Insights
Limited liability for OPCs in India: Insights from the endemol case
September 17, 2025Background
Traditionally, a ”company” has been understood as an association comprising at least 2 (two) individuals formed to carry out business activities. Departing from this conventional understanding, several jurisdictions, including India, have adopted the concept of a “one person company” (OPC). As defined under the Companies Act, 2013 (Act)[1], an OPC is a company that has only one individual as its sole member.
The concept of OPC emerged from the J.J. Irani Committee’s[2] recommendation that individual entrepreneurs be allowed to operate through an incorporated entity free from the burdens of any other association or partnership. Reflecting that purpose, the Act[3] accords OPCs procedural leniency: the duty to convene an annual general meeting is dispensed with, and the preparation of a cash flow statement has been waived, among other concessions.
Read More+
Although OPCs were introduced in India to promote entrepreneurship, their adoption has been relatively limited due to certain constraints and disadvantages. Key factors contributing to their slower growth, in comparison to other business structures, include the restriction that only a natural person can be a member of an OPC, the prohibition on an individual being a member of more than one OPC, and limitations on engaging in non-banking financial activities such as investment in the other companies’ securities.
While several legal changes have been introduced to the Act4[4] along with the corresponding rules (such as the removal of the mandatory conversion to a private company upon reaching a specified turnover threshold), the Indian legal framework still remains less progressive compared to jurisdictions like the United Kingdom, where restrictions similar to above do not exist.
Further, there has been no jurisprudence developed relating to OPCs until recently, when the applicability of the principle of limited liability to OPCs was examined in Saravana Prasad v. Endemol India (P) Ltd.[5] (Endemol case). In this article, we present a brief overview of the Endemol case[6] and share our observations on its significance.
Limited liability in OPCs: Clarifications and caveats
In Endemol case[7], a Single Bench of Justice Somasekhar Sundaresan of the Bombay High Court heard a petition challenging an order issued by the Arbitral Tribunal. The dispute arose from arbitral proceedings involving Innovative Film Academy Private Limited (Innovative), an OPC incorporated by Mr. Saravana Prasad (Mr. Prasad). Innovative had entered into a production agreement with Endemol India Private Limited (Endemol) under which Endemol was engaged to create, produce, edit, manage post-production, and deliver episodes of the popular cookery television show franchise MasterChef in several regional languages.
The payments for Endemol’s services were not made by Innovative, which led to Endemol initiating arbitral proceedings. During the course of these proceedings, the Arbitral Tribunal issued an order directing both Innovative (the OPC) and Mr. Prasad (the sole member of the OPC) to deposit the disputed amount in a fixed deposit, disclose all assets and encumbrances, reveal their interests in companies and firms, among other disclosures.
Among other issues, the Court examined whether the Arbitral Tribunal was justified in issuing directions against Mr. Prasad, in addition to those issued to the OPC.
Citing the landmark decision in Aron Salomon (Pauper) Appellant; and A. Salomon And Company, Limited Respondents (Salomon v. A. Salomon & Co. Ltd).[8], the Court reaffirmed that the concept of an OPC is a legal fiction that allows a sole individual to constitute a corporate body recognised as an artificial juridical person. It allows individuals to ”ringfence” their personal liability and protect their personal assets from the risks associated with their business activities.
Based on the Court’s decision[9], the Tribunal was found to have acted in contravention of the specific corporate law policy embodied in Indian law underlying the concept of OPCs, and the direction to Mr. Prasad by the Arbitral Tribunal to deposit the disputed amount and, more significantly, requiring disclosure of his personal assets, liabilities, tax returns, and ownership interests in other entities was found to be not good in law.
Analysis: Parity with other form of companies
Previously, the application of the principle of limited liability in the context of OPCs was somewhat uncertain, given that a single natural person serves as the sole mind and decision-maker of the company. However, Endemol case[10] has provided the necessary clarity and reaffirmed the sanctity of this principle, even in relation to OPCs. It also served to place OPCs on an equal footing with other corporate forms (private or public companies) in terms of their liability shield.
However, as with other companies, this principle is not absolute; courts, as established under several precedents, may lift or pierce the corporate veil in circumstances involving fraud, misuse of the corporate structure, or where the company functions as a sham or façade under the alter ego principle.
Around the same period as Endemol case[11], the Delhi High Court in Amrit Pal Singh v. Enforcement Directorate[12] addressed the liability of a sole director of an OPC under the Prevention of Money-Laundering Act, 2002[13]. The Court held that vicarious liability may be imputed where an individual exercises direct control over, and bears responsibility for, the company’s conduct. Collectively, these judicial developments affirm that the principles governing limited liability, as well as the circumstances warranting the lifting of the corporate veil, are equally applicable to OPCs and other forms of companies.
Conclusion: Sanctity of the limited liability for OPCS
With this clarification on the applicability of the principle of limited liability to OPCs, counterparties transacting with them should exercise appropriate due diligence and remain cognizant of the OPCs’ solvency. Although the sole shareholder may, in effect, function as the alter ego of the OPC, this fact alone does not suffice to dilute the limited liability protection. Accordingly, parties who are uncertain about an OPC’s ability to discharge its contractual obligations should consider adopting protective measures, such as obtaining additional indemnities or guarantees from the sole member.
Concurrently, the judiciary’s endorsement of limited liability in Endemol case[14] represents a salutary development, one that is likely to render the OPCs an increasingly attractive vehicle for entrepreneurs who might otherwise conduct business as sole proprietors. Whether this jurisprudential commitment to parity with other corporate forms will endure, or whether future decisions will craft fresh exceptions that recalibrate the doctrine’s scope in the OPC context, remains an open, and closely watched, question.
Footnote
[2] Justice J.J. Irani Committee, Expert Committee Report on Company Law 2005.
[9] Salomon case, 1897 AC 22.
[10] 2025 SCC OnLine Bom 2565.
[11] 2025 SCC OnLine Bom 2565.
[12] 2025 SCC OnLine Del 4613.
[13] Prevention of Money-Laundering Act, 2002.
[14] 2025 SCC OnLine Bom 2565.
This article was originally published in SCC Times on 17 September 2025 Co-written by: Rohan Jain, Partner; Kshitij Arora, Counsel; Arshit Kapoor, Associate. Click here for original article
Read Less-
Contributed by: Rohan Jain, Partner; Kshitij Arora, Counsel; Arshit Kapoor, Associate.
Disclaimer
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
