| Why one- person firms are popular |
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Recently, Delhi- basedbusinessman AnkurSharmaregisteredhistour& travelservicesfirmasaone- person company( OPC)." Rightnow, mypriorities aretogetthebusinessstartedattheearliest. Iplantomakeitaprivatelimitedcompany in six- eight months," he says. As a registeredlegalentityundertheOPCcategory, separate from its owner, Sharma will have easier access to bank loans and less compliance under the different provisionsoftheCompaniesAct, withliability limited to the entity's net worth. OPCs help start- up entrepreneurs test a business model, a product or a service, before attracting new investors. Since April this year, when the concept of OPC was introduced in the Companies Act, 2013, 479 firms have been registered as OPCs ( as of August 31), data available with the Ministry of Corporate Affairs show. Through April and May, only 10 companies were registered. As the concept gained momentum, about 450 companies were registered between June and August, 68 per cent from the services sector." This concept is really beneficial for small entrepreneurs who can benefit from limited liability. We are happy OPC ( registrations) are picking up," said a senior ministry official. The Companies Act envisaged OPCs as an alternative to the ' soleproprietorship' form of business. In a May newsletter, the ministry said of OPCs, " It is expected this model will encourage small and medium enterprises… in the unorganised sector with the concept of limited liability and open avenues for more favourable banking facilities." In India, 70- 80 per cent of business entities operate in the unorganised sector and follow a non- entity model of proprietorship company, says Balamurugan Nadar, founder, bmcgroup. in, which helps companies register themselves. Most of these are likely to be registered as OPCs, he adds. There are many entrepreneurs who, after starting sole- proprietorship companies, are yet to graduate to a private limited company for want of more shareholders. This section will opt for the OPC model, experts say. Though the provisions applicable to private limited companies hold good for OPCs, too, OPCs are relieved of procedural formalities such as conducting annual general meetings and meetings of boards of directors. " The OPC concept gives the dual benefit of limited liability as a corporate entity, as well the freedom to operate as a soloprenuer," says Nadar. It allows owners to have control over the company by appointing as many as 15 directors. Also, it could help companies attract talent by offering directorship designations, which isn't possible under the sole- proprietorship model. Experts say the OPC model supports the start- up ecosystem by allowing companies to test their business models. " As people become more aware of the benefits of an OPC, I expect a lot of start- ups to go with the OPC tag from 2016," says Saran Kumar Uppalapati, partner, SBS and Company LLP. With the government's focus on start- ups, OPCs are expected to be the popular choice. Lowawareness While most players consider the rising number of OPCs a positive trend, corporate lawyers and tax experts caution the awareness about this concept is still low. Experts say an outreach programme by the ministry in this regard is the need of the hour. Syed Perwez Hussain from Svans and Associates says: " It is difficult for any company to explain the term OPC in a sale proposal contract or to create a profile with OPC attached to its name. So, people still opt for the tag of private limited company." Start- ups, always on the lookout for investment, have to change their legal status to a private limited company before bringing in investors, says Agam Gupta, co- founder, quickcompany. in. Many start- ups with OPC tags told Business Standard they would convert to private limited ones, as and when investors showed interest. They admitted having an OPC tag was a stopgap measure to kick- start the business and test the model. " Right now, I can take my own decisions and there are less norms to follow. But in case some investor is looking, I will convert my company to a private limited one," said Kashinath Kapte, founder, Yuvaskills Services Private Ltd ( OPC). According to the Companies Act, an OPC has to covert itself into a private or public limited company in case its paid- up capital exceeds ₹ 50 lakh, or average annual turnover exceeds ₹ 2 crore, for the three immediate preceding consecutive years. "It does not take much time to covert from an OPC to a private limited company," says Gupta. While registering as private limited companies and sole- proprietorship firms might still be the most attractive option for most entrepreneurs, many corporate law experts feel through the next two years, the number of OPCs will exceed that of private companies. For this, the government will have to step up awareness about OPCs and, at the same time, encourage sole- proprietorship firms to convert to OPCs. Though these are early days, the government will have to raise awareness of the benefits of such companies One- person company |Separate legal entity |Limited liability |Perpetual succession |Loan: Not the sole responsibility of the owner |Registration required |Finance: Credit record of the OPC Sole proprietorship |Not a separate legal entity |Unlimited liability |No perpetual succession |Loans: Sole responsibility of the owner |Registration not required |Finance: Credit record of the owner Exemptions available to OPC under the Companies Act, 2013 |AGMs | Meetings of board of directors HOW THEY STACK UP OPC essentials |Paid- up equity: Less than ₹ 50,00,000 |Turnover: Average annual turnover less than ₹ 2 crore ( for three preceding consecutive years) |One- person company: One member and at least one director |Private company: At least two members and two directors |Public company: At least seven members and three directors |
Source The Hindu
New law proposed for small factories ANUMEHA YADAV
The Labour Ministry has proposed the Small Factories (Regulation of Employment and Conditions of Services) Bill to govern wages and conditions of work in small and medium enterprises (SMEs). The Bill envisages rules for wages, overtime hours, social security and appointment of factory inspectors in units employing fewer than 40 workers. While the government introduced the Factories Act (Amendment) Bill, 2014 in the Lok Sabha in August, the new Bill has been proposed to align the work conditions in the SMEs with the Factories Act amendments and allow enterprises to file compliance forms online as the government announced earlier this month. "There was a demand from the SME sector for a separate Act to govern them. In line with that, this Act will reduce the number of forms required for compliance with rules. It will allow the SMEs to employ women in night shifts based on the fulfilment of certain conditions. It will change the inspection system to one based on self-certification and inspections based on computer lots as announced by the government earlier this month," a senior Labour Ministry official says. The Bill builds on the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Amendment Bill, 2011, which increases the number of laws under which units will be exempt from maintaining registers and filings returns, he adds. The Factories Act (Amendment) Bill is for allowing the States to raise the minimum number of workers employed to 20 where power was used and 40 for others, from 10 and 20, respectively. Based on the suggestions in a June 2011 report by an expert committee under former Planning Commission member Narendra Jadhav, the Bill removes prohibitions on women working on certain machines in motion and near cotton openers and allows the State governments to make rules allowing women to work night shifts in factories upon fulfilling certain conditions. It doubled the permissible overtime hours from 50 hours in one quarter to 100 hours and from 75 hours to 125 hours in certain cases. "The Small Factories Bill will bring the SMEs, which account for over 30 per cent of industrial production, in line with the amendments to the Factories Act," an official says. The Ministry has invited public comments over the next 30 days. After the finalisation of the Bill, it will be sent to the Union Cabinet before being introduced in Parliament. |
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