Setting Up of Business, Industrial and Labour Laws · Corporate Entities - Companies

One Person Company, Small Company and Dormant Company

Updated 11 October 2026 · Fact-checked

A One Person Company has a single member and a nominee. A small company is a private company within prescribed capital and turnover limits. A dormant company is one registered for a future project or to hold an asset, or an inactive one, that gets dormant status from the Registrar under section 455.

Understand One Person Company, Small Company and Dormant Company

The Companies Act, 2013 does not treat every company the same. It gives lighter rules to companies that are small, run by one person, or not doing business. This keeps compliance cost low for them and still keeps the register of companies clean.

A One Person Company (OPC) is a company with only one person as its member. It is a form of private company. The founder names a nominee in the memorandum, who takes over if the member dies or cannot contract. The nominee must give written consent. Only a natural person who is an Indian citizen and resident in India can form an OPC, and the rules treat a person as resident if they stayed in India for at least 120 days in the previous financial year. Such a person can be a member of only one OPC at a time and cannot be nominee of more than one OPC. An OPC cannot be formed as a section 8 company and cannot carry on non-banking financial investment activities. Check the exact current rules in your study material before the exam.

A small company is a private company whose paid-up share capital and turnover stay within limits set by the Central Government. The current limits are paid-up capital up to ₹4 crore and turnover up to ₹40 crore. A holding company, a subsidiary company, a section 8 company, and a company or body governed by a special Act are not small companies. Small companies get relaxations such as no cash flow statement, fewer board meetings and simpler annual return signing.

A dormant company is covered by section 455. It is either a company formed for a future project, or to hold an asset or intellectual property, with no significant accounting transaction; or an inactive company. An inactive company has not carried on business or made a significant accounting transaction in the last two financial years, or has not filed financial statements and annual returns in the last two financial years. The company applies to the Registrar, who allows dormant status and issues a certificate. The point of the status is to avoid being struck off under section 248.

One more rule links all three. Section 446B gives lesser penalties to an OPC, small company, start-up company or Producer Company, and to its officers in default.

Key rules to remember

OPC basic structure: 1 member + 1 nominee (named in memorandum, with written consent); Only a natural person resident in India (120 days or more in the previous financial year) can form an OPC. Check the current rules for the citizenship and one-OPC limits.
Small company test: Private company AND paid-up capital ≤ ₹4 crore AND turnover ≤ ₹40 crore (current limits); Both limits must be met. Holding companies, subsidiaries, section 8 companies and companies under special Acts are excluded.
Inactive company (s. 455 Explanation): No business or no significant accounting transaction in last 2 financial years, OR no financial statements and annual returns filed in last 2 financial years; Any one of the conditions is enough.
Significant accounting transaction (s. 455): Any transaction other than: Registrar fees; payments to meet the Act or any other law; allotment of shares to meet the Act; payments to maintain office and records; Only these four are ignored when deciding whether a company is inactive.
Dormant status procedure (s. 455): Application to Registrar → certificate → entry in register of dormant companies; Under s. 455(4) the Registrar must issue a notice and enter the name of a company that has not filed financial statements or annual returns for two consecutive financial years.
Retaining dormant status (s. 455(5)-(6)): Prescribed minimum directors + prescribed documents + prescribed annual fee; The Registrar strikes off the name from the register of dormant companies if the company fails to comply. A dormant company can become active on application with prescribed documents and fee.
Lesser penalty (s. 446B): Penalty = lower of (½ × penalty in the section) and cap; cap = ₹2,00,000 for company, ₹1,00,000 for officer in default or other person; Applies to OPC, small company, start-up company and Producer Company.
Strike off for no business (s. 248(1)(c)): No business or operation for 2 immediately preceding financial years AND no application for dormant status within that period; The Registrar sends a notice to the company and all directors and allows 30 days for representations.

How to solve One Person Company, Small Company and Dormant Company questions

Use this method for any question on OPC, small company or dormant company, whether it is a theory question or a short fact-based problem.

