at the time of formation of the Company.

The nominated Person has the right to withdraw his name. It is essential to prescribe the method for withdrawing.

The Member has also the right to change the nominated person. The Nominated person may be changed when the Member gives notice. The method of notice shall be prescribed.  

It shall also be the duty of the Member of the One Person Company to intimate to the company for any change in the name of the Nominated Person.  

The Memorandum of Association of the Company should have the Name of Nominated Person mentioned in it. Thereafter, it shall be the duty of the Company to intimate to the Registrar of Companies.  

It should be noted that in case of any change in the name of the nominated person. It shall not be constructed that it is an alteration in the Memorandum of Association of the Company (Section 3).

OPC Registration Service in Hyderabad

What are the provisions of One Person Company under Companies Act?

The important provisions of One Person Company under Companies Act are;

  • The Cash Flow Statement is not included in the definition of “Financial Statement”. It means a Cash Flow statement is not mandatory for One Person Company (Section 2 (40)).
  • The Company Secretary or where there is no company secretary, the directors of the Company shall sign the Annual Return. (Section 92).
  • It is not compulsory to call the Annual General Meeting (Section 96).
  • It is not mandatory to call General Meeting in the case of One Person Company, so any transaction which shall be moved in the General Meeting as per Section 114 of the Act, the One Person Company may communicate that resolution to members. That matter shall be entered in the Minutes Book thereafter, as per Section 118 of the Act, which is maintained under law and signed and dated by the Member. Such date of Signing shall be deemed the date of the Meeting. This date shall be referred to for all purposes (Section 122).
  • Simultaneously, in the Board of One Person Company only One Director is permitted, The Company may communicate resolution for any truncation or purpose. Such resolution shall be recorded in the Minutes Book thereafter as per section 118 of the Act under the Law and signed and dated. Such date of Signing shall be deemed the date of the Meeting. This date shall be referred to for all purposes (Section 122).
  • The director must approve the financial statement including consolidated financial statement and submit to the Auditor for his report thereon (Section 134).
Important provisions of One Person Company under the Companies Act, 2013 
  • The Director must enclose the signed Board report along with the Financial Statement. The Board Report must contain explanations and comments on every reservation, qualification, and adverse remark of the Auditor (Section 134).
  • The Auditor Report also shall be attached to the Financial Statement (Section 134).
  • One Person Company shall file its Financial Statement along with necessary documents which are duly adopted by the Member within 180 days from the date of ending of the financial year/ closure of the financial year.
  • An individual who is a member shall be deemed as the first Director until the director or directors are duly appointed by the members according to the provisions of the Act (Section 152).
  • One Person Company must conduct a Board Meeting, the one meeting must be held in each half of a calendar year and the gap between two meetings should not be less than 90 days. The section 174 is not applicable for Once Person Company (Section 173).
  • It is the duty of the company to note down the Contract in the next board meeting immediately after the entering into contract, where the sole member is a member and a director of the company and those contracts which are ordinary course of business shall not be included here (Section 193).

Conclusion

In conclusion, the concept of One Person Company introduced under the Companies Act of 2013 offers a unique structure, allowing sole individuals to establish companies with simplified compliance requirements. Key provisions of One Person Company such as the absence of mandatory Annual General Meetings, flexibility in communication of resolutions, and specific exemptions from certain regulations make One Person Companies a streamlined option for solo entrepreneurs.

Overall, these Provisions of One Person Company aim to facilitate ease of operation and compliance for small businesses, fostering a conducive environment for individual entrepreneurs in the corporate landscape.

FAQs
1. Which act introduced the concept of OPC in India?

OPC is a new concept under the Companies Act of 2013.

2. Is it obligatory to mention One Person Company under the Company’s name every time? 

Wherever the name of the company shall be mentioned, it should be noted that the word “One Person Company” must be written below the name of Company. 

3. Is Cash Flow statement mandatory for One Person Company?

Cash Flow statement is not mandatory for One Person Company.

4. Is it necessary that the Annual Return be signed by the Directors of the company?

No, Annual Return can be signed by the Company Secretary or where there is no company secretary, by the directors of the Company.

5. Is it compulsory to call the Annual General Meeting?

It is not compulsory to call the Annual General Meeting. 

6. Is it mandatory to call General Meeting in the case of One Person Company?

It is not mandatory to call General Meeting in the case of One Person Company.

7. Does the OPC need to conduct a Board Meeting?

OPC must conduct a Board Meeting, the one meeting must be held in each half of a calendar year and the gap between two meetings should not less than 90 days.

8. Is it necessary for OPC to file its financial statement?

Yes, OPC shall file its Financial Statement along with necessary documents which are duly adopted by the member within 180 days from the date of ending of the financial year.

9. How many directors are mandatory for an OPC?

OPC can have only one director. The Companies Act, 2013 mandates that a private company must have at least two directors, and a public company must have at least three directors.

10. What are the Provisions of One Person Company?

In a One Person Company, a single individual can incorporate a company, becoming the sole shareholder and director. The Companies Act, under which OPCs are regulated, mandates that the sole member must nominate a nominee who will take over in the event of the member’s death or incapacity.

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