ONE PERSON COMPANY(OPC) MEANS
Section 2(62) of the Companies Act, 2013 defines “One Person Company” as a company which has only one person as member. OPC is a type of Private Company as per Section 2(68) and Section 3(1)(c) of the Act.
Rule 3 of the Companies (Incorporation) Rules 2014 says, only a natural person who is an Indian citizen whether resident in India or otherwise: –
(a) shall be eligible to incorporate a One Person Company;
(b) shall be a nominee for the sole member of a One Person Company
PRIVATE LIMITED COMPANY MEANS
As per Section 2(68) of the Companies Act, 2013, “private company” means a company having a minimum paid-up share capital as may be prescribed, and which by its articles:–
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that –
(a) persons who are in the employment of the company; and
(b) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company
1. Ownership Structure:
Private Limited Company: A Private Limited Company requires a minimum of two shareholders and can have a maximum of 200 shareholders. The ownership is distributed among these shareholders, who may be individuals or corporate entities.
One Person Company: As the name suggests, an OPC is owned by a single individual who acts as both the shareholder and the director. OPC allows a single promoter to establish and manage a company
2. Legal Requirements:
Private Limited Company: Pvt. Ltd. companies must comply with various legal requirements, such as maintaining statutory books, conducting annual general meetings, and filing annual financial statements with the registrar of companies. Additionally, the appointment of directors and auditors is subject to specific regulations.
One Person Company: OPCs have relaxed compliance requirements compared to Pvt. Ltd. companies. They are exempt from certain legal obligations, such as holding annual general meetings, and have simplified compliance procedures. However, OPCs still need to maintain proper financial records and file annual returns with the registrar of companies.
3. Liability:
Private Limited Company: In a Pvt. Ltd. company, the liability of shareholders is limited to the extent of their shareholding. Their personal assets are generally protected, and they are not personally liable for the company’s debts and liabilities.
One Person Company: Similar to a Pvt. Ltd. company, the liability of the OPC’s sole shareholder is limited. The personal assets of the shareholder are separate from the company’s liabilities, providing a level of protection.
4. Conversion and Expansion
Private Limited Company: A Pvt. Ltd. company can be converted into a public limited company or listed on the stock exchange to raise capital from the public. It also has the flexibility to issue shares, attract more shareholders, and raise funds for expansion.
One Person Company: OPCs have limitations on expansion and raising funds. They cannot be converted directly into a public limited company or issue shares to the public. However, OPCs can convert into a Private Limited Company if their paid-up capital exceeds the prescribed threshold or if they wish to have more shareholders.
Comparison between an OPC and a Pvt Ltd
PARTICULARS | ONE-PERSON COMPANY | PRIVATE LIMITED COMPANY |
RECOMMENDED FOR | INDIVIDUAL PROPRIETOR | MULTIPLE PROMOTERS |
Minimum owners | 1 Owner & 1 nominee | 2 Shareholders |
Maximum owners | 1 Owner | 200 Shareholders |
Board of directors | At least 1 director | At least 2 directors |
Shareholding | 100% of shares held by a single person | 100% of shares cannot be held by a single person. Minimum of two shareholders required |
External investment | Difficult to obtain | Easily available |
Credibility | Low | High |
Compliance requirements | Annual return filing. No board meetings if only one director &no general meetings. | Annual return filing, board Meetings &general meetings |
NRI or foreign nationals | Only Indian citizens and Indian nationals are allowed to start | NRIs or foreign nationals are also allowed to start and manage |
Mandatory conversion | If annual turnover exceeds Rs. 2 crores or paid-up capital exceeds Rs. 50 lakhs, then mandatory conversion into a private limited company | No mandatory conversion |
Procedure | Obtain DSC (digital signature certificate), obtain DIN (directors identification number), name approval, filing for incorporation &file nominee details | Obtain DSC (digital signature Certificate), Obtain DIN (directors’ identification Number), Name approval &filing for Incorporation |
Law applicable | Companies Act 2013 | Companies Act 2013 |
Minimum share capital | No minimum share capital is necessary. If capital exceeds 50 lakhs, OPC gets converted to a Pvt. Ltd. | No requirement for minimum share capital |
Board meeting | One meeting in each half of the year. The gap between the two meetings must be at least 90 days. | One meeting in each quarter of the year. The maximum gap between the two meetings can be 120 days. |
Statutory audit | Compulsory | Compulsory |
Annual filing | Financial statements and annual returns to be filed with registrar | Annual accounts and annual returns to be filed with RoC |
Liability | Limited | Limited |
Transferability of shares | Can be made by altering MOA | Can be easily transferred |
Foreign direct investment | Not eligible for FDI | Eligible via automatic route |
Suitable to which type | Individuals whose capital requirements are 50 lakhs and turnover is less than 2 crore | Business, trade, manufacturers, large industrial establishments |
Company name | Should end with (OPC) Pvt. Ltd./(OPC) Ltd. | Should end with Pvt. Ltd. |
