Amendments in Companies (Incorporation) Rules, 2014 vide Companies (Incorporation) Second Amendment Rules, 2021

Following Rules of Companies(Incorporation) Rules, 2014 has been amended-

Rule 3, 6, 7 and Annexure

Summary of amendments made

(a) Reducing the no. of days to check residence criteria of directors.

(b) Omitting limit of Turnover and paid up share capital for conversion of OPC into Private or Public company or Private company into OPC.

(c) Amended E- form No.6 for Conversion of OPC into Private or Public company.

Analysis of Existing and Amended Provisions

Rule 3: One Person Company

Existing Provisions Amended provisions
(1) Only a natural person who is an Indian citizen and resident in India-

(a) shall be eligible to incorporate a One Person Company;

(b) shall be a nominee for the sole member of a One Person Company.

Explanation I –

“Resident in India” means –

Person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding financial year

Explanation II.-

For the purposes of this rule, while counting the number of days of stay of a director in India for the financial year 2018-2019, any period of stay between 01.01.2018 till the date of notification of this rule shall also be counted

(7) No such company can convert voluntarily into any kind of company unless two years is expired from the date of incorporation of One Person Company, except threshold limit (paid up share capital) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.

Amendment 1:

For words, “and resident in India”, following substituted-

“whether resident in India or otherwise”

Amendment 2:

In Explanation I,

For words, one hundred and eighty two days, words,

One hundred and twenty days is substituted.

(1) Only a natural person who is an Indian citizen whether resident in India or otherwise

(a) shall be eligible to incorporate a One Person Company;

(b) shall be a nominee for the sole member of a One Person Company.

Explanation I –

“Resident in India” means-

Person who has stayed in India for a period of not less than one hundred and twenty days during the immediately preceding financial year

Explanation II.-

For the purposes of this rule, while counting the number of days of stay of a director in India for the financial year 2018-2019, any period of stay between 01.01.2018 till the date of notification of this rule shall also be counted

Amendment 3:

Sub rule 7 shall be omitted

Rule 6- One Person Company to Convert Itself into a Public Company or a Private Company in Certain Cases

Existing Provisions Amended provisions
(1) Where the paid up share capital of an One Person Company exceeds fifty lakh rupees and its average annual turnover during the relevant period exceeds two crore rupees, it shall cease to be entitled to continue as a One Person Company.

(2) Such One Person Company shall be required to convert itself, within six months of the date on which its paid up share capital is increased beyond fifty lakh rupees or the last day of the relevant period during which its average annual turnover exceeds two crore rupees as the case may be, into either a private company with minimum of two members and two directors or a public company with at least of seven members and three directors in accordance with the provisions of section 18 of the Act.

(3) The One Person Company shall alter its memorandum and articles by passing a resolution in accordance with sub-section (3) of section 122 of the Act to give effect to the conversion and to make necessary changes incidental thereto.

(4) The One Person Company shall within period of sixty days from the date of applicability of sub-rule (1), give a notice to the Registrar in Form No.INC.5 informing that it has ceased to be a One Person Company and that it is now required to convert itself into a private company or a public company by virtue of its paid up share capital or average annual turnover, having exceeded the threshold limit laid down in sub-rule (1).

Explanation.-For the purposes of this rule,- “relevant period” means the period of immediately preceding three consecutive financial years;

(5) If One Person Company or any officer of the One Person Company contravenes the provisions of these rules, One Person Company or any officer of the One Person Company shall be punishable with fine which may extend to ten thousand rupees and with a further fine which may extend to one thousand rupees for every day after the first during which such contravention continues.

(6) A One Person company can get itself converted into a Private or Public company after increasing the minimum number of members and directors to two or minimum of seven members and two or three directors as the case may be, and by maintaining the minimum paid-up capital as per requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion.

Complete rule has been substituted with the following :

 

(1) Alteration of MOA and AOA

MOA and AOA can be altered by passing a resolution as per 122(3) for conversion of OPC

(2) Requirements to be fulfilled

OPC may convert into a Private or Public Company, other than Section 8 company by fulfilling below requirements-

● Increasing the minimum number of members and directors to two (For Pvt. Company) and seven members and three directors (For Public Company),

● Maintaining the minimum paid-up capital as per the requirements of the Act for such class of company and

● By making due compliance of section 18 of the Act for conversion

(3) Form, Fees and Documents required for filing Conversion-

Form- e-Form No. INC-6

Fees- As per Companies (Registration offices and fees) Rules, 2014

Documents required-

(a) Altered MOA and AOA;

(b) Copy of resolution;

(c) List of proposed members and its directors along with consent;

(d) List of creditors; and

(e) Latest audited balance sheet and profit and loss account.

(4) Granting of New Certificate of Incorporation after Conversion

After completion of all requirements, ROC shall approve form and Issue New Certificate of Incorporation

Rule 7- Conversion of private company into One Person Company.-

Existing Provisions Amended provisions
(1) A private company other than a company registered under section 8 of the Act having paid up share capital of fifty lakhs rupees or less and average annual turnover during the relevant period two crore rupees or less may convert itself into one person company by passing a special resolution in the general meeting.

(4) The company shall file an application in Form No.INC.6 for its conversion into One Person Company along with fees as provided in in the Companies (Registration offices and fees) Rules, 2014, by attaching the following documents, namely:-

(i) The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion, the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be;

(ii) the list of members and list of creditors;

(iii) the latest Audited Balance Sheet and the Profit and Loss Account; and

(iv) the copy of No Objection letter of secured creditors.

Amendment 1:

In Sub rule 1-

For words, “having paid up share capital of fifty lakhs rupees or less and average annual turnover during the relevant period is two crore rupees or less” shall be omitted

(1) A private company other than a company registered under section 8 of the Act may convert itself into one person company by passing a special resolution in the general meeting.

Amendment 2:

In sub-rule (4)(i), the words “, the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be” shall be omitted

(4) Form, Fees and Documents required for filing Conversion- Form- e-Form No. INC-6

Fees- As per Companies (Registration offices and fees) Rules, 2014

Documents required for Conversion-

(i) The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion, as the case may be

(ii) List of members and creditors

(iii) Latest audited balance sheet and profit and loss account

(iv)Copy of No Objection letter of secured creditors

Amendment in Annexure

(a) E-Form No.INC-5 shall be omitted.

(b) For the e-Form No.INC-6, a new e form No. INC-6 shall be substituted.

Author Bio

Qualification: CS
Company: Priyanka and Associates
Location: EAST DELHI, New Delhi, IN
Member Since: 15 Apr 2020 | Total Posts: 11
I am Qualified Company Secretary June 2019 Batch and currently running my Own Firm -Priyanka and Associates .Writing legal blogs and articles for websites. Practising in Incorporation of Companies, Winding up of Company, All kinds of ROC Compliance, Annual Filing,Income Tax Return Filing ,Search Rep View Full Profile

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