When businesses operate independently, they grow rapidly, and company law helps in this, and provides companies with features like a separate legal entity, common seal, ability to sue, etc,. and limited liability, etc., to its owner. But the problem was that to register a business under company law, private companies required a minimum of 2 persons, and public companies required a minimum of 7 persons. To overcome this problem, the Companies Act, 2013, for the first time in India introduced the concept of a One Person Company.
Only one person is required for the incorporation of a One Person Company, and the same person holds all the positions in the company, like director, owner, etc., and it is an advanced and formal structure of a sole proprietorship business. The main purpose of introducing this concept is to promote the business and help those people who want to hold all the positions alone and also want to enjoy all the facilities of the company.
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What is a One Person Company?
One Person Company is a type of company in which only one person acts as the entire company and is the sole owner of the entire company. In simple words, One Person Company means a company that has only one member, and that one member enjoys limited liability facility which means the member is protected from unlimited liability.
Section 2(62) of the Companies Act, 2013 defines One Person Company as – “One Person Company means a company which has only one person as a member.”
It is a private company and has all the important features of a company, like a separate legal entity, capacity to sue, common seal, limited liability, capacity to own, etc. A One Person Company is required to use a name suffix after its name, like “One Person Company” or “OPC”. For example, if the name of the company is XZY, then it will be like this “XYZ OPC” or “XYZ One Person Company”.
Even though a One Person Company has only one member, it enjoys the facility of perpetual succession, which means that the company continues to function even if the member is not in the capacity to run the company due to death, illness, disqualification by law, etc. This is possible due to the Companies Act, and it is mandatory to appoint a nominee so that if, for any reason, the member is not in a position to run the company, the nominee can act as the member.
| Minimum Number of Members | 1 |
| Maximum Number of Members | 1 |
| Perpetual Succession | Yes |
| Separate Legal Entity | Yes |
| Limited Liability | Yes |
| Ability to Sue | Yes |
| Transferability of Shares | No |
| Capacity of Ownership | Yes |
| Minimum Number of Directors | 1 |
| Maximum Number of Directors | 1 |
| Nominee | Mandatory |
| Public or Private | Private |
| Name suffix | One Person Company or OPC |
Features of One Person Company
Following are the features of a One Person Company:
1. One Person:
A One Person Company has only one member, or only one member is required for incorporation, and that person acts as the member and director. All the work of the company is handled by that one person, and the entire business is of that one person only. In simple words, this company has only one member who works for all the positions.
2. Separate Legal Entity:
One Person Company has a separate legal entity/identity, and this is one of the biggest features of a company because, due to this provision, the company becomes a separate legal entity from its owner. In simple words, due to this provision, the company and its owner are two different persons, and the members of the company act as per the company.
3. Limited Liability:
Member of a One Person Company enjoy the facility of limited liability as this facility is provided by the governing law to protect the liability of the member, and under this, the member is liable only up to his share. In simple words, the member is protected from unlimited liability, which is not available in sole proprietorship or partnership business.
4. Perpetual Succession:
Perpetual succession means continuity, according to which members come and go, but the company continues. Even though one person company has only one member, it still gets this facility. Perpetual succession in this company is obtained due to the provision of the governing law, and for this, the nominee is appointed at the time of incorporation itself, and this process continues as long as the company exists.
5. Ability to Sue:
When the business is registered under the Companies Act, the business gets a separate legal identity in the eyes of the law and acts as an artificial person, and under which the company can sue anyone in its own name. In simple words, when a company is registered, both its members and the company become separate persons, and the members act as per the company; hence, everything is done in the name of the company.
6. Nominee:
A nominee is required in a One Person Company as it has only one member, and if he becomes incapable of working for any reason, the nominee takes over the position of the member. A nominee is required in this company so that perpetual succession can be maintained. Minors, mentally unsound, and persons disqualified by law are not eligible to become nominees.
7. Capacity of Ownership:
Because of a separate legal entity, the company has the power to acquire anything in its own name, and this applies to a one-person company as well. When a business is incorporated under the Companies Act, it gets a separate legal entity provision, and the company enjoys its own capacity under that provision.
8. Name:
Businesses registered under One Person Company are required to add the name suffix “One Person Company” or “OPC” after their name, for example, if the company name is EFG, then it will be “EFG One Person Company” or “EFG OPC”. This is mandatory as it helps to identify the type of company.
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QNA/FAQ
Q1. What is a One Person Company?
Ans: One Person Company is a type of company that requires only one person for incorporation.
Q2. When was one person company introduced for the first time in India?
Ans: The Companies Act, 2013, introduced one person company in India for the first time.
Q3. Does One Person Company have perpetual succession?
Ans: Yes, One Person Company has perpetual succession.
Q4. Why was the One Person Company introduced?
Ans: One Person Company was introduced so that a single person can run the business as a company and all the power remains with him only.
Q5. Write the features of one person company.
Ans: Following are the features of a one person company:
1. Only one person is required for incorporation.
2. The company has a separate legal identity.
3. The member has limited liability.
4. The company enjoys perpetual succession.
5. The company has the capacity to sue.
6. Appointment of a nominee is compulsory.
7. The company has the capacity of ownership.
8. Name suffix is necessary.
