The Concept of One Person Company (OPC) finds mention in the Draft Companies Bill, 2011 (Bill No. 121 of 2011) (‘Companies Bill’) presented before parliament in November 2011. If the Bill is passed and enacted as law it will be the first time that such form of carrying business will be introduced in India and it will be an immense departure from the traditional approach of carrying business. Traditionally company is thought of ‘as coming together of a number of individuals for a common purpose’. This principle is also emphasized in definition of company in Black’s Law Dictionary which defines it in following terms “A Corporation—or less, commonly, an association, partnership, or union— that carries on a commercial or industrial enterprise.” If concept of limited liability partnership comprised in Limited Liability Partnership Act, 2008, afforded opportunity of restricting liability of individual partners carrying on business in partnership, then OPC model of carrying business will be a variant of self proprietorship with limited liability.

In India J. J. Irani Committee’s report on Company Law dated 31st May, 2005, recommended the recognition of OPC as a legal form of company. Based on the said recommendation the concept finds mention in Section 2(62) of the Companies Bill, which defines OPC as a company which has only one person as a member. Further the Companies Bill provides for formation of such OPC in its Section 3(1)(C) by one person by way of subscribing his name to memorandum and complying with the other requirements in respect of registration mentioned therein. Since every company enjoys legal entity distinct from its members and perpetual succession, an attempt is made that OPC remains unaffected despite the death of its sole member by adding a proviso in Section 3(1)(c). The said proviso provides that the memorandum of One Person Company must indicate the name of the other person, with his prior written consent in the prescribed form, who shall, in the event of the subscriber’s death become the member of the company and the written consent of such person shall also be filed with the Registrar of Companies at the time of incorporation of the One Person Company along with its memorandum and articles.

Keeping in view the special distinct character of such companies, adequate safeguards have been incorporated in Companies Bill to ensure that one person at helm of affairs of such companies is not caught up in the procedural requirements and recurring compliances. Usual norms of holding board meetings and annual general meeting are relaxed for OPCs. Such companies are not required to hold annual general meetings and as opposed to one board meeting in every quarter they are only required to hold one board meeting in every half of the calendar year. Further in case of OPCs having only one director on their board, it is sufficient if resolution by single director is entered in the minutesbook and the date of signing of the minutes-book by the single director shall be taken as the date of board meeting for all purposes. Some other relaxation offered to OPCs inter alia relate to quorum requirements, proxies, maintenance of various registers of members, filling of forms with registrar of companies, annual directors’ report.

India is not the first country to lend recognition to OPC and there have been instances in some other jurisdictions where OPC is already a recognized corporate entity such as China, Singapore, United Kingdom, Pakistan and some states of United States of America. Conferment of legal status on OPC as legal form of business is indicative of the fact that OPC has emerged out of the current emergence of new breed of entrepreneurs in service sector providing specialized services of personal nature such as designers, practicing dieticians, freelancing artists among others. The intent behind subsequent inclusion of the provisions relating to OPC in company law of variouscountries is to facilitate individuals to operate in economic domain. The law will ensure that such individuals can reap the benefits of protection, security and investor friendliness of a company without having to give up on autonomy of operation. At present there would be number of instances where show is singlehandedly being managed by one individual in garb of private companies. However, implementation of OPC will never pave way for phasing out of self proprietorship, because no business model can offer as much flexibility as proprietorship.

Despite being a step in right direction from lone entrepreneurs’ perspective, the law comprised in Companies Bill is not without its grey areas. The law in its present form leaves some questions unanswered. Companies Bill is unclear on the issue whether a legal entity can be the one person in One Person Company. In contrast to Indian position, Singapore’s law on OPCs allows companies to be sole shareholder of an OPC. In its current form Companies Bill will not come to rescue of foreign investors wishing to set up wholly owned subsidiary in India. Besides the proposed law has received criticism on the ground that formation of OPC will lead to evasion of tax liability.