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One Person Company (OPC)

Section 2(62) of the Companies Act, 2013 defines an OPC as a company that has only one person as a member.

The very concept of an OPC is that it shall have only one member. Only an individual can form an OPC. The minimum and maximum number of members in an OPC is one. The minimum requirement of directors in an OPC is one; however, it can have more than one director. It is a type of private company.

An OPC have the features of a company and advantages of a sole proprietorship. It has separate legal entity distinct from its sole member; therefore, in case of death of the sole member, the company shall continue its operations. At the time of incorporation the sole member has to mention the name of his nominee, who in the event of his death or incapacity will become the member of the company.

One Person Company (OPC)   An analysis

How to incorporate an OPC?

An OPC can be incorporated by filing the e Form Spice+ along with e-MOA and e-AOA. The process of incorporation of an OPC is same as any private company however; there are less legal requirements in case of an OPC.

Advantages of OPC

  • Easy Formation: Incorporation of an OPC is easy as there is minimum number of member and director is one as compared to a private company where minimum requirement of member and director is 2.
  • Separate Legal Entity: It has separate legal entity. Thereby, it can sue or be sued in its own name.
  • Access to Funds: Bank and financial institutions prefer to grant loans to companies as compared to a sole proprietorship.
  • Less compliance: The compliance requirement of an OPC is quite less as compared to a private or public company.
  • No Board/General Meeting Required: Where in an OPC there is only one director there is no requirement of holding board meeting. As there is only one member in an OPC, it is exempt from the provisions of General Meeting.
  • Speedy Decision making: The decision-making and implementation is speedy as there is only one member and usually there is only one director, so there is no conflict of opinion.

Disadvantages of OPC

  • Suitable for Small Businesses: The OPC structure is suitable for small businesses only. As, the funds requirement of large scale businesses cannot be met by a single member.
  • Lack of Expertise: As the model is designed for small businesses, there is lack of expertise in this model. The sole member (owner) manages the company therefore; the managerial expertise available to a private or public company is not available to an OPC.
  • Ownership and Management: Generally, the sole member manages the company and there is no one to question, it can result in unethical business practices.
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Category Corporate Law, Other Articles by - Manju Laur