Advantages and Disadvantage of One Person Company or OPC

Concept of One Person Company is introduced for the first time in Companies Act 2013. Earlier to this act, there was no such type of provision to create or incorporate One Person Company.

Before incorporating One Person Company in India, many promoters wanted to know its advantages and disadvantages. Through this write up, today, we are going to discuss various advantages and disadvantages of One Person Company or OPC.

advantages and disadvantages

Advantages of One Person Company or OPC

One of the biggest advantages of forming One Person Company is that there is no requirement of another director or subscriber. As the name suggest, only ONE person is required to form a company. Below are certain advantages that One Person Company gets as per Companies Act 2013.

No requirement to hold Annual general or extra ordinary general meeting

Only resolution is required to be communicated to members and entered in the minute book. It should be signed and dated by the members. The date of signature will be deemed as the date of holding annual general meeting or extra ordinary general meeting.

Board meeting

Instead of holding a board meeting, the sole member has to enter resolution details in a minute book. If minute book is signed and dated by members then it will be deemed to be the date of conducting board meeting for all purpose of companies act, 2013.

Cash flow statement is not required to be prepared

For public and private limited companies other than small company, cash flow statement is required to be prepared at the end of financial year as financial statement includes cash flow statement as per new Companies act 2013.

However, One Person Company has been excluded from this provision. This means, a One Person Company is not required to prepare cash flow statement.

Annual return filing

One Person Company’s annual return is required to be signed by a director. The mandatory requirement of Company Secretary Signature is not applicable to OPC.

Disadvantages of One Person Company

Like in other form of company incorporation, One Person Company also has its drawbacks or disadvantages. Here are some of the drawbacks or disadvantages of a OPC;

  • The sole owner is not eligible to incorporate more than a One Person Company and become nominee in more than one such company.
  • Minor cannot form One Person Company and cannot be a nominee shareholder.
  • OPC cannot carry out non banking financial activities including investing in shares of another body corporate.
  • One Person Company cannot get converted to a private or public limited company unless 2 years expired from the date of incorporation. However, if the One Person Company’s paid up share capital has increase the threshold limit of 50 lakhs rupees or average annual turnover has increased 2 crores rupees then OPC has to compulsorily convert to a private or public limited company within a period of 6 months from the date of breaching the threshold limit.
  • One Person Company cannot get converted to section 8 companies
  • OPC shall inform the registrar of companies about every contract entered into by the company and recorded in the minutes of the meeting of its board of directors within 15 days from the date of approval by the board.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.