The Union Finance minister Nirmala Sitharaman in her 2021-22 Budget speech said the government would incentivize the incorporation of One Person Company (OPC) by allowing such companies to grow without any restrictions.
- The 2014 rule, which stated that a one-person company would cease to have that status once its paid-up share capital exceeds RS 50 lakh or its average turnover for the preceding three years exceeds Rs. 2 crore, has been lifted. The capital base limit has been increased from Rs 50 lakh to Rs 2 crore, and the turnover limit has been increased from Rs 2 crore to Rs 20 crore.
- The Finance Minister has reduced the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow non-resident Indians (NRIs) to incorporate OPCs in India. Earlier, only an Indian citizen and an Indian resident could start a single-person company.
- In India, the One Person Company (OPC) concept was introduced in the Companies Act of 2013. Its introduction was based on the suggestions of the J.J. Irani Committee Report on Company Law.
- In the Companies Act of 2013, such companies were exempted from many procedural requirements, and, in some cases, provided relaxations.
- Such a company does not need to conduct an annual general meeting, which is a requirement for other companies.
- A one-person company also does not require signatures of both its company secretary and director on its annual returns. One is enough.
One Person Company Vs Sole Proprietorship
- For the One person company, the person and the company are considered separate legal entities. In sole proprietorship, the owner and the business are considered the same.
- In a one-person company, the sole owner’s liability is limited to that person’s investment. In a sole proprietorship set-up, however, the owner has unlimited liability as they are not considered different legal entities.
(Source: The Hindu)
