One Person Company Incorporation

As discussed earlier, in the Companies Act 1956 a minimum of two directors and shareholders were required to form a private limited company. However, in the case of a One Person Company, only 1 person is required who can be both the shareholder as well as the director. Simultaneously there is no bar on more number of directors but is limited to a maximum of 15. To be in detail, a single shareholder can hold 100% of the shares of the Company and at the same time, he can enjoy the privileges like limited liability and separate legal entity.

As per the Act, it is well defined that only a resident citizen Indian can form a one person company. A resident citizen is an Indian citizen who has stayed in India for a period of not less than 182 days during the immediately preceding one calendar year. Such person is only eligible to incorporate a One Person Company and can be a nominee. Meaning, any legal entities like companies or societies or other corporate entities cannot form a one person company and also a non-resident Indian or a foreign citizen cannot form a One Person Company.  Apart from this, an Individual can form only one OPC at a time and can be a nominee of only one OPC.

A minor cannot become member or nominee of the One Person Company or can hold shares with beneficial interest. but at the same time, there is no bar on more number of directors.

Normally, people choose Sole-Proprietorship as the easiest option to setup a business instantly with less paperwork and minimal compliance requirements.  However, one should value the fact that a One Person Company has to face little compliance burden as compared to private limited companies and moreover can enjoy the liberty of a sole proprietorship.  Any business entity that runs in the form of a company always enjoys an increased trust and prestige.

It is also pertinent to note that an existing private company other than a not for profit company, can be converted into One Person Company by passing a special resolution in the general meeting and with the consent of its members and creditors. The Act states that conversion is possible only if the private company’s paid up share capital is less than or Rs.50 lakhs. Also, the average annual turnover during the relevant period should not exceed Rs.2 crores.

Not to the least, the Act states that the word “One Person Company” should be mentioned in brackets below the name of such company wherever it is used. For Instance: if the company name is ABCDE, it should be written as:

Key Points to Remember

1. Must have one Shareholder – Resident Indian Citizen
2. Must have one Nominee - Resident Indian Citizen
3. Must have One Director and may have 15 Directors
4. NO companies or societies or other corporate entities can form OPC
5. NO minor shall become member
6. Non-resident Indians or Foreign citizens CANNOT form One Person Company
7. Public limited company cannot be converted to OPC
8. (One Person Company) should be affixed wherever the company name is used