One person company: an analytical study

Under the Companies Act of 1956 the definition of body corporate excluded from its scope ‘a corporation sole’ but the Act of 2013 has removed this exception and come up with a new revolutionary concept i.e. one person company (OPC). But there is a difference between the two. The concept of OPC allows a single person to run a company limited by shares, and Sole proprietorship means an entity where it is run and owned by one individual and where there is no distinction between the owner and the business, whereas it is not so in case of OPC. In OPC, the company will acquire corporate personality and enjoy all the advantages of a private company viz., limited liability, perpetual succession, separate property, capacity to sue and be sued, contractual rights, etc.

Part I of the paper throws light on the concept, its meaning, characteristics, and the compliance burden along with the need for the introduction of the concept of OPC in India on the lines of UK, China, Singapore and several European countries after the recommendations of the J.J. Irani Committee in 2005. Part II tests its utility in the context of the current scenario in India. In order to critically examine the concept and its benefits over the sole proprietorship points of distinction have been drawn between the two concepts. After an elaborate discussion on its advantages the shortcomings and loop holes in the concept have been analyzed. The article concludes with the observations and suggestions to overcome the ambiguities to further the objectives of the new concept including its implications on the study of corporate governance.