Section 2(62) of Companies Act defines a one person company as a company that has only one person as its member. Furthermore, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its member.
Only a natural person who is an Indian citizen and resident in India shall be eligible to act as a member and nominee of an OPC.For the above purpose, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one financial year. A person can be member in only one OPC.
If an OPC has an average hattrick turnover of Rs. 2 crores and over or acquires a paid-up fund of Rs. 50 lakh and over, it has to be converted to a private limited company or public limited company within six months.
Benefits of OPC
- Limited Liability
The directors’ personal property is always safe in a private limited company, no matter the debts of the business.
- Continuous Existence
Sole Proprietorships come to an end with the death of the proprietor. As an OPC has a separate legal identity, it would pass on to the nominee director and, therefore, continue to exist.
- Greater Credibility
As an OPC needs to have its books audited annually, it has greater credibility among vendors and lending institutions.