One Person Company- Exemptions and Benefits

Concept of One Person Company

One person company (OPC) means a company formed with only one (single) person as a member, unlike the traditional manner of having at least two members. The concept of OPC is not alien to the world. One Person Company is a concept emerged from a Sole Proprietorship. It is a hybrid of Sole-Proprietorship and Corporate form of business. OPC is the simplest concept introduced under the Companies Act, 2013. One person company (OPC) in India is one of the easiest forms of corporate entities to manage. One Person Company has been provided with various concessions in compliance requirements under the Companies Act. It is a form of a company where the compliance requirements are less than a private company. OPC registration is very easy and cheap process. In this article let us discuss the exemptions / concessions available to OPC (One Person Company).

Exemptions to OPC from Mandatory Compliance

Compared to other forms of companies, the One Person Company enjoys certain exceptions as far as the mandatory compliance is concerned. The Privileges and exemptions to OPC (one person company) or its advantages over other companies are as follows:

One Director

Unlike Private Limited Company, the One Person Company requires only one director to run the company. This relaxation is available only to One Person Company since every other type of company requires a minimum number of two directors.

Holding of Annual General Meeting

A One Person Company is exempted from holding the Annual General Meeting of the company. As there is only one director for a One Person Company, compliance with the provisions of conducting the board meetings is impossible and is therefore granted an exemption.

In respect of businesses which can be transacted only through general meetings of the company using an ordinary or special resolution, for a One Person Company, such a meeting will be deemed to have done if the member of the company has communicated the resolution to the company and entered it in the minutes book with sign and date.

Holding of Board Meetings

One Person Company, like Private Limited Company, does not require to hold 4 board meetings. An OPC may hold only 2 board meetings if such company has more than one director, Each meeting to be held in each half of the calendar year with a minimum gap of 90 days between the two meetings.

Filing of Annual Returns

Usually, the annual returns of the company have to be signed by the Director and the Company Secretary whereas for a One Person Company, it shall be signed by the Company Secretary and if there is no Company Secretary, then by the Director alone.

Signing of Financial Statements

In One Person Company, Financial statement and Board’s report can be signed only by one director.

Cash Flow Statement

A One Person Company does not need to include Cash Flow Statement as part of its financial statement.

Audit Reports and Auditors

An exemption is given to One Person Company with regards to filing the Audit Report. OPC does not require filing of an Audit Report on internal financial controls with reference to financial statements and the operating effectiveness of such controls. Companies (Auditor’s Report) Order, 2016 not applicable on OPC.

Also, an OPC does not require to follow the condition laid in Section 139(2) of the Company Act 2013, which mandates the rotation of auditors every 5 years (individual auditors) and every 10 years (firm of auditors).

Suggested Read: Mandatory Compliance List for One Person Company.

The most important feature of One Person Company is that while the characteristics regarding the ownership & control predominately resemble that of a proprietorship, the risks are limited to the value of shares held by such persons in the company. The One Person Company has a separate legal identity and existence from its shareholders. This would encourage entrepreneurial persons to take the challenge of doing business without bothering about liabilities getting to the personal assets.