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What is One Person Company? Company formed by a single person one-person company in the legal system is a move that would encourage corporatisation of business and entrepreneurship OPC is a one shareholder corporate entity. legal and financial liability is limited to the company only. http://www.bizandlegis.com
Salient Features of OPC Promotes entrepreneurship across the country. de-risks the business by transferring the promoter’s liability to the company. very little paper work — the Articles of Association would be simple and short If same person is doubling as director and shareholder there would be no need for board or shareholders’ meetings. Quorum requirements, proxies, maintaining of various registers of members, filing of multiple e-forms fade away, leaving the single operator free from the fetters of corporate governance, except that he has to maintain his books of accounts, prepare and file annual audited balance sheet and profit and loss accounts, without the Board’s report. The memorandum of a One Person Company shall indicate the name of the person who shall, in the event of the subscriber’s death, disability or otherwise, become the member of the company. The memorandum of a company shall state the last letters and word ―OPC Limited‖ in the case of a One Person limited company. The One Person Companies are also not required to hold any Annual General Meeting under the new Companies Draft Bill, 2009. This facility is not extended towards any other type of companies. http://www.bizandlegis.com
Company vis-à-vis ONE PERSONCOMPANY Common Seal Perpetual Succession Separate finances Separate legal entity Separate property Limited liability Management and Control http://www.bizandlegis.com
OPC v/s SOLE PROPRIETORSHIP OPC Sole proprietorship Separate legal entity Owner & entity is same personality Limited Liability Unlimited Liability Debt- not the sole responsibility Debt - sole responsibility of the of the owner owner Finance- credit record of the Finance- credit history of the company owner Legal requirements- will need Legal requirements- will not to register itself as such have to draw up paper declaring its status Tax paid by the owner Separate tax http://www.bizandlegis.com
One Person Company – In ForeignJurisdictions China1. introduced it in October 2005) in which the promoting individual is both the director and the shareholder.2. In China, one person is allowed to apply for opening a limited company with a minimum capital of 1, 00,000 Yuan. The amended law of China prescribes that the owner should pay the investment capital at one time and bars him from opening a second company of the same kind. Pakistan1. The amended company law of Pakistan permits one person to form a single-member company by filing with registrar, at the time of incorporation, a nomination in the prescribed form indicating at least two individuals to act as nominee director and alternate nominee director. http://www.bizandlegis.com
U.K.1. U.K.Companies Act, 2006 & the Companies (Single Member) Private Companies Regulations 1992 Singapore1. Company Amendment Act of 2004 and other regulations United Arab Emirates1. One Person Company recognized2. Only Articles of Association United States1. In US, several states permit the formation and operation of a single-member Limited Liability Company (LLC). In most countries, the law governing companies enables a single- member company to have more than one director and grants exemptions to such companies from holding AGMs, though records and documents are to be maintained. http://www.bizandlegis.com
ONE PERSON COMPANY ININDIA J.J Irani Report Companies Bill, 2009 http://www.bizandlegis.com
Draft Companies Bill, 2009 The Draft Companies Bill, 2009, (Bill No. 59 of 2009), as introduced in Lok Sabha on 3rd august 2009, introduces the OPC concept for the first time in India. The Bill will provide a substantive legal framework while leaving the procedural issues to the rules to be notified subsequently. Articulation of shareholders democracy with protection of the rights of minority stakeholders, responsible self regulation with disclosures and accountability has been the objective behind this simplified company law. http://www.bizandlegis.com
Provisions Under Company Bill One Person Company is defined under section 2(1) (zzk) as: ―One Person Company‖ means a company which has only one person as a member‖ http://www.bizandlegis.com
Section 3(1) (c) deals with the formation of One Person Company. It states: ―One person, where the company to be formed is to be a One Person Company, by subscribing their names or his name to a memorandum in the manner prescribed and complying with the requirements of this Act in respect of registration: Provided that the memorandum of a One Person Company shall indicate the name of the person who shall, in the event of the subscriber’s death, disability or otherwise, become the member of the company: Provided further that it shall be the duty of the member of a One Person Company to intimate the Registrar the change, if any, in the name of the person referred to in the preceding proviso and indicated in the memorandum within such time and in such form as may be prescribed, and any such change shall not be deemed to be an alteration of the memorandum‖ www.bizandlegis.com
Section 5(1) deals with the memorandum of the One Person Company. It states ―The memorandum of a company shall state— the last letters and word ―OPC Limited‖ in the case of a One Person limited company‖. Section 13(1) a, b, c deals with alteration of articles including the conversion of Private Companies, Public Companies to One Person Companies and vice-versa. One very important feature of the OPC concept is the conduction of Annual General Meeting. Section 85(1) of the Draft Bill excludes One Person Company from holding Annual General Meeting at least once in a year. www.bizandlegis.com
Section 171 is perhaps the most important and fascinating provision to look out for. It states: ―Contracts by One Person Companies- 171. (1) Where a One Person Company limited by shares or by guarantee enters into a contract with the sole member of the company who is also director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract or offer are contained in a memorandum or are recorded in the minutes of the first meeting of the Board of Directors of the company held next after the entering into the contract: Provided that nothing in this sub-section shall apply to contracts entered into by the company in the ordinary course of its business. (2) The company shall inform the Registrar about every contract entered into by the company and recorded in the minutes of the meeting of its Board of Directors under sub- section (1) within fifteen days of the date of approval by the Board of Directors with such fee as may be prescribed, or with such additional fee as may be prescribed within the time specified, under section 364. (3) Where the company fails to inform the Registrar under sub-section (2) before the expiry of the period specified under section 364 with additional fee, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.‖ www.bizandlegis.com
Conclusion OPCs are imperative because they would give entrepreneurial capabilities of people an outlet for participation in economic activity and such economic activity may take place through the creation of an economic person in the form of a company. However, there has been criticism in certain quarters against the formation of such a company as it may give room for evasion of public funds and tax liability by an individual. Whether only an individual or even a legal person can form a one-person company? Whether a single member can form a company without any limit on the paid-up capital or some ceiling?
If the turnover of the one-person company exceeds certain limits, whether it should to be converted into private/public limited small entrepreneurs who are running their businesses under the proprietorship model could convert to OPCs, with the benefit of limited liability and none of the cumbersome compliance requirements. On a positive note, OPCs are expected to attract investors who were earlier afraid to take risk in investing in sole proprietorship business because of unlimited liability. Process of starting a business getting simpler it could be a boon for every form of small business. Opportunity for a lot of Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) who can set up their companies in India. www.bizandlegis.com