One,Person,Company-,New,Busine law One Person Company- A New Business Ownership Concept

When you work with an attorney, you will have no problem reducing the risks associated with getting your case in front of a judge and jury, or other formal court, when you need to. However, every case is different. It is important to work wi Bankruptcy is a situation, wherein an individual is termed as unable to discharge all the debts. When a person or a company is not able to pay off its creditors, it has an obligation to file a bankruptcy suit. In fact, a bankruptcy suit is a

TheCompanies Act, 2012 passed by the Lok Sabha provides for the concept of an OPC.Sec 2(1)(zzk) of the Companies Bill, 2009 brought in the concept of a “OnePerson Company”. It is essentially a legal entity which functions on the sameprinciple as a Company, but with only one member and one shareholder. It was analternative for Indians, who typically operate using the risky concept of aproprietorship. One person company- As the name suggests, it means a companywhich has only one person as a member and where legal and financial liabilityis limited to the company only and not to that person. (i.e. liability islimited). A New Concept - The reason why theold Companies Act of 1956 had made it compulsory for a Company to have aminimum of two members was so that it could be clearly separated from a soleproprietorship, a corporate structure which is categorically excluded from theAct. However, the duplicity of this provision was blatant and rampant. Peoplestarted forming companies by adding a nominal member/ director, allotting themone single share, which is the minimum requirement for a director as per theAct, and retaining the rest of the shares themselves. Thus a person could enjoythe status and benefits of a Company while operating and functioning like aproprietary concern for all practical purposes. Hence, to make things clearerand more logical, an option has been created wherein a person can form acompany as a one person entity. Draft Companies Bill, 2009- OPC TheDraft Companies Bill, 2009, (Bill No. 59 of 2009), as introduced in Lok Sabhaon 3rd August 2009, introduces the OPCconcept for the first time in India. Some of the theprovisions in the Draft Bill are as follows. OnePerson Company is defined under section 2(1) (zzk) as: ‘One Person Company’means a company which has only one person as a member”. ChapterII deals with the Incorporation of the Companies. Section 3(1) (c) deals withthe formation of One Person Company. It states, “One person, where the companyto be formed is to be a One Person Company, by subscribing their names or hisname to a memorandum in the manner prescribed and complying with therequirements of this Act in respect of registration. Provided that thememorandum of a One Person Company shall indicate the name of the person whoshall, in the event of the subscriber’s death, disability or otherwise, becomethe member of the company. Provided further that it shall be the duty of themember of a One Person Company to intimate the Registrar the change, if any, inthe name of the person referred to in the preceding proviso and indicated inthe memorandum within such time and in such form as may be prescribed, and anysuch change shall not be deemed to be an alteration of the memorandum” Section5(1) deals with the memorandum of the One Person Company. It states “Thememorandum of a company shall state— the last letters and word “OPC Limited” inthe case of a One Person limited company”. Section 13(1) a, b, c deals withalteration of articles including the conversion of Private Companies, PublicCompanies to One Person Companies and vice-versa. One very important feature ofthe OPC concept is the conduction of Annual General Meeting.  Section85(1) of the Draft Bill excludes One Person Company from holding Annual GeneralMeeting at least once in a year. Section 171 is perhaps the most importantprovision to look out for. It states, 1.                  Where a One Person Company limited by sharesor by guarantee enters into a contract with the sole member of the company whois also director of the company, the company shall, unless the contract is inwriting, ensure that the terms of the contract or offer are contained in amemorandum or are recorded in the minutes of the first meeting of the Board ofDirectors of the company held next after the entering into the contract.Provided that nothing in this sub-section shall apply to contracts entered intoby the company in the ordinary course of its business.2.                  The company shall inform the Registrar aboutevery contract entered into by the company and recorded in the minutes of themeeting of its Board of Directors under sub-section (1) within fifteen days ofthe date of approval by the Board of Directors with such fee as may beprescribed, or with such additional fee as may be prescribed within the timespecified, under section 364.3.                  Where the company fails to inform theRegistrar under sub-section (2) before the expiry of the period specified undersection 364 with additional fee, the company shall be punishable with finewhich shall not be less than twenty-five thousand rupees but which may extendto one lakh rupees and every officer who is in default shall be punishable withimprisonment for a term which may extend to six months or with fine which shallnot be less than twenty-five thousand rupees but which may extend to one lakhrupees, or with both. Advantages- This will bring the unorganised sector of proprietorshipinto the organised version of a private limited company. The organised versionof OPC will open the avenues for more favourable banking facilities.Proprietors always have unlimited liability. If such a proprietor does businessthrough an OPC, then liability of the member is limited. This will open alloptions for Indian entrepreneurs, with pros and cons, and leave it in the handsof such promoters to decide the best options. It will help many foreigncompanies, which just need to appoint nominees for the sake of a minimum twomembers, when they form a wholly-owned subsidiary (in India). Various small andmedium enterprises, doing business as sole proprietors, might enter into thecorporate domain. The concept would boost the flow of foreign funds into India, as the requirementfor a nominee shareholder would be done away with. However, the mandatoryclause that a resident Indian director should be on the board could be abottleneck. Formation of One-Person-Company- Firstly, the personis to give a separate name and legal identity to the Company, under which allthe activities of the business are to be carried on. This ensures that aseparate legal entity is formed. Secondly, the person has to nominate a namewith that person’s written consent as a nominee to the OPC. This person will bethe default and ad hoc member in case of the existing sole member’s death ordisability. This provision will ensure perpetuity and continuity to the life ofthe Company. The golden rule of “members may come and go, but the Company mustlive on” holds good. Finally, every One Person Company should bear the letters“OPC” in brackets after it’s registered name, wherever it may be printed,affixed or engraved. Italso provides that the memorandum of One Person Company shall indicate the nameof the other person as nominee, with his prior written consent in theprescribed form, who shall, in the event of the subscriber's death become themember of the company and the written consent of such person shall also befiled with the Registrar at the time of incorporation along with its Memorandumand Articles. OPC In Other Countries Variouscountries permit this kind of a corporate entity. China introduced it inOctober 2005 in which the promotingindividual is both the director and the shareholder. The amended company law ofPakistan permits one person toform a single-member company by filing with registrar, at the time ofincorporation, a nomination in the prescribed form indicating at least twoindividuals to act as nominee director and alternate nominee director. In US,several states permit the formation and operation of a single-member LimitedLiability Company (LLC). In China, one person isallowed to apply for opening a limited company with a minimum capital of 1,00,000 Yuan. The amended law of China prescribes that theowner should pay the investment capital at one time and bars him from opening asecond company of the same kind. In most countries, the law governing companiesenables a single-member company to have more than one director and grantsexemptions to such companies from holding AGMs, though records and documentsare to be maintained. The concept is also very popular in Singapore. Conclusion:OPCwill give greater flexibility to an individual or a professional to manage hisbusiness efficiently and at the same time enjoy the benefits of a company.Company law experts see a rise in registrations of one-person companies oncethe Bill is enacted into law. The concept of OPC will also help many foreigncompanies, which need to appoint a minimum of two nominees now when they form awholly-owned subsidiary. OPC will open the avenues for more favourable bankingfacilities, particularly loans, to such proprietors. Besides, the concept willboost flow of foreign funds in India as the requirement ofnominee shareholder would be done away with. Expertsfeel the key challenge for such a company will be to ensure that supportinglegislations also recognise such a company as an entity and not just anextension of a sole proprietorship.