MCA amends One Person Companies (OPCs) rules vide Companies (Incorporation) Second Amendment Rules, 2021
MCA amends rules 6 related to One Person Company to Convert Itself into a Public Company or a Private Company in Certain Cases and Rule 7 related to Conversion of private company into One Person Company. vide Companies (Incorporation) Second Amendment Rules, 2021.
As a measure which directly benefits Startups & Innovators in the country, especially those who are supplying products & services on e-commerce platforms, and in order to bring in more unincorporated businesses into the organized corporate sector, the incorporation of One Person Companies (OPCs) is being incentivized by amending the Companies (Incorporation) Rules to allow OPCs to grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non-Resident Indians (NRIs) to incorporate OPCs in India.
Some of the benefits of reduction in compliance burden for over 2 lakh companies as a direct consequence of the revised definition are as under:
- No need to prepare Cash flow statement as part of financial statement.
- Where other companies require providing details of remuneration to directors and key managerial personnel, small companies are required to provide details of the only aggregate amount of remuneration drawn by directors in its Annual Return.
- Mandatory rotation of auditor not required.
- An Auditor of small companies is not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report.
- Hold only two board meetings in a year.
- Annual Return of the company can be signed by the Company Secretary, or where there is no company secretary, by a single director of the company.
- Lesser penalties for Small Companies.
- Lesser filing fees for Small Companies.
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 1st February, 2021
G.S.R. 91(E).— In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Incorporation) Rules, 2014, namely: –
1. (1) These rules may be called the Companies (Incorporation) Second Amendment Rules, 2021.
(2) They shall come into force on the 1st day of April, 2021.
2. In the Companies (Incorporation) Rules, 2014,-
I. in rule 3,_
(a) in sub-rule (1),-
(i) for the words, “and resident in India” the words “whether resident in India or otherwise” shall be substituted;
(ii) in Explanation I, for the words “one hundred and eighty two days” the words “one hundred and twenty days” shall be substituted;
(b) sub-rule (7) shall be omitted.
II. for rule 6, the following rule shall be substituted, namely:-
“6. Conversion of One Person Company into a Public company or a Private company.-
(1) The One Person company shall alter its memorandum and articles by passing a resolution in accordance with subsection (3) of section 122 of the Act to give effect to the conversion and to make necessary changes incidental thereto.
(2) A One Person company may be converted into a Private or Public Company, other than a company registered under section 8 of the Act, after increasing the minimum number of members and directors to two or seven members and two or three directors, as the case may be, and 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) The company shall file an application in e-Form No.INC-6 for its conversion into Private or Public Company, other than under section 8 of the Act, along with fees as provided in the Companies (Registration offices and fees) Rules, 2014 by attaching documents, namely:-
(a) Altered MOA and AOA;
(b) copy of resolution;
(c) the list of proposed members and its directors along with consent;
(d) list of creditors; and
(e) the latest audited balance sheet and profit and loss account.
(4) On being satisfied that the requirements stated herein have been complied with, the Registrar shall approve the form and issue the Certificate.
III. in rule 7,-
(a) in sub-rule (1), the 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.
(b) in sub-rule (4), in clause (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.
IV. In the Annexure,
(a) the e-Form No.INC-5 shall be omitted.
(b) for the e-Form No.INC-6, the following form shall be substituted, namely:-
[F. No. 1/13/2013 CL-V, Vol.IV]
K.V.R. MURTY, Jt. Secy.
Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 250(E), dated the 31st March, 2014 and last amended vide number G.S.R.44(E), dated the 25th January,2021.
