In exercise of the powers conferred by sub-sections (1) and (2) of Section 469 of the Companies Act, 2013 (CA, 2013), the Central Government, vide Notification GSR 91(E) dated 01st February, 2021 has amended the Companies (Incorporation) Rules, 2014 which shall come into force on the 1st day of April, 2021 and may be called the Companies (Incorporation) Second Amendment Rules, 2021.

The Ministry of Corporate Affairs (‘MCA’) amends One Person Companies (‘OPCs’) Rules vide aforesaid amendment. MCA amends Rule 3 related to One Person Company, 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.

Before the aforesaid amendment, only a natural person who is an Indian citizen and resident in India are allowed to incorporate a OPC y. However, by making the amendment in sub rule (1) of Rule 3 for words, “and resident in India”, following words substituted “whether resident in India or otherwise”. By this amendment, now Non-Resident Indians (‘NRIs’) is also allowed to incorporate OPCs in India.

Further, for the purpose of this rule, the period of resident in India has been reduced from 182 days to 120 day. Now amended Sub Rule (1) of Rule 1 may be read as under-

“(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 – for the purpose of this rule, “Resident in India” means a 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.”

Also, the sub-rule (7) shall be omitted which is as under-

(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.

In view of the above, the restriction of 2 years to convert the OPC into any kind of company has been removed. Now, OPC can be converted into any kind of company any time and without any limit of paid up capital and turnover.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.

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