A One Person Company is established and incorporated under the Companies Act, 2013. The Companies Act contains all the provisions needed to regulate a One Person Company beginning from the key elements and conditions required to be followed for its formation, and the rules to carry out its day-to-day operations. We have also mentioned the key provisions of the Companies Act dealing with a One Person Company for your better understanding.
As mentioned earlier, a One Person Company is essentially incorporated as a Private Limited Company. In other words, its core features related to the transferability of shares and the liability of the owner remains the same as that of a Private Limited Company. Like a Private Limited Company, the shares of a One Person Company are also sold in a private manner. The restrictions over trading the shares on public platforms like Stock Exchanges and opening the sale of shares to the general public apply to a One Person Company as well. The only difference between a One Person Company and a Private Limited Company, however, is the number of owners or shareholders that they can have.
A One Person Company or OPC is a company registered and regulated under the Companies Act, 2013. So, it is obvious that the Act itself contains the legal or statutory definition of a one person company. Section 2 (62) of the Companies Act, 2013, defines a One Person Company as “a company which has only one member”.
Additionally, Section 3 of the Act which lays down the provisions regarding “Formation of a company” further clarifies that a One Person Company, which is to be formed with only one person as its owner, is essentially a “Private Company”. In fact, the incorporated name of a One Person Company ends as “Private Limited Company” with “One Person Company” mentioned in brackets by its side.
The existence of a One Person Company is not possible without the five key essential elements of its identity, namely its name, business address, capital, shareholder, directors, and Nominee. Let us go through each of them one by one.
A One Person Company can be incredibly beneficial for individuals who do not wish to share the profits of their company with any other entity. Moreover, as the owner of all its profits, the single shareholder of a one person company is not liable to pay off all the liabilities of the company. His liability is restricted only to the amount of capital that he has subscribed to, in the company.