The Ministry Of Corporate Affairs has notified1 an amendment to the Companies (Incorporation) Rules, 2014. The amended rules will be known as the Companies (Incorporation) Second Amendment Rules 2021 and will be enforced from April 01, 20212.
The amended Rules provides for the amended definition of "One Person Company" under Rule 3 and also provides for the Conversion of One Person Company (OPC) into a Public Company or a Private Company under Rule 6.
What is One Person Company?
OPC is a type of private company which is incorporated by one member. The concept is very similar to sole proprietorship with a difference of liability on member. The liability of member is limited to the extent of his share capital whereas in Sole Proprietorship, the liability is unlimited.
KEY CHANGES IN RULES
The key amendment made in Companies (Incorporation) Second Amendment Rules 2021 are as follows:
| Basis | Company incorporation rules 2014
(Old Rules) |
Companies (Incorporation) Second Amendment
Rules 2021 (New Rules) |
| NRIs can form OPC |
No provision for NRI to
incorporate OPC. It was only a resident of India who was allowed to start a OPC The number of days for residential status is 182 days. |
NRI will be allowed to form a One Person Company in
India, through Substitution of words-"whether
resident in India or otherwise". The residential status of individual shall be computed on 120 days. Instead of 182 days. |
In addition to the above change MCA has also amended rules regarding conversion of OPC to Private Limited Company or Public Limited Company and requirement of paid up share capital and turnover.
| Conversion of OPC to Private or Public
company. Deletion of E-FORM INC-5 |
Voluntary Conversion was followed
for OPC to convert into public or Private Company. It also requires to: a. Complete Two Years of Incorporation.
Form No.INC-5 submitted to Registrar, when OPC converts into a private company or a public company. |
Voluntary conversion has been
omitted by MCA to convert OPC into
Company. The amendment has omitted: a. two year period has been omitted FORM INC-5 has been omitted. |
| Paid Up Share Capital and Turnover | A. Paid
up share capital of an One Person Company must
exceeds fifty lakh rupees or; B. Average annual turnover during the relevant period must exceed two crore rupees. |
The requirement of paid up share capital
and turnover has been omitted. |
| E-FORM INC-6 |
E-FORM INC-6 was used for conversion into One Person Company. |
The new regulation substitutes E-FORM INC-6 with a new contents. |
The amendment provides relaxations for NRIs to set up a One Person Company in India. It also eases doing of business in India, with establishment of OPC. It allows a choice of converting to OPC from private limited company by omitting the minimum threshold of paid share capital of INR 50 lakhs earlier.
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Footnotes
1. http://www.mca.gov.in/Ministry/pdf/SecondAmndtRules_02022021.pdf
2. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1694828
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