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CompaniesAct.in: Graduated One Person Company- a mixed bag CompaniesAct.in
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Updated On: 23/09/2015

Now updated based on Final Rules

Companies Act, 2013 defines ‘One Person Company’ or OPC as a company which has only one person as a member. USA, many European countries of Europe, China and Singapore are among nations that allow the entrepreneurs to structure their business as OPCs. One point however that may need to be looked into is that if supporting legislations do not recognize OPC as an entity, it may be seen as an extension of a sole proprietorship, and there be some regulatory and legislative hurdles in implementation.

IMPACT AND ANALYSIS

  • The concept of One Person Company is new in law and was sought by the industry since it provides entrepreneurs an opportunity to set up a company without adding family as members of the company just to fulfill the requirement of minimum two members.
  • It provides an opportunity to proprietorships, particularly in the SME sector, to organize themselves as private limited company and thus limit their liability to the share capital invested in the company.
  • Structured as an OPC instead of proprietorship, the entrepreneur can have better access to banking finance.
  • Since physical presence of directors and member of the OPC is not compulsory for meetings of the board or members, the flexibility to participate through virtual presence will help increase operational efficiencies.
  • Conversion of SMEs into an OPC will help the government capture quality data about the sector and form policies accordingly.
  • Since foreign companies prefer to do business with registered entities such as private or public limited company, the introduction of OPC has to potential of helping increase international trade with India too.






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