Should you register a company with one owner or two directors?

 The Companies Act, 2013 introduced the new concept of One Person Company (OPC). As the name suggests, an OPC is a company established by a single person. A single individual establishes and manages the company. An OPC has all the features of a company, such as perpetual succession, limited liability and a separate legal entity¹. Before the enforcement of the Companies Act, 2013, a single person could not establish a company. If an individual wanted to establish his business, he/she could opt only for a sole proprietorship as there had to be a minimum of two directors and two members to establish a company¹. In a Private Company, a minimum of 2 Directors and 2 Members are required whereas in a Public Company, a minimum of 3 Directors and a minimum of 7 members. A single person could not incorporate a Company previously. As per Section 2 (62) of the Company’s Act 2013, a company can be formed with just 1 Director and 1 member¹. The director and member can be the same person. It is a form of a company where the compliance requirements are lesser than that of a private company. Thus, one person company means one individual who may be a resident or NRI can incorporate his/her business that has the features of a company and the benefits of a sole proprietorship¹.

The Companies Act, 2013 mandates a minimum of 2 directors to incorporate a private limited company for a wide number of reasons, the predominant one being, to prevent the likelihood of abuse of power under a single directorship⁵. Section 149 (1) of the Companies Act, 2013 mandates a minimum of 2 directors as a prerequisite in order to incorporate a private limited company⁵. The Act allows a maximum of up to 15 directors and can be further increased by passing a special resolution⁵. The exception to this rule is an OPC where the company should have at least one director⁵⁷. A private limited company needs to have at least two directors⁶⁷, and it can have up to 15 directors⁶. A public company must have at least three directors⁶⁷, and it can have up to 15 directors⁶.

Source: Conversation with Bing, 9/22/2023

(1) One Person Company Registration – OPC Registration Procedure in India. https://cleartax.in/s/one-person-company-registration-procedure-india/.

(2) Are Two Directors Required To Register A Company As PVT LTD? - Vakil Search. https://vakilsearch.com/blog/are-two-directors-required-to-register-a-company-as-a-pvt-ltd/.

(3) Types of Directors in a Company - ClearTax. https://cleartax.in/s/types-of-directors-in-a-company/.

(4) Directorships – Section 165 of Companies Act, 2013 - ClearTax. https://cleartax.in/s/directorships-section-165-companies-act-2013.

(5) Ministry Of Corporate Affairs - One Person Company. https://www.mca.gov.in/MinistryV2/onepersoncompany.html.

(6) Single Director Company Definition | Law Insider. https://www.lawinsider.com/dictionary/single-director-company.

(7) Can you still have only one director in a private limited company? How .... https://imdcorporate.co.uk/corporate-solutions/can-you-still-have-only-one-director-in-a-private-limited-company-how-the-law-changed-in-2022/.