1Identify the category the question is about: OPC, small company, dormant or inactive company, or the penalty relief under section 446B.
2State the definition in one or two lines, using the exact words of the Act where you remember them.
3List the conditions or tests and apply each one to the facts. For a small company check private status, paid-up capital, turnover and the excluded classes. For a dormant company check the two financial year tests and the meaning of significant accounting transaction.
4State the procedure: who applies, to whom, what the Registrar does, and what the company must keep doing to retain the status.
5Add the relaxations or consequences, such as lesser penalty under section 446B or strike off under section 248 or section 455(6).
6For a numeric penalty, take half of the stated penalty, then compare it with the cap and take the lower figure.
7End with a clear conclusion that answers the exact question asked, for example 'Hence, the company qualifies as a small company' or 'Hence, the maximum penalty is ₹2,00,000'.

Quickest way: Three-tag check for category questions

When to use it: Use when the question gives facts and asks which type of company applies, or whether a relief is available.

Tag 1, members: only one member means OPC. Check that the member is a natural person resident in India and that a nominee exists.
Tag 2, size: a private company that is not a holding or subsidiary company, is not a section 8 company, and is within the capital and turnover limits is a small company.
Tag 3, activity: no business or no significant accounting transaction for two years means inactive. Then ask if dormant status was applied for. If not, section 248 strike off is the risk.
For penalties, halve and then cap: ₹2,00,000 for the company, ₹1,00,000 for the officer or other person.

Common mistakes in One Person Company, Small Company and Dormant Company

Saying a small company can be a public company or a subsidiary.
Students remember only the capital and turnover limits and forget the exclusions.
Fix: Learn the definition as: private company, within limits, and not a holding company, subsidiary, section 8 company or special Act company.
Treating an OPC and a small company as the same thing.
Both enjoy relaxations and both are usually small businesses.
Fix: Remember the test for each. OPC is defined by the number of members (one). Small company is defined by size (capital and turnover). An OPC can also be a small company if it meets the size limits, but the two are separate categories.
Treating every payment as a significant accounting transaction when testing for dormancy.
Students forget the list of four excluded items in section 455.
Fix: Registrar fees, payments to meet legal requirements, allotment of shares to meet the Act, and office and record maintenance costs do not count. Only other transactions count.
Stating that a dormant company is dissolved or struck off.
Dormant is confused with strike off under section 248.
Fix: A dormant company remains on the register in a separate register of dormant companies. Strike off from that register happens only if it fails to comply with section 455 requirements.
Applying the 'half of the penalty' rule without the cap, or applying the cap to the full penalty.
Students remember one half of the rule, not the 'subject to a maximum' part.
Fix: Step 1: halve the penalty in the section. Step 2: if the result is above ₹2,00,000 (company) or ₹1,00,000 (officer or other person), use the cap.
Forgetting that section 446B covers start-up and Producer Companies as well as OPC and small companies.
The marginal heading of the original section mentions only OPCs and small companies.
Fix: Quote the current text: OPC, small company, start-up company or Producer Company.

Worked examples

Example 1

A small company and its officer in default are liable to a penalty under a section of the Companies Act, 2013 which prescribes ₹5,00,000 on the company and ₹1,00,000 on each officer in default. What is the maximum penalty under section 446B?

Show the solution

Provision: section 446B says the company and its officer in default are liable to a penalty not more than one-half of the penalty in the relevant provision, subject to a maximum of ₹2,00,000 for a company and ₹1,00,000 for an officer in default or any other person.
Company: one-half of ₹5,00,000 = ₹2,50,000. This is more than the cap of ₹2,00,000, so the cap applies.
Officer in default: one-half of ₹1,00,000 = ₹50,000. This is below the cap of ₹1,00,000, so ₹50,000 applies.
Conclusion: the penalty is limited as stated below.

Answer: The company can be penalised up to ₹2,00,000, and each officer in default up to ₹50,000.

