Question

Companies Act, 2013 allows the formation of

• A. Two persons company only
• B. Seven persons company only
• C. Two or more persons company only
• D. One person company also.

Hint:

Remember the key innovations of the Companies Act, 2013. The introduction of the One Person Company (OPC) is a very important one that encourages entrepreneurship by providing the benefit of a corporate structure to a single individual.

Answer 1

The Correct Option is D

The key to this question is recognising it as being about what changed between 1956 and 2013, not about the general membership rules that were already in place.

1. Spot the trap: "Two persons company only" and "seven persons company only" both describe pre-existing thresholds for private and public companies respectively, and "two or more persons company only" is just a generalised version of the same idea. All three use the restrictive word "only," which cannot be right when a genuinely new structure was added.
2. Identify the new structure: The 2013 Act's defining innovation on this point was Section 2(62), creating the One Person Company, letting a single individual incorporate a company with limited liability instead of needing a co-promoter purely to meet a headcount rule.
3. Match the wording: Because a genuinely new option was added without removing the old ones, the only accurate description is one that says "also," which is exactly what the fourth option does.

The correct answer is One person company also.

Answer 2

It also helps to think about this from the entrepreneur's perspective and ask what problem the 2013 reform was solving.

1. Two persons company only: Requiring two people just to incorporate, even where only one person is actually running the business, was seen as an artificial barrier for solo entrepreneurs, and this option describes the very rule the reform moved beyond, not the reform itself.
2. Seven persons company only: This reflects the public company threshold, which was never the barrier the OPC reform addressed since it is a much larger and more regulated structure aimed at wide public participation, not solo founders.
3. Two or more persons company only: Before 2013, a sole proprietor who wanted limited liability had no choice but to bring in a second member, often a nominal one, purely to satisfy this rule. This option describes the old constraint, not the change the Act made.
4. One person company also: To let a single individual enjoy corporate personality and limited liability without needing a nominal second member, the 2013 Act created the OPC as an additional category alongside the existing ones, directly solving the problem the earlier structures created.

Looking at the legislative purpose confirms that the Act did not replace the old structures but added a new one for solo founders.

So, the correct answer is One person company also.