This research paper deals with the understanding of the relevant sections and contexts that deal with the understanding of One person company.

One person company as defined under section 2(62) of Companies Act, 2013 refers to a company which has only person as a member. The said person shall be a natural person. An One Person company shall be incorporated as a private company. The words " One person company" should be mentioned in brackets below the name of the company, whenever it is printed or engraved, as per under section 12(3) of the Companies Act, 2013.[1]

The new concept of One person company has been introduced in India by the Companies Act, 2013. Under the Companies Act, 1956, a minimum of two directors and shareholders were required to form a private limited company. Whereas, in case of an One person company, only one person is required who can be a shareholder as well as the director. The introduction of this concept has opened up new prospects of business and striking possibilities for sole proprietors and entrepreneur as they can now get the benefits of limited liability and corporatization which was not possible earlier because of the requirements of finding a second director or shareholder to get a company registered as a private company.

The concept of One person company in India is brought from the foreign countries. This is brought into India for the smooth running and to form a new legal entity by an individual. Before applicability of the Companies Act, 2013 , an individual legally can form only his sole proprietorship in India and no other option remained to him. Before the applicability of Companies Act, 2013, Individual had to search a reliable, genuine, and honest partner to form a private limited company.

One person company is a concept introduced with the applicability Companies Act 2013, the requirement of 2 or more person is not required. Now a person who wishes to incorporate a private limited company can form individually without the involvement, share of any other individual. This is really a great concept introduced by the concept in the interest of the new entrepreneur who wants to start the business by forming a private limited company but could not do the same.

The concept opens up new vistas of business opportunities and particularly spectacular possibilities for sole proprietorship and entrepreneurs who can enjoy the advantages of limited liability and the benefit of separate legal entity as well.

Origin Of The Concept In India

The concept of One person company was mooted, in the report of Dr. J.J. Irani Committee. The Irani Committee briefly refered to One person company in its report. In Chapter III titled "Classification and Registration of Companies" the committee suggested multiple classification of companies.

The classification of One person company was included in Kinds of Companies under the sub head of "On the basis of number of members".

The company expressed the view that the law should recognize the potential for diversity in the forms of companies and rather than seeking to regulate specific aspects of each form, seek to provide for principles that enable economic inter-action for wealth creation on the basis of clear and widely accepted principles.

Regarding One person company the suggestions of the committee were:
One person company (OPC)
With increasing use of Information technology and computers, emergence of the service sector, it is the time that the entrepreneurial capabilities of the people are given an outlet for participation in economic activity. Such economic activity may take place through the creation of an economic person in the form of a company. Yet it would not be reasonable to expect that every entrepreneur who is capable of developing his ideas and participating in the market place should do it though an association of persons.

We feel that it is possible for individuals to operate in the economic domiainand contribute effectively. To facilitate this, the committee recommends that the law should recognize he formation of a single person economic entity in the form of 'One person company'. Such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters.

The concept of 'One person company' may be introduced in the act with the following characteristics:

1. A one-person company may be registered as a private company with one member and may also have at least one director.
2. Adequate safeguards in case of death/disability of the sole person should be provided through the appointment of another individual as Nominee Director. On the demise of the original director, the nominee director will manage the affairs of the company till the date of transmission of shares to legal heirs of the demised member.
3. Letters 'One person company' to be suffixed with the name of the One person companies to distinguish it from other companies.

Impact Of OPC In Indian Entrepreneurship

The concept of One person company is still in its nascent stages in India and would require some more time to mature and to be fully accepted by the business world. With the passage of time, One person company mode of business organization specially for small entrepreneurs. The benefits emanating from this concept are many, to name a few:

• Minimal paper work and compliance
• Ability to form a separate legal entity with just one member
• Provision of conversion to other types of legal entities by induction of more members and amendment in the Memorandum of Association.

The One person company concept holds a bright future for small traders, entrepreneurs with low risk taking capacity, artisans and other service providers.

The OPC would act as a launch pad such entrepreneurs to show case their capabilities in the global arena.

The counterparts of Indian OPCs in Europe, United States and Australia has resulted in further strengthening of he economies in the respective countries. OPCs in India are aimed at structured, Organized business units, having a separate legal entity ultimately playing a crucial role in further strengthening of the Indian Economy.

OPC is a feasible option for small entrepreneurs as incorporated involves very few paper work. Any foreign company or investor who wishes to establish in India through either investment, merger or a joint venture will have to just deal with the member of an OPC, and the venture will be expected to start sooner with more effective results. The foreign investors in order to establish a corporate relationship need not have to deal with a score of shareholders/ directors as that might involve disparity in ideas, concepts, etc for the business to grow.
 

Characteristics Of One Person Company In India

The characteristics of One person company are listed below:[2]

• One person company is a type of company based on number of members.
• One person company is a company which has only one person as a member and where legal and financial liability is limited to the company only and that person is not personally liable.
• It can be incorporated only as a private company and it is a private company for all legal purposes, all the benefits that are available to private company are applicable to One person companies such as access to credits, bank loans, limited liability, legal protection for business and access to market, etc all with a separate legal identity.
• One person company can have only one director, although it can have up to fifteen directors.
• It is mandatory to appoint a nominee.
• The words "One person company" should be mentioned in brackets below the name of such company, where its name is engraved, affixed or printed.
• An One person company is exempted from holding general meetings and board meetings if the company has only one director.
• The Registrar of Companies should be informed about every contract entered into.
• One person company to lose its status if paid up capital exceeds Rs. 50 lakh or average annual turnover is more than 2 crore in three immediate preceding consecutive years.
• No minor shall become member or nominee of the One person company or hold shares with beneficial interest.
• Such company cannot carry out Non Banking Financial Investment activities including investment in securities of any body corporate.
• Such Company cannot be incorporated or converted into a company under sec 8 of the Companies Act, 2013.
• An existing private company other than a company registered under section 8 of the Act which has paid up share capital of Rs. 50 lakh or less or average annual turnover during the relevant period is Rs. 2 crore or less may convert itself into One person company by passing a special resolution in the general meeting.

