1.

SALIENT FEATURES OF OPC

 Independent corporate existence

Like any other company, an OPC will have its own existence, which is separate from that of its
Director/shareholder. The principle was first emphasized in Salomon v. Salomon & Co Ltd 1. A
company is in law a person, having perpetual succession and a common seal. It forms a distinct
legal persona independent of its member. Thus, an OPC becomes a body corporate capable
forthwith of exercising all the functions of an incorporated individual. It becomes
impersonalized. In the words of Palmer, “The benefits following from incorporation can hardly
be exaggerated. It is because of incorporation that the owner of the business ceases to trade in his
own person. The company carries on the business, the liabilities are the company’s liabilities and
the owner is under no liability for anything the company does, although as principal shareholder,
he is allowed to take full advantage of the profits which the company makes.

Further in T.R. Pratt v. E.D. Sasoon & Co. Ltd2, the Bombay High Court has held that,

“Under the law, an incorporated company is a different entity, and although the entire share
maybe practically controlled by one person, in law a company is a distinct entity.”

This is in contradistinction to a proprietorship where there is no separation of identity between

the individual and his business. They function as one and share the same identity.

 Member of the Company

First and foremost is that the company shall have only one member 3. Member is defined as a
shareholder or a person who agrees in writing to become a shareholder or the subscriber of MoA
who has agreed to become the member of the company4.

The member of the company shall always be a natural person. Thus, a company, which is an
artificial person, cannot incorporate OPC as a subsidiary or holding company.

1
[1897] AC 22
2
AIR 1965 Bom 62
3
Section 2(62) of the Companies Act, 2013
4
Section 2(55) of the Companies Act, 2013
The natural person who will be the member of the company shall have to be an Indian citizen
and a resident of India (a resident of India means a person who has stayed for 182 in the
immediately preceding financial year5.

He shall be a major because he would be the person to enter into a contract on behalf of the
company and thus will be liable in breach of the contract. Indian Contract Act specifies that a
person entering into a contract shall be a major.

The member of the company shall have only one OPC in his name. The member cannot be a
shareholder of more than one OPC simultaneously6.

 Directors of the company

Every company shall have directors. Minimum of two directors in case of private company and
minimum of three directors in case of public company 7. OPC shall have minimum of one
director and maximum of 15 directors 8. The member of the company shall be its first director 9
which shall also be mentioned in MoA.

 Naming of OPC

Section 12 of the Companies Act, 2013 deals with naming of a company, that is, whether it is a
public company or a private company, it should be mentioned wherever the name of the
company is used. The same is in the case of OPC as well, that is, under the name of the
company, One Person Company should be written in brackets, whether the name is printed or
affixed or engraved10.

 Nominee of the company

Company has a feature of perpetual succession. In any other company, on the demise of the
member or his incapacity to act as a member, then the legal representatives of the incapacitated
member shall replace and carry over the business. But it is not in the case of OPC, as a member
can have more than one legal representative, on the incapacity of the member to act, all the legal
5
Rule 3 of the Companies Incorporation Rules, 2014
6
Ibid.
7
Section 149 of the Companies Act, 2013
8
Ibid.
9
Section 152 of the Companies act, 2013
10
Section 12 of the Companies Act, 2013
representatives cannot act as members of OPC, if such were the case, then the whole purpose of
OPC is eliminated11.

As the definition itself suggests, OPC is a company which has only one member. Thus, a
nominee has to be nominated in the case of death of the existing member or incapacity of the
member to carry on the business any more 12. In such cases, the existing member shall have to
nominate a person as the member of the company. This shall happen only with the written
consent of the nominee according to the form INC-3 which is regarding the nominee of a one-
person company.13

The nominated member can withdraw from the nominee himself. He has to communicate this to
the existing member who shall then within 30 days communicate it to the company, that is, the
board of directors; And the same procedure in case of change of the nominee. It shall later have
to be mentioned in the memorandum14 and shall also have to be informed to the registrar of
companies.

11
Anagha, Characteristic features of One Person Company Comparison of OPC and sole proprietorship,
http://www.legalserviceindia.com/legal/article-926-characteristic-features-of-one-person-company-comparison-of-
opc-and-sole-proprietorship.html
12
Section 3 of the Companies act, 2013
13
Companies Incorporation Rules, 2014
14
Section 4 of the Companies Act, 2013