The new Companies Act has made it possible to form One Person Companies (OPC) in India.  This change has been made keeping the growing startup sector in mind.

OPC is a special provision drafted under the new Companies Act to allow people to form a company with just one person on the board. 

According to YourStory, a leading Indian news portal:

“[OPC] has only one person as a member who will act in the capacity of a director as well as a shareholder. Thus, it does away with the hassles of finding the right kind of co-partner/s for starting a business as a registered entity. The best part is, legal and financial liability is limited to the Company and not the member. Hence, you do not need to share your piece of cake in the name of the partnership.”

Legal Definition

The legal definition of OPC comes from Section 2(62) of the Companies Act. It defines OPC as a “Company which has only one person as a member.”

How to Incorporate an OPC?

  • You can form an OPC with a minimum capital of Rs. 1,00,000.
  • You OPC will be registered as a “Private Limited Company.”
  • It will have only one person on its board of members.
  • The Memorandum of Association must name one person who will assume the duties of the board, in the event of the death/disability of the original member.
  • You can form an OPC in three ways: a) company limited by share capital; b) limited by guarantee; or c) an unlimited company.
  • One person can form only one OPC, and he/she must be an Indian National with permanent residence in India.

Advantages of OPC over General Companies

  • There’s no need for the mandatory Annual General Meeting.
  • If the board of directors consists of just one member, the OPC is exempted from a mandatory board meeting as well.
  • In the above case, the provision of the appointment of “First Director” is also waived off.
  • Various exemptions in regulation and functioning of a company which are dealt with in Sections 101 through 110.

The main advantage forming an OPC is that it separates the owner and the company. All the liabilities rest with the company and not the member. Which is unlike a sole proprietorship, where the two entities are merged. So with OPC, you can be sure that in the event of a bankruptcy, your private assets will remain untouched.