Definition & Characteristics of One Person Company

Definition & Characteristics of One Person Company

Introduction:

A company has no strictly technical or legal meaning. A company in common parlance means ‘an artificial (fictitious) person created by law perpetual existence and common seal’. The word ‘artificial’ denotes, it has no body or soul. In simple, a company by itself is not a living persons viz. directors, employee etc. act on its behalf.

The word company has no technical or legal meaning. It literally means “a group or association of persons, who have agreed to undertake a predetermined venture.” Etymologically speaking the word ‘Company’ is derived from the Latin word ‘com’ and ‘panies’. ‘Com’ means with or together; and ‘panis’ means bread. The words referred to an association of persons, who took their meals together.

Background:

When a business is carried on by a single person, it is called ‘Sole Trading Concern’. When a business is carried on by two or more persons, subject to a maximum of ten in case of banking business and twenty in case of a non-banking business, it is called partnership firm.

If the business is carried out by large scale, the alternative resort is company business. A company may be a private company or a public company. Earlier, the law relating to companies is governed by the Indian Companies Act, 1956. It has been replaced by the Companies Act, 2013 (Act 18 of 2013).

Definition:

Whenever a corporate legal entity for small business at an initial stage which is started, managed as well as executed by a single individual is basically a one person company. In order to promote the entrepreneurs of the country government of India has brought many schemes, and one of its product is one person company.

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It is said that, “A one person company is a paradigm shift in the Indian Corporate Regime, bringing it at par with global standards” as per section 2(62) of the Companies Act, 2013 defined ‘one person company’ means a company which has only one person as member.

Formation of one person company can only be considered only when –

  1. He/she is natural person, citizen and resident in India
  2. He/she shall be a nominee for the sole member of a person company.

Characteristics of One Person Company:

  1. Private Company: As provided under section 3(1) (c) of the Companies Act says that a single person can form a company for any lawful purpose. Further, one person company is also called as ‘private company’.
  2. Single Member: One Person Company has only one member or shareholder, unlike other private companies.
  3. Nominee: Nominee has to be mentioned while registering the company.
  4. Perpetual Succession: In one person company there is no perpetual succession, as there is only one member in company. And his death will result in the nominee choosing or rejecting to become its sole member.
  5. Minimum one director: One person company should have at least one member as member or director. Further, they can have maximum 15 directors.
  6. Liability: One person company liability of owner is limited to his/her investment in the company.
  7. No minimum paid-up share capital: Companies Act, 2013 has not prescribed any amount as minimum paid-up capital.

Conclusion:

One person company is basically is type of entity which is owned by a single person which allows a sole person to own and also manage the entire business operations. The registration of One Person Company is same as that of private limited companies as governed by Indian Companies Act, 2013.

Author: Nishchal Kukade,
Dr. Babasaheb Ambedkar College of Law , Nagpur Final year student

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