One person company is a new concept in India which has been introduced by the companies act 2013. In the old Companies act 1956 a minimum of two directors and shareholders were required to form a private limited company. However in case of a One person company, only 1 person is required who can be a shareholder as well as the Director. Hence the name, One Person Company.
The concept opens up spectacular possibilities for sole proprietors and entrepreneur who can take the the advantages of Limited liability and corporatization but were held back in doing so because of the requirements of finding a second director or second shareholder.
A small note on what is meant by limited liability
The biggest difference between a sole proprietor and a One Person Company would be that in case of a One Person Company, your liability in case the business fails, is limited to only the business assets. In case of a proprietorship, the liability is unlimited and the creditors of your business can even take hold of your home and personal assets like your house, personal bank accounts, jewellery etc which can be used to settle the business liabilities.
Freedom from compliance
One Person Company also gets freedom from complying with many requirements as normally applicable to other private limited Companies. Certain sections like Section 96, 98 and sections 100 to 111 are not applicable for a One Person Company. Some of these are mentioned below:
No requirement to hold annual or extra ordinary general meetings.
- Only the resolution shall be communicated by the member of the company and entered in the minutes book and signed and dated by the member and such date shall be deemed to be the date of meeting.
- For the purposes of holding board meetings, in case of a OPC which has only One director, it shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes under Companies Act, 2013.
- No requirement of preparing cash Flow in the annual financial statements.
- Annual returns can be signed by the Director himself instead of A Company Secretary.
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