The Companies Act, 2013 introduced the concept of one person company to take one step further in providing the more convenience in private limited company registration in India and introduced some relaxations to registration requirements of a private limited company under the ACT and given the facility of registering a private limited company with only one director.
According to Section 2(62) of the Companies Act, 2013 ‘ A one person company is a company which has only one person as its member’ in other words in order to consider a company as a one person company a company must have only one director and also only one member.
Although the Companies act, 2013 has provided some relaxations to the registration of a private limited company, but there are also some restricts attached to it. Have a look at the below mentioned restrictions imposed on a one person company;
1. Only a citizen of India and resident in India (must be a natural person) can become the nominee and director in a one person company.
2. The member and the nominee in a one person company can not become the member and the nominee in any other one person company respectively.
3. In case a member in one opc becomes the member in the other one person company in which he was a nominee before, he must comply with the above mentioned condition mentioned before the expiry of 180 days.
4. Both the member and the nominee of a one person company must be a major i.e more than 18 years of age and competent to enter into a contract.
5. One person company can not be converted into a company under section 8 of the companies act, 2013.
6. A one person company is not permitted to make the investments in non banking finance investment schemes.
7. In order to convert a one person company in any other form of the company one must wait upto the expirty of two years from the date of its incorporation (exception: in case where the paid up share capital of the company is increased to RS. 50 lakhs or its average annual turnover exceeds Rs. 2 crores in the relevant financial year a one person company can be converted into any other form of company before the expiry of 2 years).
Penalty:
In the one person company or any of its officers contra-veins to the provisions of this Act the same shall be punishable with fine which can be extended uto 10,000 rupees and a further fine of Rs.1,000/- per day for the period for which the contravention continues.
Despite the above mentioned restrictions imposed to a one person company it enjoys a variety of benefits also, we will now discuss the various advantages associated with a one person company;
1. Lesser Burden of Compliance ; Although an opc comes under the definition of a private limited company as per section 2(68) of the Companies Act, 2013, still the opc enjoys the relaxation of lesser compliance related burden.
2. Organized form of Proprietorship ; Before the introduction of opc concept , one person companies are regarded as proprietorship firms which are not governed by any law in force, the opc has given an organized manner of operation to such proprietorship firms which are to be registered only by one member.
3. Protection of Personal assets ; Unlike proprietorship firms, in the event of the dissolution or in the business crisis, the personal assets of the member of the opc is safe and the liability of the member of the opc will be limited to the amount of shareholding of the member.
4. Minimum Statutory requirements ; Unlike private limited company a one person company has the minimum requirement for its registration.
5. Easy Loan availability ; As any other private limited company an opc is also given preference in giving loan.
Over all study of the pros and cons of one person company registration in Delhi it is concluded that the one person company is a better option for small enterprenuers.