Example 2

Sundaram Projects Private Limited was incorporated in April 2022 to hold a plot of land for a future project. For two financial years it has made no transaction except paying fees to the Registrar and the cost of maintaining its office and records. It has also filed no financial statements. Advise the directors on what they can do and what happens if they do nothing.

Show the solution

Provision: under section 455(1) a company formed for a future project or to hold an asset or intellectual property, with no significant accounting transaction, may apply to the Registrar for the status of a dormant company.
Test the facts: fees paid to the Registrar and payments for maintaining office and records are excluded from 'significant accounting transaction'. So the company has had no significant accounting transaction. Also, it has not filed financial statements for two financial years, so it also meets the inactive company description.
Action: the company may apply to the Registrar in the prescribed manner. The Registrar considers the application, allows dormant status and issues a certificate under section 455(2), and records the company in the register of dormant companies.
To keep the status: under section 455(5) it must keep the prescribed minimum number of directors, file the prescribed documents and pay the prescribed annual fee. It may become active later by applying with prescribed documents and fee. If it fails to comply, the Registrar strikes off its name from the register of dormant companies under section 455(6).
If the directors do nothing: under section 455(4), where financial statements or annual returns have not been filed for two consecutive financial years, the Registrar shall issue a notice and enter the name of the company in the register for dormant companies. Under section 248(1)(c), if the company has carried on no business for the two preceding financial years and made no application for dormant status, the Registrar may send a notice and, after 30 days for representations, proceed to remove the company's name.
Conclusion: the directors should apply for dormant status. Doing nothing risks notice and removal from the register.

Answer: Sundaram Projects can apply under section 455 for dormant status, since it was formed to hold an asset and has no significant accounting transaction. It must then meet the prescribed director, document and fee requirements. If it does nothing, it risks notice and removal of its name under section 248.

Exam tips

Write the section number for dormant companies (section 455), for lesser penalties (section 446B) and for striking off (section 248). These are in the official text and examiners expect them.
For difference questions between OPC and small company, answer in two columns of points: basis of definition, member count, size limits, nominee, conversion and relaxations. Keep each point to one line.
For dormant company questions, always quote the two limbs: formed for a future project or to hold an asset or intellectual property, and inactive company. Then list the four excluded payments.
In numeric penalty questions, show both the half and the cap. A correct figure with no working loses marks.
Check the current capital and turnover limits for small companies and the current OPC rules in your ICSI study material before the exam, because these figures are set by notification and rules.

Practice questions from Corporate Entities - Companies

One Person Company, Small Company and Dormant Company: frequently asked questions

What are the main conditions for forming a One Person Company?

An OPC has one person as its member and a nominee named in its memorandum, with the nominee's written consent. The member must be a natural person resident in India. A person cannot be nominee of more than one OPC, and an OPC cannot be a section 8 company. Check the current rules for the other conditions.

What is the difference between a small company and a One Person Company?

An OPC is defined by having a single member. A small company is a private company defined by limits on paid-up capital and turnover, and it cannot be a holding company, subsidiary, section 8 company or special Act company. An OPC may also be a small company if it meets the size tests.

What does section 455 say about dormant companies?

It allows a company formed for a future project or to hold an asset or intellectual property, or an inactive company, to apply to the Registrar for dormant status. The Registrar issues a certificate and keeps a register of dormant companies. The company must meet prescribed director, document and fee requirements, or the Registrar strikes off its name from that register.

How do I convert a One Person Company into a private company?

An OPC converts by following the conversion procedure laid down in the Act and the rules, which includes a board resolution, member and creditor-related steps, alteration of the memorandum and articles and Registrar filings. The rules have been relaxed from time to time, so read the current rules in your study material. In the exam, name the steps in order and conclude with the Registrar's certificate of incorporation on conversion.

Does a small company get lower penalties?

Yes. Under section 446B a small company, OPC, start-up company or Producer Company is liable to not more than half the penalty in the relevant provision. The cap is ₹2,00,000 for the company and ₹1,00,000 for an officer in default or any other person.