Entrepreneurs have a reason to smile with the Government introducing the novel idea of ‘one person company’ but an individual can register a maximum of five such entities for business purposes.
‘One person company’ opens up plethora for business opportunities for small entrepreneurs and people, such as those working in the areas of handloom, handicraft and pottery.
Interestingly, the setting up of OPCs is also subject to certain conditions unlike other class of companies.
According to the new Companies Act, the words ‘One Person Company’ should be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.
Before the new Companies Act came into effect, at least two shareholders were required to start a company.
“No person shall be eligible to incorporate more than five One Person Companies,” according to draft rules issued for the Companies Act 2013.
According to experts, OPC could facilitate easier access to funding sources for entrepreneurs. Besides, having such entities, especially in SME (small and medium enterprises) sector would help the government to capture quality data about the sector and form policies accordingly, they added.
Many countries, including the US, Singapore and China, allow entrepreneurs to structure their business as One Person OPC.
Meanwhile, as per the new Companies Act, an entity would lose the status of OPC if it exceeds certain limits of paid up share capital and turnover.
When the paid up share capital exceeds Rs 50 lakh or average annual turnover during the relevant period crosses Rs 2 crore, then a firm ceases to be an OPC.
As per the draft rules, an OPC can get itself converted into a private or public company by complying with relevant norms including having the requisite paid up capital for those class of entities.
Only a natural person who is an Indian citizen and resident in India would be eligible to set up OPCs.
In the case of OPC, the financial statements — duly adopted by the member — along with all the related and required documents should be filed with the government within 180 days the end of a financial year.
Recently, Corporate Affairs Minister Sachin Pilot had said that the concept of OPC is quite revolutionary.
”... also, rather than the middlemen conjuring profits, the one person company will have direct access to the market and wholesale retailers,” he had said.