WHAT ARE THE LIABILITY FOR AN OPC AS PER COMPANIES ACT 2013
LIABILITY
Liability is a legal term that refers to the responsibility of a person or entity to another person or entity. In the context of business, liability refers to the responsibility of a business to its creditors, customers, employees, and other stakeholders.
There are two main types of liability: contractual liability and tort liability. Contractual liability arises from a breach of contract, while tort liability arises from a wrongful act or omission that causes harm to another person.
Here are some of the most common types of liability in business:
- Contractual liability: This is the responsibility of a business to fulfill its contractual obligations to its customers, suppliers, and other business partners.
- Tort liability: This is the responsibility of a business for its wrongful acts or omissions that cause harm to another person.
- Product liability: This is the responsibility of a business for injuries caused by its products.
- Environmental liability: This is the responsibility of a business for the environmental damage caused by its operations.
- Employment liability: This is the responsibility of a business for the injuries or other losses caused by its employees.
OPC
OPC stands for One Person Company. It is a type of company that is owned and controlled by a single person. OPCs were introduced in India in 2013 as a way to make it easier for individuals to start and run businesses.
OPCs have a number of advantages over other types of companies, including:
- Simple compliances: The compliance requirements for OPCs are relatively simple compared to those for other types of companies. This makes it a good option for entrepreneurs who want to start a business with limited personal risk and simple compliance requirements.
- Flexibility: OPCs have a lot of flexibility in terms of their structure and operations. This makes it a good option for entrepreneurs who want to have a lot of control over their business.
WHAT ARE THE LIABILITY FOR AN OPC
The liability of an OPC is limited to the unpaid amount of the subscribed capital as per the Companies Act 2013. This means that the personal assets of the member of an OPC are not at risk in the event that the company is unable to meet its liabilities.
However, there are some exceptions to this limited liability. For example, the member of an OPC may be personally liable if they:
- Make contracts in their own name on behalf of the company.
- Fail to operate a separate bank account for the company’s financial transactions.
- Draw money from the company’s bank account for personal use.
In addition, the member of an OPC may also be personally liable if they commit fraud or other illegal acts in the course of running the company.
Here are some of the limits of an OPC:
- The paid-up capital of an OPC cannot exceed Rs. 50 lakhs.
- The average turnover of an OPC cannot exceed Rs. 2 crores in three consecutive financial years.
- An OPC cannot have more than one member.
- An OPC cannot raise money from the public through public issue of shares or debentures.
Overall, the liability for an OPC is limited, which makes it a good option for entrepreneurs who want to start a business with limited personal risk. However, it is important to be aware of the exceptions to limited liability and to take steps to minimize the risk of personal liability.
Here are some of the steps that can be taken to minimize the risk of personal liability for an OPC member:
- Operate a separate bank account for the company’s financial transactions. This will help to ensure that the company’s assets are kept separate from the member’s personal assets.
- Do not make contracts in your own name on behalf of the company. This could make you personally liable for the debts of the company.
- Take steps to prevent fraud or other illegal acts from happening in the course of running the company. This could help to protect you from personal liability if something does go wrong.
By following these steps, you can help to minimize the risk of personal liability for an OPC member.
