Appetite for forming One Person Co still low

The appetite among entrepreneurs to form One Person Companies (OPCs) remains low even though 10 months have passed since the government started registering single owner-based enterprises.

Until now, 120 OPCs have been registered with the Registrar of Joint Stock Companies and Firms (RJSC), RJSC officials said last week.

The RJSC has been registering OPCs since August 2021, after the government brought changes to the Companies Act 1994 that enabled personally-owned businesses to form companies.

However, the interest to form OPCs is yet grow for a lack of awareness about the opportunity while high registration fees could be another reason for low enthusiasm among entrepreneurs in this regard.

As per the law, the minimum capital required to set up an OPC is Tk 25 lakh and maximum is Tk 5 crore.

To be eligible for opening an OPC, entrepreneurs also have to record at least Tk 1 crore turnover in the previous year before filing for registration.

However, there is no minimum paid-up capital requirement for establishing public and private companies, which RJSC officials said may be a reason for the lack of interest to open OPCs despite the huge number of sole proprietorships in Bangladesh.

Registration fees to open OPCs are another factor because at present, entrepreneurs have to count Tk 50 for every Tk 100,000 of paid-up capital from above Tk 10 lakh to Tk 50 lakh during registration.

The rate goes up to Tk 80 for every Tk 100,000 if the paid-up capital exceeds Tk 50 lakh, according to the fees schedule issued by the commerce ministry.

Sheikh Shoebul Alam, registrar of the RJSC, said OPC is a new concept here and many people are yet to know about the opportunities presented by registering single ownership companies.

"We expect the number of companies will increase gradually," he said.

Snehasish Barua, partner of Snehasish Mahmud & Company, said the conditions for opening OPCs are quite stringent. For example, the requirement for minimum turnover is Tk 1 crore, as well as the minimum paid-up capital of 25 lakh, whichever is high.

"These types of conditions do not exist in other countries," he said.

He further added that the National Board of Revenue (NBR) took the right initiative by reducing the tax rate of OPC from 25 per cent to 22.5 per cent but the condition of taking all receipts and income through the banking channel would be tough for them. He proposed withdrawing this condition for OPC to bring them under the tax net.

"There is also inadequacy of campaigning by the government. Increased campaigns would encourage people to take the opportunity and besides, this would help the government monitor businesses better," he added.

Barua went on to say that opening an OPC provides a number of benefits, particularly regarding the scope to transfer shares.

"If anyone wants to exit the business, that person can do so easily as the fixation of assets and liabilities in a company is easier than that of sole proprietorships," he said.

"So, doing business by opening an OPC would be helpful for succession."

Besides, OPCs provide the scope to create a culture of governance as business will be run by separating shareholders and management, he added.

Md Shahadat Hossain, president of the Institute of Chartered Accountants of Bangladesh, said most of the registered companies in Bangladesh are family-owned. This may be a reason behind the low interest to form OPC, he added.