A company that is formed with a single person as a shareholder and director is known as a one person company. In India, the concept of a one person company is relatively new. This concept was launched by the Companies Act in order to encourage various small businesses and entrepreneurs to set up companies of their own. A natural person who is a citizen of India and is an Indian resident can form a one person company also known as an OPC. In this blog, we will discuss the eligibility criteria for the formation of an OPC a.k.a. A One Person Company.

But first, let's discuss a One person company a.k.a. An OPC. A separate legal entity is provided by OPC. The individuals also get to enjoy limited liability. An OPC permits the Individuals to continue their business without the need of any partner of a board of directors. The concept of both a private limited company and a one person company are quite similar but OPC has less requirements for compliance.

However, the number of OPCs that can be formed by a person is restricted and the paid-up capital and turnover is also limited to a certain amount. An OPC will have to be converted into either a public or a private limited company in case the turnover or the company becomes more than Rs. 2 Crores or in case the paid-up capital of the company becomes more than Rs. 50 Lakhs.

Simply put, OPC is one of the most preferred options for solo entrepreneurs who wish to start their own business and want to gain benefits but do not want to work with any partners.

Eligibility Criteria

A natural person who is an Indian citizen and an Indian resident can form a one person company by meeting the following eligibility requirements:

1. The individual should be an Indian citizen and an Indian Resident.
2. The individual can only be a natural person and not a legal entity or a company.
3. The individual must be either of 18 years or more.
4. The individual should not be a nominee or a member of two or more OPCs.
5. The individual must be qualified under the Companies Act, 2013.

In addition to this, some businesses can not be opted as a one person company like non-profit organisations, financial institutions, banking institutions and companies which are engaged in activities related to investment in securities.

Additional Conditions to form an OPC

As discussed before, an OPC can be formed only by a natural person who is an Indian resident and an Indian citizen. Any non-resident or a foreign national is not qualified to form a one person company.

1. Only one OPC can be formed at a time by a single person. If an individual already has an OPC, then he/she can not form another OPC.
2. Only an Indian citizen who is also an Indian resident can be the nominee of an OPC. Nominee is that individual who is appointed by the company’s owner and will own the company in case the real owner dies or gets incapacitated.
3. Any non-profit organisation can not form a one person company and can not perform any unlawful activities.
4. The paid-up share capital of a one person company can not be more than Rs. 50 Lakhs and the annual turnover of the company can not be more than Rs. 2 Crore.

Conclusion

In this blog, we discussed in detail a one person company also known as an OPC and the eligibility criteria to form an OPC. We also discussed some additional conditions for the formation of a one person company.