One Person Company – Salient Features of Proposed Law

Companies Bill, 2012 defines ‘One Person Company’ (OPS)as a Company which has only one person as member. Further, clause 3of the Bill provides that a Company may be formed for any lawful purpose by one person. One Person Company is a Private Company formed by subscribing the name of such one person to the Memorandum and complying with the requirements of the Act in respect of registration. As regards the name of a One Person Company, the Act provides that the words “One Person Company” shall be mentioned in brackets below the name of such Company, wherever its name is printed, affixed or engraved.

The Bill 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 or his incapacity to contract 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. Such other person may withdraw his consent in a manner that may be prescribed in that regard.

The concept also provides flexibility to the member to change the name of such other person, at any time by giving notice in such manner as may be prescribed. It shall further be the duty of the member of One Person Company to intimate to the Company the change, if any, in the name of the other person nominated by him by indicating in the Memorandum or otherwise within such time an din such manner as may be prescribed, and the Company shall intimate the Registrar of any such change. With respect to the appointment of Directors in a One Person Company, member who is an individual shall be deemed to be its first Director until the Director is duly appointed by the member.

Salient Features of the Proposed Law

• The Annual Returns that are filed by such Companies have to be signed by the Company Secretary, and where there is no Company Secretary, by the Director of the Company.

• The provision relating to the holding of Annual General Meeting is not mandatory for such Companies.

• Moreover, clause 122 specifies some sections which are not applicable on OPCs and provides the manner in which ordinary businesses (as mentioned under clause (a) of sub-clause (2) of clause 102) which a company, other than a One Person Company, is required to transact at its Annual General Meeting, shall be transacted. In case of One Person Company any business which is required to be transacted at an Annual General Meeting or other general meeting of a Company by means of an ordinary or special resolution, it shall be sufficient if such resolution is communicated by the member to the Company and entered in the minutes book required to be maintained under law and signed and dated by the member and such dateshall be deemed to be the date of the meeting.

• Further where there is only one director on the Board of Directors of a One Person Company, for any business which is required to be transacted at the meeting of the Board of Directors of a Company, it shall be sufficient if, such resolution by such Director is entered in the minutes book required to be maintained under law and signed and dated and such date shall be deemed to be the date of the meeting of the Board of Directors.

• The financial statements, including consolidated financial statements, if any, shall be approved by one Director, for submission to the Auditor for his report thereon. The report of the Board of Directors to be attached to the financial statements in case of a One Person Company, shall mean a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report. It is however noteworthy that with respect to One Person Company, the financial statement may, not include Cash Flow Statement as is mandatory for other specified Companies.

• A One Person Company is also required to file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements within one hundred eighty days from the closure of the financial year.

• A One Person Company has to conduct at least one meeting of the Board of Directors in each half of a calendar year and the gap between the two such meetings is not less than ninety days. Further the requirement with respect to quorum of meetings of Board as provided in clause 174 shall not apply to One Person Company in which there is only one director on its Board of Directors.

Analyzed by : CA Sujeet Pal

E-mail : [email protected]