OVERVIEW OF ONE PERSON COMPANY AND PRIVATE LIMITED COMPANY

 Page content

  1. Introduction
  2. Meaning of one-person company and private limited company.
  3. Exemptions for one-person company
  4. Features of one-person company
  5. Features of private limited company
  6. Difference between private limited company and one-person company
  7. Takeaway.               

Introduction:

The revised Companies Act, 2013 of India completely revolutionized corporate laws in India by introducing various new concepts that did not exist before that. The growth of trade and business led to more difficulties that traditional forms of business didn’t solve. For below example, there having unlimited liability feature of a sole proprietorship form of business resulted in people forming partnerships, but even that proved to be too inadequate and risky. There is when the concept of companies emerged, and private limited and unlimited companies form of business is the oldest example of it.

Meaning Of One-Person Company:

Section 2(62) of Indian companies act 2013 defines a one-person company as a company that has only one person as to its member and Furthermore, members of a company are nothing that but subscribers to its memorandum of association of company, or its shareholders of company then So, an one person company is effectively a that has only one shareholder as its member.

Meaning Of Private Limited Company:

According to section 2(68) of companies act 2013 private limited companies are those companies which companies articles of associations fully restrict the transferability of shares and prevent the public at large from subscribers to them. It was the basic criteria that differentiate private companies to public companies.

Exemptions for OPC:

OPC having the following exemptions or privileges under the companies act 2013:

  1. Several provisions relating to meetings and quorum do not apply to them.
  2. Provisions relating to independent directors do not apply to them.
  3. Their financial statements need not include cash flow statements.
  4. They do not have to hold annual general meetings.
  5. A company secretary is not required to sign annual returns; directors can also do so
  6. Their articles can provide for additional grounds for vacation of a director’s office
  7. They can pay more remuneration to directors than compared to other companies

Features of One Person Company

  1. Single-member:

One Person Company must have only one member or shareholder, which difference between other private companies

  • Private company:

Under companies Act Section 3(1)(c) says that a single person can form a company for any lawful purpose and it further describes OPCs as private companies.

  • Nominee:

A main feature of One Person Companies that separates it from other types of companies is that the sole member of the company has to mention a nominee while registering the company

  • No minimum paid-up share capital:

Under Companies Act, 2013 has not prescribed any amount as minimum paid-up capital for One Person Company.

  • No perpetual succession:

There is only one member in an OPC, his death will result in the nominee rejecting to become its sole member of company. This does not happen in other type of companies as they follow the concept of perpetual succession

  • Special privileges:

One Person Company enjoy several type of privileges and exemptions under the Companies Act that other kinds of companies does not get.

  • Minimum one director:

One Person Company must have minimum one person (the member) as director and they can have a maximum number of 15 directors of the company.

Features of Private Limited Company:

  1. A private company can have a minimum of just two members (but just one is enough if it a One Person Company), and a maximum of up to 200 members
  2. Private companies cannot freely transfer their shares to the public like public companies Then so why stock exchanges never list private companies
  3. All private companies must include the words “Private Limited” or “Pvt. Ltd.” in their names
  4. There was a minimum paid-up share capital requirement of Rs. 1 lakh previously, but that is omitted now
  5. Since private companies do not freely transfer their shares and involve limited interest by members, the law has granted them several exemptions that public companies do not enjoy

Difference Between Private Limited Company and One Person Company:

  1. Board of Directors OF Companies

In the name OPC (One Person Company) there we have only one member in the company that means there is no need to hold any such Annual General Meeting (AGM) or Board meetings.

Above case is fully Contrary to this in a private limited company there is a Board of Directors which consists of a minimum of 2 Directors and a maximum of seven directors at the time of incorporation and also, it is mandatory to convene 4 Board meetings and 1 AGM in a financial year

  • Shareholders in the company:

In the One Person Company, only one person and one shareholder is required to incorporate and run the company, in this case the Director and the shareholder in the One Person Company is the same individual who holds the 100% shares in the company.

But in the Private Limited Companies there is minimum of 2 shareholders and a maximum of 200 shareholders are required during the incorporation of company and the shareholders of the private limited company can be any entity.

  • Investment by the NRI (Non-Resident Indian) or Foreign National:

The best advantages of having a Private limited company is that foreign nationals and NRIs can quickly start the PLC in India and also, 100 percent FDI under the automatic approval route is accessible in the Private Limited Company.

Otherwise in the One Person Company only the citizens of India are allowed to commence the company. otherwise, One Person Company is not eligible to Foreign Direct Investment.

  • Business Activities:

For the one person company Certain activities are restricted like an investment in securities, non-banking financial activities.  But the  company registered as a Private Limited Company can engage in such activities taking the approval of the concerned authority.

  • Controls and Ownership of the Company:

In the case of the private limited company, the ownership is divided between two members and based on the ratio of shares held by each member, the voting power is divided.

 But the One Person company, the sole member that is the Director has the complete ownership of the company, and it is not shared with any other person.

Takeaway:

One Person Company and the private limited Company have certain advantages and disadvantages and it was totally up to us, what kind of company you want to commence.

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Swapnil S

CA in Mumbai

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