“Proprietors always have unlimited liability. If such a proprietor does business through an OPC, then liability of the member is limited. This will open all options for Indian entrepreneurs, with pros and cons, and leave it in the hands of such promoters to decide the best options. It will help many foreign companies, which just need to appoint nominees for the sake of a minimum two members, when they form a wholly owned subsidiary ( in India),” Vijay adds.
Various small and medium enterprises, doing business as sole proprietors, might enter into the corporate domain. The concept would boost the flow of foreign funds into India, as the requirement for a nominee shareholder would be done away with.
However, the mandatory clause that a resident indian director should be on the board could be a bottleneck, experts say. An OPC can be formed by subscribing the name of a person to the memorandum and complying with the requirements of the Act in respect of registration.
As regards the name of an OPC, the Act provides that the words “ one person company” shall be mentioned in brackets below the name of such a company, wherever its name is printed, affixed or engraved. The law comes with provisions that cover various situations arising in such a new format.
For example, any business, which is required to be transacted at an annual general meeting or any other general meeting of a company by means of an ordinary or special resolution, shall be done in the case of an OPC by passing a resolution, which shoud be communicated by the member to the company and entered in the minutes book required to be maintained under law.
|One Person Company in Companies Bill 2011|
It also provides that the memorandum of One Person Company shall indicate the name of the other person as nominee, 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 at the time of incorporation along with its Memorandum and Articles.
In countries like USA, and many countries of Europe, Singapore etc. the entrepreneur have options to decide the constitution of company as per their need and the option of ‘One Person Company’ is available to them. The concept of OPC is prevalent in many countries and notably in China.
Experts feel the key challenge for such a company will be to ensure that supporting legislations also recognise such a company as an entity and not just an extension of a sole proprietorship.
Source : Business Standard