Jan 16, 2013

One-person companies may soon become a reality

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Setting up a one person company (OPC) will soon be allowed in India.

The Companies Bill 2012, when enacted into a law, would provide for floating an OPC – a concept prevalent in Europe, the US, Singapore and China.

The Companies Bill defines ‘One Person Company’ as one which is formed for any lawful purpose by only one person as member. Currently, at least two persons are required to float a private company in India.

Industry has been demanding that the Government introduce the concept of OPC, which will have a limited liability.

“It will bring in a more structured arrangement and bring in the unorganised sector of proprietorship firms in the organised version of private limited company,” said Pavan Kumar Vijay, Group Founder, Corporate Professionals.

The Companies Bill mandates that ‘One Person Company’ shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved. The concept provides an opportunity to an entrepreneur to enter the corporate world without adding any of his family members for namesake.

“OPC will give greater flexibility to an individual or a professional to manage his business efficiently and at the same time enjoy the benefits of a company,” said Lalit Kumar, Partner, J. Sagar Associates, a law firm.

Company law experts see a rise in registrations of one-person companies once the Bill is enacted into law.

“Private limited companies with a minimum of two members will be reduced and there will be tremendous increase in OPCs after enactment of the Bill,” Vijay said.

The Companies Bill 2012, which seeks to replace the Companies Act, was passed by the Lok Sabha in the recently concluded Winter Session. The Rajya Sabha is expected to take up the Bill in the early part of the Budget Session of Parliament in mid-February.

The concept of OPC will also help many foreign companies, which need to appoint a minimum of two nominees now when they form a wholly-owned subsidiary. However, Vijay said the Government should restrict the concept of OPCs to smaller companies alone.

OPC will open the avenues for more favourable banking facilities, particularly loans, to such proprietors. Besides, the concept will boost flow of foreign funds in India as the requirement of nominee shareholder would be done away with.

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