Privileges Available To OPC

Some of the privileges and benefits identified with OPCs are:

• OPCs would provide the start up entrepreneurs with new business idea.
• One person company provides an outlet for the entrepreneurial impulses among the professionals.
• The advantages of limited liability. The most significant reason for shareholders to incorporate the One person company is certainly the desire for limited liability.
• One person companies are not proprietorship concerns; hence, they give a dual entity to the company as well as the individual, guarding the individual against any pitfalls of liabilities. This is the fundamental difference between OPC and sole proprietorship.
• Unlike a private limited company or public limited company (listed / unlisted) OPCs need not bother too much about compliance.
• Businesses currently run under the proprietorship model could get converted into OPC without any difficulties.
• One person company require minimal capital to begin with. Being a recognized corporate, could well raise capital from others like venture capital financial institutions, etc. Thus graduating to a private limited company.
• Mandatory rotation of auditors after expiry of maximum term is not applicable.
• The annual return of a One person company shall be signed by the company secretary, or where there is no company secretary, by the director of the One person company.
• The provisions of section 98 and section 100 to 111 (both inclusive), relating to holding of general meetings, shall not apply to a One person company.

Drawbacks Of One Person Company

OPC attracts some disadvantages as well which are listed below:

• A person shall not be allowed to incorporate more than one OPC.
• OPC cannot be incorporated or converted into a company not for profit.
• It cannot carry any non-financial activities.
• An OPC cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of OPC, except threshold limit (paid up share capital) is increased beyond Rs 50 lakhs or its average annual turnover during the relevant period exceeds Rs 2 crores.
• The compliance cost is high as compared to sole proprietorship.
• Existing Private ltd Company cannot be converted into an OPC.

Procedure Of Incorporation Of OPC
Process of Incorporation of One person company:

• Obtain Digital Signature Certificate [DSC] for the proposed Director(s).
• Obtain Director Identification Number [DIN]
• Select suitable Company Name, and make an application to the Ministry of Corporate Affairs for availability of name.
• Draft Memorandum of Association and Articles of Association.
• Sign and file various documents including MOA & AOA with the Registrar of Companies electronically.
• Payment of fee and stamp duty to the Ministry of Corporate Affairs.
• Scrutiny of documents at Registrar of Companies [ROC]
• Receipt of Certificate of Registration/Incorporation from ROC.

Conclusion And Suggestions
In conclusion, this research paper has provided a brief outlook on One person company.

The success of OPC is purely dependent upon its implementation but the concept is a necessity in the changing business arena of the country where entrepreneurs are require taking risk & at the same time needs protection to cover up that risk. The single entrepreneurs are in the need of a speedy mechanism to get incorporated in company form of a business & OPC seems to be the possible solution where the entrepreneurs are not required to fritter away their time, energy & resources on procedural matters. Though OPC appears a promising form of business but there is a long way to go since in India the outlook of sole traders is more traditional & they usually don't want to deviate from the way they have doing their business.

This concept is a very revolutionary measure taken and if its used well then it would surely help in the development of the economy as well help in utilizing the full potential of most of the entrepreneurs of the country who want to start a company with the benefits of sole proprietorship and that of a company.

The concept of a One person company is expected to give big impetus to corporatization in the country. The only care to be taken is that there should be no regulatory mess ups like the ones which hampered the growth of the Limited Liability Partnerships in this country. Otherwise the rules framed so far with respect to One person company have been sensible.

Bibliography
This research paper is written by the writer's own knowledge and understanding of the topic and has also referred google, books and prior knowledge.

References

• Company law text book - Mohammed Kamalun Nabi
• FAQ's on One person company: http://www.mca.gov.in/MinistryV2/onepersoncompany.html
• e-book Companies Act, 2013: http://ebook.mca.gov.in/Default.aspx?page=rules
• http://www.caclubindia.com
• http://taxguru.in/company-law/
• www.mca.gov.in
• Companies Incorporation rules
• Introduction to Company law text book - Avtar Singh
• All you want to know about One person company - Rajkumar S. Adukia and Rishabh R. Adukia
• https://indiacorplaw.in/2013/04/one-person-company-still-born-half.html
• Swati Shankar and Shubham Gautam, Indian law journal, vol. 7, Issue 1
• https://www.legalservicesindia.com/article/2407/One-person-company.html

End Notes:

1. J.J. Irani, Report on Company law, (May 31, 2005), http://www.primedirectors.com/pdf/JJIraniReport-MCA.pdf
2. Namrata Gupta, One person company, International journal of legal insight, vol 1, Issue 3
3. Dheeraj Verma, One Person Company, (Apr. 20, 2023, 10.45 AM), https://www.legalservicesindia.com/article/2407/One-person-company.html
4. Mohammed Kamalun Nabi, Company Law, 25 (2019)