After the implementation of new Companies Act, 2013, the concept
of "One Person Company" has become buzz word. Corporate industry
recognizes only one type i.w. "Limited Company:. Nowadays Limited
Liability Partnership vehicle is getting best response because its own
advantages. I was studying new rules and regulations of OPCs and found interesting
stuff in this. Less complex structure, less legal formlities, easy conversion
option into Private / Public Limited Company and less Government intervention
are the plus points of OPC. Any person who is running business as a proprietor
may consider this option. The biggest benefit is it gets "Corporate"
status being a legal entity formed under the Companies Act.
While analyzing few provisions of the Act, it is clear that this
is a small vehicle like Maruti 800 and not any other hatchback or sedan car.
You cannot drive your Maruti 800 on expressways with full speed because of its
own limitations. I believe you will understand this example! Let me come
straight to the point. OPCs have its own limits, once you gets close to maximum
limits, by virtue of law, your OPC will get converted into Private / Public
Limited Company. Provisions of the law states that when any OPC crosses a
turnover of Rs. 2 crores or paid up capital exceeds Rs. 50 lakhs, you have to
switch onto Limited Company without any option. I think for small businessmen
or traders can take advantage of this form of vehicle at initial stage at least
for 2 years. Because once you form OPC, you cannot apply for conversion before
expiry of 2 years from the date of formation.
I am sure coming days will decide the direction and the good
response to One Person Companies, otherwise LLPs have already proven excellent
form of an organization.
--Ishan Kulkarni
