Central Govt gives clearance to Companies Bill 2008

The Indian Union Cabinet on Friday approved the introduction of a new Companies Bill in Parliament to incorporate far-reaching changes.

Some of the changes proposed are:

•  Scrapping the minimum paid-up capital requirement
  
• Setting up special courts to try offences
• Allowing one individual/person to create/own a company
• Self regulation and shareholder control instead of government control

I like all the changes proposed except a few ones that should have been improved further.

One Person Company (OPC) verses LLC

The idea behind a one person company is to allow a single individual to own and operate a limited liability company. In India the minimum number of persons required for formation of a private company is 2. In some cases individuals (specially in service sector - which is booming in India) want to form a corporate structure for their business but are not able to do so because of large amount of compliance issues and requirement of at least 2 persons.

So in general the government is thinking in right direction that, one person can contribute to economy in never before ways and to facilitate that new form of corporate structure with simple administration and compliance requirements is a must. Corporate law should allow a single person to form a company. OPC or “one person company” is a concept in this direction. But, instead of OPC, I strongly suggest that government allow creation of USA style, LLC kind of companies, where a single person can own the company, run it and manage it. If the need be he can introduce other shareholders and directors without going through name changes and other compliance issues. For all practical purposes, the LLC can fulfill the requirements of not just single individuals but also small group of people who want to incorporate their business.

Further one of the biggest advantage of using LLC as an extension will be that it will look more international and will cause less confusion. I searched “OPC” on internet and could not find any results that even remotely connect to the corporate laws. LLC with similar concepts exist in various jurisdictions across the world and will become more popular in India as well. Indian companies are doing more and more international business and using an extension/suffix (in company name) that is widely understood is sure to help.

My wish list also includes that the word 'Incorporated' be allowed as the suffix along with Limited and Private Limited. But this is very low priority stuff as the world Limited as suffix is well understood across the globe.