Important legal considerations of One person company (OPC)

OPC is the simplest concept introduced under the Companies Act, 2013. The concept has definitely swayed its way from sole proprietorship. Hence, in India the perplexities of the two concepts seem to be interchangeable, same and even different at the same time. The understanding of the concept as a whole hence has become essential.

OPC under the Companies Act, 2013 is a separate legal entity having perpetual succession, which is required to be registered as per the provisions of the Companies Act, 2013. The liability to repay the loan availed by the OPC is limited only to the OPC, unlike, a sole proprietorship which is not a separate legal entity, thus making the sole proprietor personally liable for any loan or any credit facility availed. Further, registration of a sole proprietorship is not required.

The very essential of an OPC is that the member and nominee have to be a resident of India, which means that they stayed in India for more than 182 days during the immediately preceding one calendar year.

The legal status of an OPC as an incorporated company gives an edge to it with respect to availing of loans from any banks as compared to a sole proprietorship. The Reserve Bank of India, by its Master Circular issued in July 2013, has provided for all Scheduled Commercial Banks (excluding regional Rural Banks) to promote financing of the priority sector, i.e., agricultural and small scale industries. OPCs have ventured into various sectors, such as construction, electricity, mining & quarrying, transport, trading, manufacturing of textiles, food, leather, just to name a few, since the loans are non-depositing security with lower rate of interest in nature as provided to small scale industries.

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