The Companies Act, 2013 (No. 18 of 2013) introduced a new form of business,
a hybrid of Sole-proprietorship and Company, by providing sole proprietors an
opportunity to enter into a corporate world. It is treated as a private company
only having separate legal entity and limited liability. Only an Indian citizen
and resident of India shall be eligible to incorporate ‘One person Company’.
Nominee for One Person Company shall be an Indian citizen and resident in India.
There must be a minimum one director, hence, shareholder can himself be the sole director.
A company may have 15 directors maximum. One person company shall have two Board
of Directors meeting in a calendar year and the gap between these two meetings shall
not be less than 90 days. A sole-proprietor can incorporate only one company of such
kind and can be a nominee in one company. A minor cannot become member or nominee of
One Person Company. One Person Company can never be converted into a company meant
for not for profit. This company cannot carry Non-banking financial investment activities.
They are not required to conduct Annual General Meeting. It loses OPC character if the
paid up share capital exceeds INR 50Lakhs or previous annual turnover exceeds INR 2Crore.
It provides assistance to startup entrepreneurs. Annual return shall be signed by
Director/Company Secretary. The setting up of OPC requires lot of time and paperwork.
A company has 'perpetual succession', meaning uninterrupted existence until it is legally dissolved. A company being a separate legal person, is unaffected by the death or other departure of any member and continues to be in existence irrespective of the changes in ownership.
Ownership of a business can be easily transferred in a company by transferring shares. The signing, filing and transfer of share transfer form and share certificates is sufficient to transfer ownership of a company. In a one person company, the ownership can be transferred by altering the shareholding, directorship and nominee director information.
Banks and Financial Institutions prefer to provide funding to a company rather than partnership firms or proprietary concerns. However, a one person company cannot issue different types of equity security, as it can only be owned by one person at all times.
A company being an artificial person, can acquire, own, enjoy and alienate, property in its name. The property owned by a company could be machinery, building, intangible assets, land, residential property, factory, etc., Further, the nominee director cannot claim any ownership of the company while serving as a nominee director.
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