An incorporated company is a separate legal entity distinct from its shareholders or members. Earlier there used to be two kinds of companies: public companies consisting of at least 7 persons, and private companies consisting of at least 2 persons. As a result, a single individuals had no option but to settle for sole proprietorship with a various of risks and business limitations.

The latest amendment to the Companies Act in 2020 came as a relief to the problem. It introduces a new concept named 'One Person Company' ('OPC' hereinafter)- allowing a single person to register a company and get the benefit of 'limited liability'. This amendment is an initiative to encourage entrepreneurs. OPC facilitates small and medium business enterprises by giving them a corporate form but relieving them of major legal compliance requirements of a corporation. This article aims to discuss the opportunities in registering an OPC and points out the challenges in the latest corporate structure 'OPC'.

Who can register an OPC?

The latest amendment provides that only a 'natural person' can be a shareholder of an OPC. That means a 'legal person', i.e., a corporation cannot be a shareholder of an OPC. The law does not permit one person to form more than one OPC. This requirement is aimed at ensuring maximum attention of the sole shareholder in the OPC so that the OPC grows fast and is converted into a Private/Public Company. Then the sole shareholder can focus on another business venture through OPC.

The text of the law does not create any bar for any non-citizen of Bangladesh to set-up an OPC for any lawful purpose. Despite such absence of any express bar for the foreigners, the prescribed forms in Schedule 9A of the Companies Act 1994 requires the sole shareholder to include National Identification Card Number (NID Number). A foreigner cannot have any NID Number. The absence of 'passport number' as an alternative to 'NID number' creates a practical problem for the foreigners to invest in an OPC. Although such a provision makes Bangladesh at par with India, the objective of the Bangladesh government to attract foreign investment fails on a technical ground. However, the other provisions of the Company Act 1994 indicate that foreigners can register an OPC. For example, the 2020 Amendment to the Company Act 1994 provides elaborate provision for transfer of share to foreigners. According to the provision, the supporting documents relating to share transfer agreement and affidavits are required to be sent through the relevant Embassy after due attestation. It is thus submitted that the RJSC should accept passport number for foreigners in filling up the schedule 9A to facilitate Foreign Direct Investment in Bangladesh.

On 'Nominees'

Any natural person may be nominated as a nominee with his written permission. The nominee shall be the shareholder of the company if the sole shareholder dies or becomes incapable of running the company. The name of the nominee is required to be registered at the time of registration of the OPC. However, the nominee can withdraw his/her name as a nominee of any OPC. Again, changing the nominee is possible by the shareholder of the OPC by informing the Registrar about such change. The nominee is entitled to the same amount of dividend and other benefits as the deceased shareholder. Such benefits will be followed by similar liabilities of the earlier shareholder.

Although there is restriction on a person in forming more than one OPC, a person can be nominee to innumerous OPCs who in the event of death of the sole shareholder may become shareholder of more than one company.

On Name of the OPC

The private and public limited companies were required to use 'LTD' after their name all these days. The latest amendment allowing formation of one person company requires these companies to use 'OPC' after their name. However, the traditional exception for naming as regards associations not for profit and companies limited by guarantee shall prevail.

On Capital Requirement

The paid-up share capital of OPC is required to be at least 2.5 million taka and not more than 50 million taka. Such capital requirement provision has been widely criticized because the typical small and medium enterprises do not have such high amount of capital. India provides for an affordable amount of capital requirement to establish OPC. They ask that paid up capital will not be less than one hundred thousand Indian rupees and not more than five million Indian rupees. The government of Bangladesh can reconsider this provision and lower the ceiling for the paid-up capital between Tk.2 million and Tk.50 million.

In addition, the annual turnover of OPC needs to be at least 10 million taka and not more than 50 million taka for the immediately preceding financial year. If a person owns the paid-up share capital of a company exceeding the said amount and the annual turnover exceeding the amount mentioned, then subject to some conditions, OPC 'may be' converted into a private limited company or, a public limited company. While the Bangladeshi law on this point takes a soft law approach, the Indian law speaks on a 'shall' language and makes it mandatory for OPCs exceeding the limit to be converted to either private or public company. In addition, there is no sanction against an OPC in Bangladesh if it does not convert itself after exceeding the limits.

Registering an OPC

The Memorandum of Association (MoA) has to contain the name and consent of a nominee who shall replace the shareholder in the event of incapacity or discontinuance as a shareholder. With necessary adjustments, the procedures relating to private limited company shall apply to the registration of OPC. Apart from producing the MoA and Articles of Association (AoA) to the Register of Joint Stock Companies (RJSC), there are some other formalities that must be maintained. For example, Application for Name Clearance, Production of National Identity Card of the shareholder, Copies of Tax identification number, Filled out form 9A given in the schedule of the act will be needed. In cases of foreigners their passports are necessary. After registration the RJSC will issue a certificate of incorporation which will enable the company to carry out its business with its common seal.

On Director and Meetings of OPC

The only shareholder of an OPC shall be its director. The law does not provide that OPCs shall have only one director. In addition, the BSEC notification titled 'Corporate Governance Code' dated 03 June 2018 provides that all companies are required to have 'effective representation of independent directors on their Boards'. However, it remains to be seen that OPCs are appointing Independent Director.

Notably, OPCs are required to hold at least one meeting of Directors once in every 6 months. Thus, if there are not more than one director in the OPCs, holding a meeting would be a mere eyewash. Therefore, OPCs can have more than one director.

There remain further questions about the procedures in these meetings. For example, what would be the quorum in the meetings of OPCs. The Indian Company Law categorically mentions that the rules relating to Annual General Meeting (AGM) are not applicable for OPCs and the concept of quorum is not applicable for Board Meeting in the OPC. The Bangladeshi law should provide for flexibilities to the OPCs.

Share Transfer of OPC

The sole shareholder of OPC can only transfer his entire share in the OPC. The share can be transferred to a natural person only and the share cannot be transferred in a piecemeal manner. If a shareholder of an OPC wants to transfer his share, he must transfer the entirety of it and he can do so to a single person only. Section 38 of the Company Act clearly provides rules for transfer of shares to the foreigners. Thus, the share in an OPC can be transferred to foreigners as well.

On Taxation

The Government of Bangladesh has reduced tax rate of the OPC to 25% from its earlier rate of 32.5% in 2021-22 financial year. This move is aimed at ensuring people are investing in promising business ventures without much associated costs.

On Compliance

Within 180 days of the completion of a financial year, the financial statements of an OPC are required to be submitted to the Registrar. It is a mandatory requirement of law that the sole shareholder-director shall sign the statements before submitting the documents to the Registrar.


OPC as a business vehicle has been introduced in Bangladesh as a major entrepreneurial boost. However, it also has the potential to be 'Frankenstein Incorporated'. The OPC was targeted at domestic entrepreneurs. But with time it has proved to be unfriendly towards domestic businesses due to the massive amount of required paid up capital. The fact that only 3 OPCs have been registered after one year of legal enactment is a testament to the challenges involved in an OPC. OPC is still a newborn venture, the best practices are yet to be developed. It remains to be seen how the gray areas in law will be put into practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.