Debts incurred by solo business are not personal liability: HC

There were about 68,500 active OPCs in India as of 31 May, as per data from the ministry of corporate affairs

- Neha Joshi & Nehal Chaliawala

A crucial ruling by the Bombay High Court (HC), which declared that solo entrepreneurs operating one-person companies (OPCs) generally cannot be held personally liable for company debts, could give a shot in the arm to entrepreneurship in India, experts said.

The July 3 judgement reinforces the legislative intent behind OPCs by ring-fencing the private assets of entrepreneurs from their business liabilities while also raising the bar for creditors attempting to pursue the founder's personal assets.

The ruling emerged from a dispute between Endemol India and Innovative Film Academy Pvt. Ltd, an OPC solely owned by Saravana Prasad. Endemol sought to recover over ₹10 crore in unpaid dues from a production agreement, not only from the company but also from Prasad personally, demanding disclosure of his private assets.

An arbitral tribunal had initially ordered both the company and Prasad to deposit the disputed sum in a fixed deposit and disclose their financial details.