Single-person company to get green light soon

NEW DELHI: Entrepreneurs who find it hard to rope in a business partner for incorporating a company may soon have a way out. The proposed changes in the company law would obviate the need for having at least two partners to incorporate a company.

The draft company law bill, which is set to be placed before the Parliament soon, includes provisions for setting up ���one-person��� companies. This will provide start-up entrepreneurs the flexibility to set up their business ventures without involving a partner. The move would particularly facilitate entrepreneurship in services sectors like information technology.

Officials told ET that the concept of ���one-person��� company that has been introduced in the new company law bill had found favour with the inter-ministerial consultation group which examined it. The concept is followed in various countries including the UK, Australia, and Singapore.

One-person companies will not have to adhere to stringent norms prescribed under company law. This would reduce cost of paperwork and make it simpler to incorporate such companies.



Enterprising individuals now set up sole proprietorship firms. The option of a single-person company would give them a legal status different from proprietorship firms. While liability of sole-proprietorship is unlimited with the promoters��� individual assets exposed to attachment in cases of defaults, the one-person company will be different in terms of the promoter���s liability.

The mandatory need for at least two individuals to form a company is considered a hitch towards corporatisation of business entrepreneurship. Experts believe that promoters of proprietorship firms would benefit by shifting to the one-person company model. The proposed regulatory changes are in sync with the J J Irani committee report which had recommended that individuals should be given economic liberty to set up companies on their own.