QA Series 2025 - 10 - Legal Points Part 2

 

The Banking Tutor

Question Answer Series 2025

S No 10                                                                    19-06-2025

Legal Points – Part 02 

33. What is a One Person Company  (OPC) ?

A One Person Company (OPC) is a business structure in India where a single individual acts as both the shareholder and director. 

34. Which Act has introduced the concept of OPC?

OPC was introduced under the Companies Act, 2013, allowing sole proprietors to enjoy the benefits of a company, such as limited liability and a separate legal entity, without needing additional shareholders or directors. 

35. Why the concept of OPC introduced ?

One person company has been introduced to encourage entrepreneurship and corporatization of business. 

36. How OPC differ from Proprietorship ?

OPC differs from sole proprietary concern in an aspect that OPC is a separate legal entity with a limited liability of the member whereas in the case of sole proprietary, the liability of owner is not restricted and it extends to the owner‘s entire assets constituting of official and personal. 

37. Whether Nomination Facility is there in case of OPC ?

Nomination facility, per se, is not there in case of OPC. However, The memorandum shall state the name of a person ,who in the event of death of subscriber, shall become the member of the company. 

38. What are statutory requirement regarding Naming the OPC?

In case of One Person Company, the words “One Person Company‘ shall be mentioned in brackets below the name. 

39. Can OPC be opened in the name of Minor?

No minor shall become member or nominee of the OPC or can hold share with beneficial interest. 

40. In how many OPCs an individual can be member?

A natural person shall not be member of more than a One person company at any point of time. 

41. In how many OPCs an individual can be a Nominee?

Any individual (other than Minor) shall not be a nominee of more than a One person company. 

42. Can OPC be converted into a Company?

OPC cannot be  convert  voluntarily into any kind of company unless two years have expired from the date of incorporation, except where the paid up share capital is increased beyond Rs 50 lakhs or its average annual turnover during the relevant period exceeds Rs 2 Crores.

43. What is a Small Company ?

Small Company means a company, other than a public company which satisfies both the following conditions :

(a) its paid-up share capital does not exceed Rs. 50 lakhs; or such higher amount as may be prescribed (not being more than Rs. 10 crore).

(b) Its turnover(as per the profit and loss account for immediately preceding financial year) does not exceed Rs. 2 crore or such higher amount as may be prescribed (not being more than Rs. 100 crore). 

44. What is MoA in Company Law ?

The Memorandum of Association (MoA) is a foundational legal document in company law that outlines the company's relationship with the outside world, defining its scope, objectives, and powers. It's essentially the company's charter, establishing its legal identity and purpose. The MoA is a public document, accessible to anyone, and is crucial for registration with the Registrar of Companies (RoC). 

45. What mandatory information need to be furnished in MoA ?

The following information is mandatory in an MOA - Association Clause ; Name Clause ; Registered Office Clause;  Object Clause ; Liability Clause ; Capital. 

46. What is AoA in Company Law ?

The Articles of Association (AoA) is a document that outlines the internal regulations and management of a company. It defines the rules and procedures for how a company operates internally, including the rights, responsibilities, and powers of directors and shareholders. It essentially acts as a "rulebook" for the company's internal affairs. 

47. What is Entrenchment in case of AoA?

Entrenchment of articles of association means incorporating provisions that make it more difficult to amend specific clauses within the articles of association. This is done to protect certain aspects of a company's governance, like shareholder rights or capital structure, and requires a higher threshold for alteration than a typical special resolution.

48. What is Doctrine of Constructive Notice ?

The doctrine of constructive notice means where individuals dealing with a company are presumed to be aware of certain publicly available information, even if they haven't actually seen it. This presumption is based on the idea that the information is easily accessible and therefore, individuals should have known about it.

49. What is Doctrine of Ultra Vires in Company Law ?

The doctrine of ultra vires ( "beyond the powers”) states that any action taken by a company that exceeds the powers granted to it by its foundational documents (like the memorandum of association) is considered void and unenforceable. This doctrine  acts as a safeguard, ensuring companies operate within the boundaries of their stated objectives and powers, protecting shareholders and creditors.

50. What is Doctrine of Indoor Management ?

The Doctrine of Indoor Management, also known as the Turquand rule,  protects outsiders dealing with a company from internal irregularities within the company. It states that outsiders can assume that the company's internal procedures have been followed, even if they haven't been, as long as the outsiders are acting in good faith and are not aware of any potential irregularities.

@@@ 

Next Issue  will be shared on 21^th  June 2025.

Sekhar Pariti

+91 9440641014