Intermediate · Paper 5 – Business Laws & Ethics · Companies Act, 2013 · 2:35
English
Transcript
One person, one company, and much less paperwork! Let's see why small entrepreneurs love the One Person Company, and when it changes into another company.
Babu makes clay pottery in Puducherry. With an O P C, he gets bank credit, direct access to the market, limited liability, and legal protection.
Babu: Now I can sell directly to big stores, without any middlemen!
An O P C also enjoys many relaxations. It need not prepare a cash flow statement. Its annual return can be signed by a director, if there is no company secretary. And it need not hold an annual general meeting.
Then how does an O P C pass a resolution? Under Section 122, the member enters the resolution in the minutes book, and signs and dates it. That date is treated as the date of the meeting. And an O P C need not use a postal ballot.
Now, conversion. As per the study notes, when the paid up capital exceeds fifty lakh rupees and the average turnover exceeds two crore rupees, the O P C must convert into a private or public company within six months, and inform the Registrar in Form I N C 5 within sixty days.
Note the 2021 amendment: these limits, and the two year waiting period, were removed. Now an O P C can convert at any time, by choice.
And a private company, other than a Section 8 company, can convert into an O P C by a special resolution, with a no objection certificate from its members and creditors, and an application in Form I N C 6.
Malar: Babu, so my brother's private firm can also become an O P C!
Exam tip! For relaxations, remember: no cash flow statement, no annual general meeting, and resolutions in the minutes book. For conversion, remember Form I N C 5 and Form I N C 6.
Let's recap. Benefits: credit, market access, limited liability, and less compliance. Relaxations: no cash flow statement, no annual general meeting, and minutes book resolutions. Conversion: the book limits, and the 2021 amendment.
Now try the test in the MPA app. In the next video, we will learn about the small company.