Tuesday, 30 June 2015

Has a One Person Company (OPC) failed to take off in India? Why?

1. The new Companies Act has brought in a number of strict regulations on every form of company. Even though OPC's are exempt from complying with a number of such regulations, the compliance requirements that remain are again not too easy to fulfill.

2. Further, an OPC can have a maximum paid up share capital of Rs. 50 lakhs and an annual turnover of not more than Rs. 2 crores. It puts a cap on the level to which a business can grow. A businessman might not want to change his organizational and legal structure soon on achieving such threshold limits.

3. It does not take away the requirement of filing financial statements with the ROC. Even an OPC will have to file its audited financials on the MCA website annually, which is information that many businessmen would not want to disclose.

4. Certain provisions of the Income Tax law such as those on deemed dividends u/s 2(22)(e) and other restrictions imposed on withdrawal of remuneration from a company by its shareholder-directors prevent people from going for OPC's. Sole-proprietorships seem to be a better option from compliance perspective.

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