Formalisation of India’s entrepreneurial system continues to grow with strong momentum, as the number of new one person companies (OPCs) outpaced the total new company registrations over the last year, data compiled from the Ministry of Corporate Affairs shows.
In the year ending August 31, the total number of OPCs went up nearly 20 percent from 71,745 to 60,084 from the previous year. In contrast, the total number of new company registrations grew 10 percent from 17.6 lakh to 19.4 lakh during the period, according to the data.
The OPC concept was introduced by the government to allow small business owners, traders and craftsmen to formalise their businesses by incorporating companies. Unlike normal companies, which mandate the appointment of a board and other compliances, an OPC can be created by a single person without the need for a board.
The OPC framework was introduced in 2013 but the scheme did not take off until 2021-22, data shows.
Earlier, the small business owners had no option but to form sole proprietorship firms, where the personal liability of the entrepreneurs was unlimited if something went wrong.
OPCs, on the other hand, are corporates where liability is limited. The company structure offers additional credibility to the entrepreneur while raising funds or debt, market participants say.
“Until an entrepreneur develops a capable management team, they might prefer to use an OPC,” said Gaurav Pingle, a company secretary. “OPC is an attractive business structure because it allows for easy decision-making and straightforward overall management. Furthermore, the recent decision by the Bombay High Court to uphold the limited liability principle for the sole shareholder of an OPC strengthens its appeal."
Not just the past year, new OPC creations have outperformed new company creations for at least the last five years, data compiled by Moneycontrol shows.
Since 2020, the number of OPCs has more than doubled from 30,787 to 71,745. On the other hand, the overall number of active companies in India grew by about 60 percent from 12.4 lakh to 19.4 lakh.
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