One-person company law off to a dismal start

The one-person company (OPC) law is off to a disappointing start as no single entrepreneur has come forward to incorporate firms under the provision although six months have passed since its passage.

OPC means a company formed with only one person as a member, unlike the traditional private companies with at least two members.

In November, the parliament passed the law to give a boost to entrepreneurship, draw investors and support the growth of small and medium enterprises.

"No company has been incorporated under the OPC so far," said Md Mokbul Hossain, registrar at the Office of the Registrar of Joint Stock Companies & Firms (RJSC).

"No application was submitted by potential entrepreneurs. It may take some time to popularise the concept," he said, adding that many entrepreneurs are, however, contacting the RJSC to have their firms registered under the OPC.

The senior official blamed poor knowledge about the OPC for the weak response.

The OPC was rolled out through an amendment to the Companies Act (Bangladesh), 1994 with a view to improving the country's ranking in the World Bank's Ease of Doing Business index as a single-person company encounters lesser complexities and is easy to run.

In contrast, running private companies involves many legal complexities, especially to protect the interests of minority shareholders as the majority shareholders dominate the business. Legal tussles sometimes disrupt the activities of companies.

Any natural person, either a born citizen or a foreigner, can set up an OPC following registration with the RJSC. The paid-up capital will be a minimum of Tk 25 lakh and a maximum of Tk 5 crore. OPC has to be written at the end of the company's name.

Previously, there was no minimum paid-up capital for the formation of a company.

The fixing of the lower limit might be another reason for the lukewarm response for OPC registration, Hossain said.

Md Jafar Uddin, senior secretary of the commerce ministry, said his ministry had taken the move to incorporate OPC because the economy had grown over the years, and many potential entrepreneurs were encouraged to form single-person firms.

"It is expected that investment will take place and employments will be generated because of the OPC as running such companies is easier than a private company," he said.

The minority shareholder of a joint venture company often complains that the majority shareholders do not respect their decision in the board meetings, he said. "OPC will reduce such discrimination."

"The OPC is an excellent initiative to create entrepreneurs and expand the tax net," said Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry.

The minimum paid-up capital requirement should be brought down to Tk 5 lakh because many startups do not have such a high amount of funds at the beginning of a company, he said.

Currently, the corporate tax rate of the OPC is 25 per cent. It needs to be reduced by 2.5 percentage points in the next budget along with all other companies, Rahman said.

"This is a recovery period for the business from the fallouts of Covid-19. So, the corporate tax needs to be cut so that companies can survive."

If the government wants to bring in innovative entrepreneurs in the sectors like IT, the new businesses have to be facilitated in various ways so that they feel encouraged to form companies, the DCCI chief said.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said any company that was not registered under the OPC with the RJSC could call for government facilities.

For instance, many SMEs are not registered with the RJSC, but they are enjoying government facilities, he said.

The changes to the Companies Act have been part of a $250 million budget support the government has received from the World Bank.

Allowing the formation of single-member companies would enable entrepreneurs and family businesses to move out of the shadow of informality and gain access to financial and business services available in the formal economy, said Finance Minister AHM Mustafa Kamal in a letter to the multilateral lender in April last year.

Because of the opportunity to form an OPC, 50,000 new firms would be set up in the country, according to an estimate.